seems like a bit of blame game to me -- i doubt its the merger, its just the evolution of business as we have it today. having people in charge whose top priority is financial efficiency will destroy any org (looking at you too universities). i think the end result will be fragmentation as the rest of us flee.
The article seems really thin. I'd be curious what decision-making process went into the situation where "McDonnell Douglas bought Boeing with Boeing’s money". Was the MD management team just savy about mergers? Were consultants pushing for "value creation" involved? Or what?
I remember some good stories after the last MAX scandal, like https://qz.com/1776080/how-the-mcdonnell-douglas-boeing-merg.... It's not clear whether Stonecipher simply outmaneuvered Condit, or perhaps McDonnell Douglas execs were knowingly elevated because Condit didn't trust others, who might also have resented his decisons.
Interesting article: "An ambitious program of cost-cutting, outsourcing, and digitalization had already begun (before the merger)". It seems like Boeing may wanted MD executives "expertise" at cost-cutting based management.
Regarding costs of switching to different aircraft model - the type ratings themselves might not be that expensive, similarly parts and other preparations when looked in isolation.
Which is fine for privately-owned company, but not for publicly traded company that is going to take a pounding for the expenses over multiple quarters.
And similarly Boeing wanted to have a happy path over designing and certifying a completely new plane, which is frankly what they should have done - the 737 design could not be enhanced further without at least major recertification part (for example, going full fly by wire).
This is probably just confirmation bias on my part, but it seems like M&As and going public almost always make things worse for non-shareholders in the long run. Be that employees, customers, or the community around a company.
Wow, a whole lot of people in this thread don't know about Jack Welch and his outsized influence on the current state of US business. No, US businesses did not always focus exclusively on current quarter's earnings, nor did they lay people off every year to juice the share price. In fact, before Jack Welch, many US corporations openly said that their mission was to "build/provide X", and that dividends to shareholders were just another bill to pay on their way to providing X.
Although he wasn't the only one, Jack Welch was probably the biggest figurehead of the "shareholder value" movement, and was given deity status by the business press back in the 80s. The revelation that his amazing numbers at GE were based upon deceptive accounting practices, hasn't seemed to dampen his influence one bit.
I wonder why I'm being down-voted for this. Obviously I'm not advocating murder unless you really believe in time travel; it's a thought experiment about how the present would be different if this individual had not gotten to the position he did in the corporate world, similar to the questions about the effects of murdering Hitler before he joined the Nazis.
My thought is that taking out baby Jack Welch probably wouldn't have that much effect, and someone very similar would have come along not much later. I think a big part of the reason many big American companies were able to function the way they did (basically not worrying so much about profits) was because America got rich by being the one untouched industrial power at the end of WWII, and this gave them the luxury of building these companies into powerhouses that didn't have much competition to worry about and that could be idealistic and also wasteful. But this advantage eroded after several decades so it eventually became more important to maximize profitability and this required (or facilitated) someone like Welch.
> this gave them the luxury of building these companies into powerhouses that didn't have much competition to worry about and that could be idealistic and also wasteful. But this advantage eroded after several decades so it eventually became more important to maximize profitability and this required (or facilitated) someone like Welch.
You've got it backwards. The current state of US business is ideologically driven and wasteful. Two economies that were wrecked during WWII -- Germany and Japan -- are less shareholder driven than the US and therefore actually able to produce quality goods and services.
>Two economies that were wrecked during WWII -- Germany and Japan -- are less shareholder driven than the US and therefore actually able to produce quality goods and services.
That's true, but it seems like you're blaming Jack Welch for this. I think it was something that was going to happen anyway, and is simply a product of American culture.
What can reasonably be done to combat it? Leadership at all the biggest firms is on board with shareholder capitalism. To them, Welch style management just means line goes up...
It's going to take a long time, but first is to destroy the myth that corporations have one purpose they need to fulfill: Generate revenue and ensure things are profitable for shareholders. This myth artificially took root in the 1970s. Business schools have to stop teaching this.
That will only happen if we change laws to make boards and executives criminally liable for these types of problems.
