Flying Blind

Key Takeaways

Under Consideration — to be added.

Interconnections

Under Consideration — to be added.

Highlights

• Most disturbing was what the crashes revealed about the rotted culture of an iconic American company, as the plane’s grounding stretched to almost two years, cost more than $20 billion, and finally forced the departure of Muilenburg. Once ruled by engineers who thumbed their noses at Wall Street, Boeing had reinvented itself into one of the most shareholder-friendly creatures of the market. It celebrated managers for cost cutting, co-opted regulators with heaps of money, and pressured suppliers with Walmart-style tactics.
  • #Anduril
• An employee despairing of foul-ups wrote, “This airplane is designed by clowns, who in turn are supervised by monkeys.”
• Until the pandemic, a 737 was landing or taking off somewhere around the world every 1.5 seconds.
• The acquisition of McDonnell Douglas a year earlier had brought hordes of cutthroat managers, trained in the win-at-all-costs ways of defense contracting, into Boeing’s more professorial ranks in the misty Puget Sound. A federal mediator who refereed a strike by Boeing engineers two years later described the merger privately as “hunter killer assassins” meeting Boy Scouts.
• It’s become sadly apparent that at Boeing—as at so many other places—the assassins won. Some of the very people who ran McDonnell Douglas into the ground resurrected the same penny-pinching policies that sank their old company. Borrowing a page from another flawed idol, Jack Welch’s General Electric, they executed what today might be called the standard corporate playbook: anti-union, regulation-light, outsourcing-heavy. But pro-handout, at least when it comes to tax breaks and lucrative government contracts.
• Rather than investing in new aircraft, Boeing’s leaders poured more than $30 billion of cash into stock buybacks during the MAX’s development, enriching shareholders and ultimately themselves. Muilenburg made more than $100 million as CEO, and he left with an additional $60 million golden parachute.
• What happened at Boeing reflects the same forces that have roiled corporate America since the Reagan revolution ushered in an era of imperial leaders like Welch, obsessively focused on stock market investors.
  • Reagan ruined everything
• The same year that Boeing bought McDonnell Douglas, the Business Roundtable, a lobbyist for the largest U.S. corporations, did away with any pretense that employees, customers, or communities also had important voices. The group declared that the first duty of any company was to shareholders; everything else would follow, as if by some natural law. In 1997, this new statement of purpose was uncontroversial enough that few newspapers even carried a story about it. It was the fulfillment of a long shift away from the communitarian ideals that had dominated American politics, economy, and culture from the New Deal of the 1930s to the Great Society of the 1960s. That consensus was just starting to fray when Milton Friedman, the Reaganites’ favorite economist, argued what was then still the contrarian viewpoint in the New York Times Magazine in 1970: “The social responsibility of business is to increase its profits.”
• The federal government’s mismanagement of the COVID-19 crisis was only the most visible sign of decay in American institutions—the effects are felt in virtually every aspect of life, from soaring health-care costs to skyrocketing inequality to wildfire smoke blanketing American cities for weeks on end because of escalating carbon emissions. All stem at least in part from the failed belief that corporations will police themselves and shower us in riches if they’re just left alone to do so (and are lightly taxed all the while).
  • #[[American Exceptionalism on Trial]]
• It’s impossible to divorce these regulatory failings from the financial imperatives underlying them.
• The 737 remains the only large commercial aircraft without an electronic checklist to assist its pilots, who depend on heavy binders laden with step-by-step instructions to guide them in the event of an emergency.
• Before its grounding, the MAX, in its limited service, had a fatal accident rate of one in every two hundred thousand flights—a frequency not seen since the early days of the jet age.
• The next year, Congress passed a law barring airplane manufacturers from owning airlines and required a rebid of all existing contracts. Bill Boeing, at fifty-three, took early retirement and, in disgust, sold all of his shares in the newly separated companies.
• A commercial aircraft presented vastly greater challenges, for reasons still true today. Most obviously, there’s no government contract putting a floor under revenue for passenger planes, promising a certain return if milestones are met. For a commercial plane, the capital to turn a blueprint into reality—the massive sums for machinery, tools, engineers, mechanics, pilots, flight testing, marketing, administration, regulatory affairs, customer service—all comes up front. After years of expense, the manufacturer has a single product, with no guarantee of sales.
• But Wells, as Johnston later described the scene, simply said, “We will fix it.” In a Boeing-commissioned history, George Schairer, the engineer who had pored over Nazi jet research, said such a response was typical of Wells, for decades one of the company’s most influential leaders. “When something goes wrong with an airplane, what should an engineer do? Send out public relations? The lawyers? Or the engineers?” Schairer said. “It’s easy for the bean counters to call out the lawyers—and the lawyers will say, ‘There was nothing wrong with our airplane—it was pilot error.’ A manufacturer can go on for years this way. Wells wouldn’t put up with that.”
