Mario's Corner - May 2019.

Boeing's Current Problems and Why It Will Take Longer Than a Few Months to Fix Them!

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I usually publish this page in the first two or three days of the month.  However, this time I waited a few days longer.  The reason for this is that I kept hoping there would be good news from Boeing regarding the 737 Max problems it has been facing over the past few months.  Unfortunately, the past few days have brought larger issues with two incidents with its 737-800 model.  One of the planes skidded off a runway into a river at a Florida military base - injuring 22 people.  A few hours ago, the same model skidded off course in a snowstorm in Russia.  Fortunately, no one was hurt in this incident.  This compounds the problems that Boeing is already facing with its 737 Max airplanes.  


As per recent news, the Ethiopia March disaster killed 157 and triggered the grounding of the flagship aircraft.  This was on top of the Indonesia Lion airlines disaster in October of last year.  In these cases, the problem has been identified as a malfunction of the Maneuvering Characteristics Augmentation System (MCAS) sensor.  This led to the airplane forcing the nose downwards when the plane was taking off.  To add to its problems, it has been reported in the last few days that Boeing did not involve its test pilots in the development of this system and did not train the pilots who would fly this plane properly.


I consulted with Boeing at its Boeing Leadership Center (BLC) in Florissant, Missouri, and at its Renton facilities a few years ago, helping its managers and leaders to increase their leadership, marketing, and product management skills.   The BLC was inspired by the GE Crotonville Management Center in New York, which is a campus where GE top and middle management is trained on how to lead the company successfully.  I also still own shares in the company, so it pains me to see its current travails. 


Boeing has been in business since 2019.  It has always been a very successful maker of airplanes and has acquired many smaller manufacturers and suppliers along the way.  However, in 1997 it merged with McDonnell-Douglas, a successful aerospace company in its own right and one of the leading U.S. military and defense contractors in history.  


The union of these companies created a behemoth that could easily compete against the European defense and airplane company, Airbus.  Together, these companies became a duopoly in aerospace.

​Unfortunately, their size and competition planted the seeds of Boeing's current problems.


​First, each of these companies started to bet their future in the next generation of their respective planes.  For Airbus, the 340 and 380 models became its future.  In the meantime, Boeing bet its future on continuing to innovate the 737 model.  Thus, it engineered the 737-800 and 737-Max on the existing 737 airframes.  Although this was economical and saved it design time, this is similar to using a 1980's car chassis in iterating the 2019 new cars.  The problem is that the new engines and composite material used today are different than those used in the 80's.  Thus, many compromises had to be made to "force" the improvements on the existing design.  One of these compromises was creating the MCAS to counteract the powerful engines that are used today.  Without going into the technical details, without this software and hardware system, the engines could stall in mid-air.  Unfortunately, the cure has been worse than the initial problem since the MCAS, due to software and hardware errors, "overruled" the pilots trying to control the airplane.


Which brings me to why it will take Boeing a long time to fix this issue it is facing:


1.  It takes five to ten years to design and launch an airplane.  Fixing this issue might mean redesigning the airplane.  Although a "quick fix" might be possible, the FAA and the public seem to have lost faith on this model, and it might take a new model launch or major re-design to overcome these concerns.  This process will take years, not months.


2.  Boeing's Supply Chain is global.  In the early 2,000's, Boeing decided to create a supply chain that would involve multiple suppliers in multiple countries instead of locating everything in Renton, Washington, as it had in the past.  It did this to save money and time and to increase efficiency.  However, it also created a very complex supply process.  Thus, it will take years to bring these suppliers up to date, get them to create and design new parts for a new airplane, and coordinate all of these efforts.


3.  Boeing's Management is not the same as a few years ago.  Dennis Muilenburg took over for James McNerney, who had been very successful in running the company for a long time.  I met McNerney when he came into the company and he was an astute and agile executive.  I don't know Muilenburg, but I do know that it is always better to have a seasoned, experienced executive at the helm in times of crisis.  Muilenburg has not faced any problems until now, due to the recent success of Boeing, so he might not be ready to manage in times of crises.


4.  Bombardier, Embraer, and other emerging aerospace companies, along with Airbus, are waiting in the wings to grab a share of Boeing's market.  If Boeing cannot bounce back quickly, it will lose ground against the competition.


​For these and many other reasons, I hope that Muilenburg and his executive team are up to the task of executing flawlessly and urgently.  Otherwise, Boeing is in for very turbulent times in the near future. 


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Please do not hesitate to call me at 1 (617) 391-0347 or e-mail me at mariocastaneda@bluesailconsulting.com to talk about this or any other subject.  I always like to hear from clients and readers.  

 

Also, please don't forget to read my interview with BostonVoyager magazine.  To read it, click here.

 

Additionally, please do not hesitate to contact us if you need help in planning and managing in a crisis or in normal times.  We can help you to create a solid and successful business market strategy - and execute it.

 

I look forward to seeing you here again in June.

 

​Mario