We need to pierce the corporate veil and directly go after the responsible individuals when they, either directly or by deliberate ignorance, cause problems that lead to people dying etc. No shielding behind a corporation if your decisions to make lots more bucks led to avoidable deaths.
That isn't the corporate veil unless you mean to go after the owners/shareholders. Considering changes to what limited liability corporations can and cannot do is a potential avenue.
It took root in 1919, so I don't think that's actually the issue. The problem is short-term thinking based on financial markets and the ability of corporations to reinvest their capital freely. Regulating stock buybacks and the ability of corporations to invest in markets will cut down on corporate fissure.
Fairly certain he’s referring to Dodge v. Ford Motor Company, where it was established that a company needs to operate in the best interests of shareholders above all else.
Also IIRC there was a case before the Supreme Court where the dispute was whether shareholder value was the sole & supreme goal, or there could be other factors involved from other stakeholders (such as workers, the community, ...).
The Supremes ruled for shareholder value.
However I forget details of ths case. If anyone here happens to know what case I am referring to, please chime in.
I don't know of a case where the Court affirmed shareholder primacy - as far as I am aware it's a state by state thing though since Delaware has it in their code it impacts a massive number of corporations.
The problem with this assertion is that focusing on profit for the shareholders no longer has any downsides because the public is numb to it. So it's the winning play. We need regulations that sufficiently disincentive such behavior in order to approach equilibrium (that being a state where businesses exist to serve customers).
Ok, suppose the myth is destroyed and companies change their ways. Then a small group of activist investors demands a return to "shareholder value", the company refuses, and the investors orchestrate a takeover with other people who have not yet learned the myth was dispelled. What next?
Working in the best interests of shareholders is fine.
The problem is that because Boeing has a US monopoly and global duopoly on large jets neither the regulators or customers are willing to punish them when they under perform. Boeing has become too big to fail.
It's not a myth. It's a fact. The whole point of any for-profit company is to generate a return for the company's owners. Companies which fail to do so go out of business. It has always been thus.
As for the notion that Boeing has prioritized shareholder value over safety: just look at their share price over the last few days. It tanked by 10% since this accident occurred. Clearly, making safe planes is a prerequisite for generating shareholder value. There is no conflict there.
If leadership gets stock as part of their compensation, they don't get to sell it off until long after their tenure in leadership is ended.
The time horizon of these jokers is too short. If they had a 10 or even a 5 year risk horizon, they would not make these short-sighted decisions. The Welchian approach isn't just value destruction, over a longer time horizon it's quantifiably unprofitable for the business as a whole.
Forgive me a tangent here, particularly relevant with the 737, about how leaders regularly mistake economies of scope for economies of scale.
Scale and Scope are fundamentally different things, but M&A specialists and related finbros often treat them as equivalent. This is unfortunate. Scalar efficiencies are largely functions of density - more people buying the same thing over a given space. Scope involves equivalence - more people buying things that are just similar enough. This is a trap. In order to evaluate equivalence, you need domain knowledge, but in order to consolidate operations, you've already jettisoned that same domain knowledge. Also known as "Why do I need fuselage experts in three different places? It's just a tube! Let's just hire one outsourced Fuselage Expert".
Economy of Scope takes a truly heroic amount of domain knowledge among the M&A team to make it work, but if you're already convinced that finance contains the secrets of the universe, you're probably going to be dismissing domain knowledge as a basic concept.
Again - not for the first time - I marvel at the structural similarities of end-stage Soviet industry and our own late-stage financier capitalism.
Also, we need the state to act in the best interest of the people it serves, instead of in being held hostage by a few with much economic weight.
The state should wield power it derives from the mandate given to it by it's people, and it should defend the capability to influence the economy with that.
This fact seems to have been forgotten since the end of the cold war, when neoliberal theory seems to have been the defacto "truth" in economics.
It was enabled by deregulation, so regulation seems important.
That was enabled by more overt bribery of politicians (PACs, super PACs, etc.). So stop the bribes.
That happened simultaneously with changes in how business was depicted by media, whether news or entertainment. So . . . convince the heads of that small handful of companies to change their representations.
And so far that's just the US. All of these things are global.