• All reported to “functional fathers,” experts of the various disciplines—such as structures, flight controls, and propulsion—who had wide authority over designs. They were encouraged to fight loudly for their views in the name of a better, safer airplane.
• Wygle persuaded the program’s manager to address the issue with a redesign costing $22 million (about $200 million today). “I said, ‘I know it’s a big chunk to swallow, but the airplane’s going to be around a while and I really think we ought to do it,’ ” Wygle recalled—to which his manager replied, “Well, if that’s what you think, we’ll do it.”
• As the investment banking firm Lazard Frères explained in a report that year, Douglas suffered from “an overly sales-oriented operating management in the Aircraft Division which appears to be functioning with little coordination with corporate staff.” With a backlog of orders, but without the funds to produce the necessary planes, Douglas was left with no choice but to sell to rival McDonnell Aircraft of St. Louis.
• When the director started probing the projected investment returns at the meeting, a senior manager replied that they’d run some studies but forgot the results. “My God, these guys don’t even know what the return on investment will be in this thing,” Greenewalt muttered.
• They built and tested the first 747s in just sixteen months—right on through the moon landing.
• In the same compressed time frame as the engineering work, thousands of machinists built a giant new Everett factory—the largest building by volume in the world—to assemble the plane. It’s so big that clouds sometimes form in its upper rafters.
• The Boeing chief was well paid, one of a dozen industrial executives in the country who earned more than $1 million in 1978. (Adjusted for inflation, his pay was equivalent to $5 million in 2019—less than a quarter of the average CEO compensation of $21.3 million that year.)
• The Seattle plane maker surprised crash investigators when it issued a mea culpa just weeks after the crash. A statement said one of its repair teams had incorrectly installed a splice plate on the jet’s rear bulkhead after a hard landing that damaged the tail section years earlier. Japanese officials, just settling in for a long examination and tough negotiations, were stunned at the company’s transparency. In a single stroke, Boeing had swiftly curtailed a drawn-out legal fight—and ended any doubts about the company’s integrity.
• NASA’s organizational structure, Sutter discovered, was a mess, with competing fiefdoms, tangled reporting lines—and no top-level leader focused solely on safety. It would never happen at Boeing, Sutter declared.
• “In the aviation industry, you make these [new airplane] decisions every ten years, give or take a few,” the analyst Wolfgang Demisch of First Boston said. “You then have to live with the consequences for the next fifty.”
• “No one of us is smarter than all of us,” Condit would tell people.
• One saying went that every airplane development program has twenty thousand surprises; the point was to send a message that bad news was welcome. Trying to avoid confusion and costly changes, Boeing created a group of early customers it called the “Gang of Eight” and involved them in all design decisions.
• Mulally often repeated maxims like “no secrets” and “the data will set you free.”
• “The only thing that will make me rip off your head and shit down your neck is withholding information,” one engineer recalls him saying.
• “A lot of the Boeing management were engineering oriented,” he says. “They weren’t the money people, contract people.”
• “The 777 was Boeing’s Camelot,” Morton said. It was also expensive, ultimately costing as much as $12 billion, by some estimates. As with earlier programs, the sum was tough to swallow at first. But as orders rolled in—eventually more than two thousand—it proved to be the right choice. Time, inflation, and the lure of a well-designed product worked their magic, in the staggering arithmetic of an industry that completes tens of millions of flights each year. With list prices starting at $150 million, the value of the deliveries soared past $250 billion—more than enough to recoup the investment.
• Meeting with engineers in the Speea union around the time the new planes were being built, he told them that Boeing’s products had attained “theoretical perfection,” a remark that led to a few smirks from the people who knew the imperfections all too well. Woodard’s point was that the heady days of the jet age, when flying machines had shrunk the world with vast leaps in range and speed, were over. Airplanes were now a commodity, like most everything else. The physicist Stan Sorscher asked him about all the ideas they had to improve their products and processes: Wouldn’t implementing those help?
• The junior McDonnell was quietly planning his exit. In 1994, a year after Defense Secretary William Perry held what later became known as “the Last Supper” to urge the chiefs of America’s competing military contractors to consolidate, McDonnell and Boeing’s then CEO Frank Shrontz began their first tentative conversations about a merger. The combination had a certain commercial logic: McDonnell’s military programs like the F-15 fighter and Apache attack helicopter balanced out Boeing’s jetliner franchise.
  • #Anduril
• That same year, John McDonnell hired Harry Stonecipher, a driven protégé of Jack Welch, as the first outsider to run the family business. McDonnell cautioned him that a sale to Boeing was likely. Stonecipher, then fifty-eight, told an associate that if a merger came to pass, he would probably retire. As it happened, he wouldn’t go nearly so quietly, ushering in a bottom-line mindset that would shake the proud Pacific Northwest engineering firm to its core. In fact, by the end of it, Boeing would be neither from the Pacific Northwest nor, to hear Stonecipher tell it, an engineering firm at all.
• But the money isn’t free. When companies buy back shares, they’re forgoing other spending, like investments in their next line of products or pension contributions. McDonnell Douglas ramped up buybacks over the next two years; simultaneously, it cut its R&D spending 60 percent.
• GE met or beat Wall Street’s expectations every quarter from 1995 to 2004. Welch was an innovator in the euphemistic art of “earnings management,” relying especially on the opaque dealings of GE Capital. The unit might sell half a parking lot at the close of a quarter to juice earnings, then buy it back later.
• Privately, longtime Boeing executives grumbled that they’d been played. When they took a closer look at the Douglas machinery in Long Beach that they had just acquired, they reported that it hadn’t been updated since World War II. Boeing’s factories had an extensive network of overhead cranes on rails; at Douglas, the workers were mounting engines on the planes with what looked like rented mobile cranes. Woodard told people their old rival “brought nothing to the table but a lot of headaches.” He was especially upset that his exclusive sales deals—“the most beautiful thing we’d ever done”—were voided as part of the deal.
• (Indeed, the European company would have been Stonecipher’s next call: “If the merger with Boeing hadn’t happened, we’d be building Airbuses in Long Beach,” he said years later.)
• “McDonnell Douglas has bought Boeing with Boeing’s money,” T. said ruefully. The phrase was soon widely heard around Boeing, with few aware that one of the company’s most legendary leaders had come up with it. T. told at least two of his former deputies that grooming Condit for the top job had been his biggest mistake.
• When it came to the dark arts of corporate one-upmanship, many at Boeing were novices. Their products may have won in the marketplace, but the people who designed them were scientists and craftsmen, not sharp-elbowed operators.
• T. Wilson himself, asked once how many people worked at Boeing, had jabbed back: “About half.”
• “When the McDonnell Douglas guys came in, they just went through them like a knife through butter.”
• After a months-long series of meetings to plot how to rationalize their many duplicate facilities, labs, and administrative offices, the McDonnell Douglas team presented the lead manager on the Boeing side, C. Gerald King, with a plaque. It showed an Economist cover of two camels humping, the illustration for a story about the challenges of corporate mergers, with the added line, “Who’s on Top?” Embarrassed, King put it in a closet.
• Stonecipher gave the opening speech. He frequently lectured people about how Boeing needed to be a “team,” not a “family,” the word people there had always used partly because it was true: sons had followed fathers, and grandfathers, to Boeing. Managers there always thought of it as a strength, said Fred Mitchell, the executive who’d survived the 747 bust when desks were stacked thirty feet high: “We fought like hell but when push came to shove we all came together.” Stonecipher brought in a consultant who’d written a book about how Phil Jackson managed the divergent personalities on the Chicago Bulls to drive home the message. But the takeaway, for many, was that if you’re Dennis Rodman—the team’s disruptive, narcissistic power forward—it will be tolerated as long as you get results.
• Condit told Woodard he was being replaced by Alan Mulally, the highly regarded leader of the 777 project; an announcement would go out after the meeting. Incredibly, no one so high-ranking had ever been fired so publicly at Boeing.
• The idea is to encourage efficient use of assets—what the boldfaced Welch was so insistent on improving in Boca Raton. In practice, the easiest way to make the number go up was by selling off plants. It was the Walmart model: Boeing would still get the parts it needed to build planes, but it would get them from smaller, more vulnerable suppliers, whose costs could be squeezed and union benefits renegotiated or eliminated.
• Morton kept a list of “things to remember”: Courage. Will. Perseverance. Skill. “And in flying, the superior pilot uses superior judgment to avoid situations that might require the use of superior skill!”
• Morton told him it was really a “quasi-union,” not the kind of labor union Dagnon knew from the railroad company. “They see themselves as the defenders of Boeing’s virtue and values in a technical sense,” Morton explained. “Hmm, sounds like a union to me,” Dagnon had replied.
• The executives who’d come from McDonnell Douglas, he said, were “hunter killer assassins”—and those from Boeing, “Boy Scouts.”