My point is that just combating the existing problems is akin to whack-a-mole. A new pervasive philosophy will replace neoliberalism, though. Maybe put effort into pushing whichever of those seems best?
Meh... it's trendy to blame Jack Welch, but it's not like companies have always chased money and always will. Many will cut corners, and it often works out just fine, others crater their business.
airbus was made as a very deliberate political project from various european countries to stay competitive in the airline bussiness.
Mind you this happened around the same time many foundations of a lot of european institutions where formed, and airbus is the primary example of a intra-european company in both its bussiness form (being an S.E[0]) aswell as in the way its products get build across different member states.
Airbus has done the thing that the EU aims to do on a political scale, merge many different smaller european entities to stay competitive against both the US and China on the global scale.
Which makes Airbus even more impressive, TBH. How many "deliberate political project from various countries to stay competitive in the X business" can you think of that actually became successful?
They're seriously trying to blame the problems of Boeing on a merger from nearly 3 decades ago. The culture of the company surely should have evolved radically over 3 decades
No way in the world will airlines, or the US government, accept a world where Airbus is the only company able to sell you a passenger airliner. Nor would they accept a word where the alternative to Airbus was Comac.
In which case, isn’t it in our collective interest to stop the rot? Doesn’t this imply that government (or some other representative body) should act to stop the decline in whichever manner seems most appropriate?
That we tolerate such monopolies in our generally capitalist nation really demands re-evaluation. Efficiency of scale does not tend to benefit consumers that monopolistic rent extraction detracts. Moreover, I think that any National Security arguments for monopoly control is such sectors is, on its face, weak.
Betteridge’s Law says “no.” Also any sort of real analysis can lay the blame squarely at capitalism itself, demanding ever increasing profit with ever decreasing margins ad infinitum.
That doesn't make sense, the decisions which lead to the 737 MAX debacles were made well before the now receding wave of corporate DEI efforts. 737 Max was announced in 2011, work (likely) started a few years prior to that. DEI started gaining traction around 2014, really took off in 2020, if you trust google trends.
A Boeing with chutzpah would have committed to a new plane in the last decade. Their real failure was a failure to aim high. Long before DEI.
At least you've dispensed with any possibility that you're discussing this in good faith. Your flagged comment was nonsensical, please spend some time reacquainting yourself with basic logic and the nuances of fallacies before embarrassing yourself again in the future.
No, I'm just annoyed when someone bleats on about any fallacy and doesn't understand it. Your willingness to attack me in the same way is amusing though.
> And it even stumbled in its quest to build the US President’s new Air Force One.
Technically of course, Air Force One is a call sign, not an aircraft. The quote is from an FT article which indicates the Boeing bill for retrofitting two custom 747-8s was $3.9B USD, marked down from 5B after Trump called the price "ridiculous". I agree with him.
I know ahead of time that what I am about to say, will result in me getting yelled at by the HN crowd that what I am saying is anecdotal and all that. But, after refraining for a while, I guess I have to say something so, I know you will down vote me because this is not based on a scientific A-B test blah blah. Cool.
People's lives are at risk. And No, I DO NOT work for Boeing and never have. I work for a company that makes a product that does not involve any risk to people's lives, we make a dumb thing.
I live in Seattle, and yeah, I know a lot of people who currently do, or have worked for Boeing. So, yes, this is not a scientific study, again, down vote button is in the lower left over there. Have fun with that.
But from what I have heard, there is something "wrong" at Boeing. And yeah, this is not scientific, got it.
But, from my, unscientific study, that plant in Renton seems to be especially problematic and it sounds like from what I have heard, the Renton operation where the Max 9 and all the other Max N's are were made, there is something especially "wrong:' there. I just cannot NOT say something.
It seems like there is a pattern here, I know this is all anecdotal and all that. But it seems like that particular operation has a management problem that is putting peoples lives at risk.
I suspect you were downvoted because 80% of your post was about how you expect to be downvoted (when HN guidelines ask that we not talk/complain about downvoting), and then other 20% was "there is something wrong at the plant", but you didn't elaborate on that at all. I didn't learn anything useful or interesting from your post, and I'm not getting that time back.