• Sorscher, the scientist, recalls telling Marie Douglas, an analyst from Lazard Asset Management, that the strike had been emotional. He said the feelings were far different from anything he’d ever experienced at Boeing, which now seemed ruled by anger, fear, and pride. “Really? That’s my experience every day on Wall Street,” replied Douglas, then twenty-eight. Blond, six foot three, and a countess from Sweden, Douglas would go on to marry George David, the CEO of United Technologies, another of the aerospace companies she covered. (Their divorce at the height of the Great Recession in 2009 became a tabloid sensation when, though the couple were childless, she asked for $53,000 in maintenance—per week. That included $4,500 a week for clothing, $1,570 a week for horse care, and $600 a week for flowers.)
• He asked: “Which would you rather have—a high-performance work environment with high productivity, or lower unit costs?” He had meant that second option as the straw man, the obviously stupid choice. But the Oppenheimer analyst evidently took it as a real question. He folded his arms and looked up, thinking. Finally, he answered: “Lower unit costs.”
• Within a year, Condit surprised the workforce with an even bigger takeaway: he was moving Boeing’s headquarters to a city far removed from its workers and their communities, the better to make cold calculations about the future of the jet business.
• Of course, after the bursting of the Internet bubble in the early 2000s, the September 11 terrorist attacks, and the 2008 financial crisis, even the wisest business leaders would have to acknowledge that they didn’t know where the puck was going—and in fact, maybe it was going to be a basketball.
• “Headquarters is supposed to be thinking longer-term: Where are markets going, have we positioned the company correctly, are we developing the right people, what’s the compensation structure that we have—the kind of things that are not how-do-you-design-an-airplane stuff,” as Condit recalled it later. “How do you avoid getting deeply engaged in the day-to-day activity, and ignoring those strategic things?”
• On March 21, 2001, Condit stunned the city where Bill Boeing built his first wooden float planes by saying he would move the headquarters to one of three cities: Chicago, Dallas–Fort Worth, or Denver. It would be “a new, leaner corporate center focused on shareholder value,” the statement said.
• The executive that Condit is thought to have edged out in the CEO succession race, Jim Johnson, made a point of leaving the factory through a different door every night so that he could talk to different people on the line. Johnson invited mechanics to have lunch with him once a week without their bosses. (He departed Boeing in 1993 after Condit was named president.)
• “As long as we are side-by-side with commercial airplanes, the view always is that’s what we’re about,” he said.
• The Boeing World Headquarters would be thirty-six stories above the Chicago River in what used to be called the Morton Thiokol Building—named, ironically, after the infamous maker of the failed O-rings in the Challenger explosion.
• In a conversation with another Wall Streeter, as Sorscher argued against excessive cost cutting, the analyst quickly cut him off. “What you’re saying is you’re different,” he said. “Everybody thinks they’re different. Nobody is different. This works for everybody. It works for running shoes, ladies’ garments, hard drives, cell phones, integrated circuits. And it will work for you, too.”
• “If in fact there’s a reverse takeover, with the McDonnell ethos permeating Boeing, then Boeing is doomed to mediocrity,” he said. “There’s one thing that made Boeing really great all the way along. They always understood that they were an engineering-driven company, not a financially driven company. If they’re no longer honoring that as their central mission, then over time they’ll just become another company.”
• Under soft-spoken finance chief Boyd Givan, Boeing had sought to keep cost data out of the hands of rank-and-file engineers, to keep the information from compromising their designs; now the opposite was true. Boeing wanted them all to make decisions with the cold eye of a Jack Welch or a Harry Stonecipher. After finishing the course, engineers were meant to “understand, God, that program has to be produceable, I can’t put every bell and whistle on it,” said Boeing’s vice president of learning, Steve Mercer, the former deputy at Crotonville.
• He said he was “a math guy,” not an “airplane freak.”
• The only way to meet it would be to outsource pieces of the plane, as McDonnell Douglas had done, to its detriment.
• John Hart-Smith, then sixty, called the paper “Out-Sourced Profits—the Cornerstone of Successful Subcontracting.” In fifteen densely worded pages, he laid out from his own experience at Douglas Aircraft how parceling out construction of the DC-10 had impoverished the company while enriching its suppliers. The basic point was that outsourcing is never simple. Design specifications actually had to be more precise, because any omissions would lead to costly disputes involving lawyers. Making sure the work got done right led to additional overhead costs that no one had counted on. Finally, all those extra costs had the perverse effect of making the company doing the outsourcing look less efficient than the ones it awarded business to—a vicious cycle that only encouraged more of the same destructive behavior.
  • #Anduril
• First came a scandal at the rocket launch business, where it emerged that executives had used thousands of pages of proprietary documents from competitor Lockheed Martin to help win the lion’s share of a critical contract. That July, the air force stripped Boeing of $1 billion in deals and barred it from future work while the government initiated a criminal investigation.
• Stonecipher had an ever-combative answer for those who claimed he’d taken the cost focus too far. “When people say I changed the culture of Boeing, that was the intent, so that it’s run like a business rather than a great engineering firm,” he told the Chicago Tribune that year. “It is a great engineering firm, but people invest in a company because they want to make money.”
• Stonecipher sold off giant parts-making operations, including a factory in Wichita that Boeing had owned for seventy-five years and employed seventy-two hundred people. It may have improved the RONA numbers, but it made everyone’s jobs harder. Now when they needed a part at the last minute or had an idea for a process improvement, it wasn’t a call with a colleague; it was a negotiation with lawyers, procurement-chain executives, human-resources representatives—all the overhead hassles Hart-Smith had warned about in his treatise.
• “In the old days,” he reportedly told a colleague in the parking lot one day, “you would go to the board and ask for X amount of money, and they’d counter with Y amount of money, and then you’d settle on a number, and that’s what you use to develop the plane. These days, you go to the board, and they say, ‘Here’s the budget for this airplane, and we’ll be taking this piece of it off the top, and you get what’s left; don’t fuck up.’
• Klaus Brauer, a silver-haired Boeing sales executive who frequently hosted customers there, kept telling anyone who would listen that getting rid of the mockups was a bad idea. He got a sympathetic hearing from fellow salespeople; the exception, he said, was “people who were on a career track to potentially go to the corporate office.” To those in thrall of the metrics, rooms that sat empty most of the time were an enticing target for savings.
• Mulally resisted, telling people at a meeting in 2006, “If you hire a team that you think is really good and they’re all performing well, why in the hell would you eliminate 10 percent every year?”
• At one meeting, Bair walked a roomful of managers, including Mulally, through a color-coded status report illustrating the likelihood that various systems of the airplane would meet expectations. The chart showed mostly green boxes, with a couple of yellows. The uniform positivity, to those versed in the usual travails of new airplane programs, was as disturbing a sign as if they had been uniformly red.
• For people who thought of Mulally as Boeing’s engineering soul, it was hard to watch. “The idealism just went out,” a Mulally lieutenant said. “It was no longer about working together, it was about something else—I guess shareholder value.”
• the elder McNerney pioneered managed care, in which insurers became the dominant middlemen dictating access and prices. He finished his career on the faculty of Northwestern University’s Kellogg School of Management, where his lectures somehow made health policy spellbinding. “Because of his drive, brilliance and devotion, many citizens who otherwise would have been left vulnerable or even destitute now have health care coverage,” the publisher of Modern Healthcare wrote of Walter McNerney.
• In 1982, McNerney finally landed at General Electric, run at that point for little more than a year by a live wire named John Francis Welch Jr. It was the year Fortune magazine first used the term downsizing in reference to people.
• General Electric had increased its earnings for twenty-six straight quarters and outperformed the stock market over the previous decade, but as Welch told the analysts that day: “We have the commitment and the potential to do better.”
• Welch’s talk, titled “Growing Fast in a Slow-Growth Economy,” has often been identified as the birth of the “shareholder value” movement. He never used the phrase. What he was really birthing was the imperial CEO, the notion that a brilliant, Clausewitzian tactician could be entrusted to improvise boldly and impose his will upon economies and nations.
• One in four people on the payroll, 118,000 jobs, were gone within five years. “Neutron Jack” had arrived.
• Labor union membership in the United States had reached a peak of 21 million in 1979. Reagan’s tough stance is frequently credited with emboldening a generation of corporate leaders to similarly challenge unions in that decade’s wave of downsizing.
• While GE rarely suffered strikes during his tenure, it wasn’t because he was conciliatory. If any of its businesses had a heavy union membership, they were candidates for an early sale. In a dizzying seven years, GE’s workforce went from 70 percent unionized to 35 percent by 1988.
• At the SEC, run by a former executive from the E.F. Hutton investment bank, the implementation of Rule 10b-18 in November 1982 drew little notice in the press but opened the way to a sustained transfer of wealth. The rule gave companies that purchased shares of their own stock in the open market “safe harbor” from charges of manipulation, as long as they didn’t exceed a limit of 25 percent of the daily trading volume. Over the subsequent decades, the University of Massachusetts economist William Lazonick wrote, “stock buybacks have channeled the productivity gains of U.S. business into the hands of the richest households, while the persistent gushers of corporate cash have played a major role in the rise of the financial sector over the once-dominant manufacturing sector.” From 1981 to 1983, he calculated, buybacks consumed only 4 percent of net income for the largest U.S. companies. By 1996, it was 27 percent; by 2006, 46 percent; and by 2016, 50 percent. Two generations later, in any prosperous American city, the unequal effects are plain—Teslas, luxury high-rises, avocado toast. And tents.
• Fortune had just named Welch “Manager of the Century,” and he was enjoying a victory lap. GE’s market value had increased from $12 billion to $410 billion over his twenty-year reign. Unprecedented portions went straight back to investors and Welch himself. From 1994 to 2004, GE spent $75 billion, 56 percent of its free cash flow, on stock buybacks and dividends. Welch left with a $417 million severance and still got the company to pay for perks including an $80,000-a-month Manhattan apartment, courtside tickets to New York Knicks games, box seats for both the Boston Red Sox and the New York Yankees, country club fees, and a standby private jet. (The perks were later exposed, to a considerable public outcry, during Welch’s divorce from his second wife, sparked by his affair with the editor of Harvard Business Review while she was profiling him; he agreed to pay GE for them.)
• The Minneapolis company was the birthplace of masking tape, Thinsulate, and the Post-it note. It had a culture of innovation that employees treasured. Official policy allowed them to use 15 percent of their time on pet projects, and the tenets of “the 3M Way” included generous funding for independent research. The Post-it note famously emerged after years of trial and error, from an employee who wanted to mark passages in his hymn book. In just over four years, McNerney doubled the company’s annual profits; the stock price rose 30 percent. He did it by going straight at 3M’s future, slashing capital expenditures 22 percent in his first full year and 11 percent more to a low of $677 million in 2003. R&D spending was held constant at just over $1 billion from 2001 to 2005, and McNerney cut eight thousand jobs, about 11 percent of the workforce. Many of those laid off were older, higher-paid workers. “We should be developing 30 year olds with General Manager potential,” read one email summarizing McNerney’s “vision for leadership development” that later turned up in a discrimination suit brought by the Equal Employment Opportunity Commission. Research was evaluated with a new, profit-minded rigor. Steven Boyd, a PhD researcher whose job was eliminated after thirty-two years in 2004, told BusinessWeek that after a couple of months on a project, he would have to fill in a “red book” with scores of pages worth of charts and tables, analyzing everything from the potential commercial application, to the size of the market, to possible manufacturing concerns. Critics of the new CEO included the inventor of Post-it notes himself, Art Fry, who said he wouldn’t have invented them under McNerney’s strictures. “What’s remarkable is how fast a culture can be torn apart,” he said.
• In the year McNerney took over, Boeing spent $9.2 million on lobbying, with 66 lobbyists. Five years later it spent $18.1 million, with 143, ranking sixth among all American companies. “We used to have a few people in Washington, D.C., and now we have an empire,” marveled one former executive. Even the air force refueling tanker, lost in scandal, returned; Boeing won a $35 billion contract.
• Another lucrative defense program was Future Combat Systems, run by Dennis Muilenburg. Boeing was tasked with creating a networked system linking mortars, cannons, ground vehicles, and infantry for the U.S. Army. “We are right on cost, right on schedule, and meeting all the performance requirements,” Muilenburg told reporters who watched a live-fire demonstration at Maryland’s Aberdeen Proving Ground in September 2005. Four years later, Defense secretary Robert Gates killed the program after almost $20 billion had been spent. It was a “toxic” contract in which the industry consortium led by Boeing and a partner, SAIC, had effectively been in charge of overseeing its own performance, Defense News reported. “I think this program single-handedly set the Army back a generation in vehicle technology,” said Todd Harrison, a defense analyst at the Center for Strategic and International Studies.
  • #Anduril
• Mike Bair, the Mulally protégé who led the program, talked up the benefits of outsourcing more work, saying that when Boeing had sent specifications to its electronics supplier for the 777, the document was twenty-five hundred pages long. “There wasn’t a lot left to the imagination,” he said. “We told them exactly what we wanted in excruciating detail,” he said. Distressingly, the equivalent specification document for the Dreamliner was just twenty pages.
• When the vendors sent designs to Customer Services, the department charged with writing manuals telling airlines and maintenance workers how to use their new airplanes, huge sections of them were blank, stamped “proprietary,” said Cynthia Cole, the president of the engineers’ union at the time. How could Boeing’s workers provide instructions if they had no idea themselves how the planes worked?
• Yet Boeing’s incentive structure practically guaranteed it. The compensation of McNerney, Luttig, and other top executives was tied to boosting free cash flow and the net return from assets on hand—the sort of metrics that tend to favor investors over employees and customers. It reflected the shift in priorities at Boeing that had begun under Stonecipher. In 1999, executive compensation had been based on earnings from operations, as well as such intangibles as “customer and employee satisfaction, safety, and diversity.” By 2007, the focus was on “optimizing net assets,” as the Boeing proxy statement explained. “This is done through more efficient processes, cost containment and minimized inventory, among many other ways.”
• Ironically, one of the management theorists who had inspired Boeing’s reinvention—Harvard Business School’s Clay Christensen, author of the influential piece about “skating to where the money will be”—had started having second thoughts about pushing business leaders to use rigorous financial metrics that encouraged conserving capital. With interest rates at historic lows, capital was now abundant. In a 2014 article called “The Capitalist’s Dilemma,” Christensen wrote that companies needed more “market-creating” innovations, not “efficiency” innovations, whose benefits lasted only a year or two and cost jobs. “Much as it pains us to say it, a lot of the blame for the capitalist’s dilemma rests with our great schools of business, including our own,” he wrote. “We’ve advanced success metrics that are at best superficial and at worst harmful.”
• In McNerney’s single-minded emphasis on cost savings, there was something else that went unmentioned in his letter to stockholders: Safety. For five years of his tenure—from 2010 through 2014—the word was nowhere to be found in the company’s annual proxy statements. As one board member who served during those years put it, “Safety was just a given.”
• The first organizational charts sent around about this new system—mandated by Congress—had the headshot of the FAA manager in charge underneath his counterparts at Boeing. The implication was clear enough: the regulators were there in service of Boeing, not to police them.
• The FAA would have only vague “organizational” supervision under a plan that was supposed to make the agency more “risk based” and efficient. The implicit message was clear: the FAA’s primary responsibility was to hasten the production and sale of American airplanes, not to burden plane makers with red tape.
• When the drill sergeant asks Gump why he completed the task so quickly, he answers dully, “You told me to, drill sergeant.” Reed started telling colleagues in a Gump voice what he would say if he was ever hauled in front of Congress to explain why a Boeing plane had been waved briskly through certification: “You told me to, Congressman.”
• Christopher Witkowski, who wasted little time addressing the elephant in the room. “It’s our belief that Congress and the American people have lost oversight of the deep workings of this major rule making committee,” he said. “It’s dominated by industry representatives whose goals may sometimes be at odds with the public interest.”
• In her first major speech as FAA administrator, at the Aero Club in Washington in February 2003, Blakey announced what she called the “customer service initiative.” It was a breathtaking shift in emphasis. She said the FAA needed to be more responsive to its customers—by which she meant manufacturers and airlines, not the flying public. She expressed sympathy for the inconsistent answers and long waits they sometimes experienced—as if the country’s top aviation authority was some kind of corporate call center—without mentioning the funding shortfalls that had starved it of resources.
• “We are committed to a dynamic, results-oriented plan that we’re going to pulse regularly, measure quarterly, and adapt as necessary real-time,” she said. “In short, we will run the FAA more like a business.”
• Among the critics of the new mandate was Jim Hall, the former chairman of the NTSB who had pursued the investigations into rudder defects on early 737 models and the explosion of TWA Flight 800. “The primary reason we’ve been able to build such a safe system is the structure we’ve had in place for years,” he said. “The ultimate responsible party for safety is the government, and this new FAA policy essentially is trying to transfer that responsibility. It may work in the short term, but in the long term the public will see that what we have is a less safe system.”
• He ordered the FAA to ground the Dreamliner, the first time the agency had done so for a Boeing jetliner and its only grounding of any model since the McDonnell Douglas DC-10, when a federal judge ordered it after the Chicago crash in 1979.
• Roger Williams, a Texas Republican, asked an FAA official a couple of perfunctory questions. “Would you feel comfortable flying on a Boeing 787?” (Yes, came the answer.) “Do we need to get more involved?” (No.) “Less government is the best government,” he concluded.
• Boeing had introduced a new employee-ranking system that, according to Speea, made it more likely that experienced workers would be laid off. For engineers in their forties, the chances of a layoff doubled; in their fifties, it tripled. (It echoed the strategy McNerney had used to pare the workforce at 3M, which the Equal Employment Opportunity Commission determined was unlawful—3M in 2011 paid $3 million to settle an EEOC lawsuit from hundreds of people over forty-five laid off while McNerney was running it.) “We no longer think that we’re hiring people forever,” the Boeing CEO told the publication at his alma mater, the Harvard Business School, in 2013. “We understand that we are not going to get fiercely loyal people who will never leave like we did in the 1950s.”
  • People didn’t spontaneously grow less loyal. Companies systematically stopped being loyal to employees.
• McNerney’s phrase—“more for less”—became the company’s driving theme as it embarked on the MAX, a sharp contrast to “Working Together,” the motto Phil Condit had advanced in the early 1990s during the successful creation of the 777. The implications were clear: More performance, lower cost. More range, less fuel burn. But also: more work, fewer people. And ultimately: more risk, catastrophic return.
• Whoever yelled loudest got what they wanted, said one person who worked directly with the engineers who coded the MAX software. When it came to fulfilling the FAA’s requirements, he said, the regulator was just one more constituency to satisfy. And not a particularly forceful one. In dealing with the agency’s specialists, Boeing’s engineers came up with what was called “the drawer full of paper” technique. “If you can just inundate them with information it makes them go away,” he said.
• Paying for pilots, maintenance, and cabin crews, plus all of the training needed to operate aircraft safely, comes to 20 percent of an airline’s operating budget—more than is spent on fuel.
• From 2010 to 2020, carriers took delivery of single-aisle jets worth $442.2 billion—36 percent of all such planes manufactured in the previous half century, according to Richard Aboulafia, the Teal Group consultant.
• “People have to die before Boeing will change things,” Ewbank was told by his manager.
• Overall, Boeing’s workforce fell 7 percent in 2015, while making many more planes. The climate didn’t reward people willing to buck managers, said Mark Rabin, who worked in a flight test group that supported the MAX. He was let go that year after a seventeen-year Boeing career. “It was pretty intense low morale because of all the layoffs—constant, grinding layoffs, year after year,” he said. “So you really watched your step and were careful about what you said.”
• When he complained, a supervisor replied, “Bill, you know we can’t find all defects,” according to the suit. Hobek called over an inspector, who quickly found forty problems. Other employees described defective manufacturing, debris left on planes—wrenches, metal slivers, even a ladder—and pressure not to come clean about it.
• Muilenburg, whose goal in college had been to be the world’s greatest airplane designer, had discovered a new inspiration. “In the past, we may have said our best engineers are working on the new thing,” he said. “Now, we want our best engineers working on innovative reuse.”
• Boeing estimated that its cumulative “economic profit” was $8.3 billion, compared with a target of $5.7 billion. For the higher-ups, that meant a maximum award of twice their targeted bonus. The rank and file weren’t as lucky. The average bonus for salaried nonmanagement staff for 2014 was $4,500.
• While they pressured the engineers for savings, Boeing enriched shareholders, spending $41.5 billion on stock buybacks from 2013 to 2018—enough capital to develop several all-new aircraft, had they chosen to. Almost 80 percent of the free cash during that period went to buybacks. McNerney himself made $231 million from 2001 to 2016, with a retirement package that wasn’t Welch-sized but in the neighborhood: at least $58.5 million. For his part, Muilenburg made $106 million from 2011 to 2018.
• In regular Thursday meetings, she encouraged the pilots to give her good news, not bad news—an inversion of Mulally’s old rule about not hiding problems.
• In practice, the turmoil left the aircraft’s cockpit designers alienated from instructors. It was teachers who regularly saw how the typical pilot responded to unusual situations, but the division between their ranks meant it was difficult for such information to trickle back to the people most empowered to do something about it.
• The Seattle Museum of History & Industry interviewed the younger Taylor as part of its centennial exhibit in 2016, and he volunteered some frustrations about how Boeing had changed since he started there in 1986. “We’re not leading the market with the technical innovation that we might have been,” he said. Moreover, letting Alan Mulally go—“an incredible leader that people naturally gravitate to”—was a big mistake: “He brought technical excellence to Ford.”
• Rick Ludtke, the controls designer, didn’t have much time to join in the festivities when the MAX won official certification the following March; he was laid off. “I was getting too expensive,” he said.
• “Oh I’m sure it’ll get better when Boeing engineers design a whole new one. Wait? Who is left to do such a thing?” one worker wrote in an email later turned up by investigators. “No one!” came the reply.
• Even after he’d made his fortune, he sometimes sounded regretful about his chosen profession. He once mused that “only stupid people” start airlines. “If I had money,” he said, “I would buy plantations or do mining or property or restaurants.”
• He’d participated in a “Go/No Go meeting” that, he said, became known internally as the “Go/Go meeting” because saying “no” wasn’t an option.
• Then he put his finger on the forces that had been building for years, decades even, and would soon destroy lives and reputations: “It’s systemic. It’s culture. It’s the fact that we have a senior leadership team that understand very little about the business and yet are driving us to certain objectives. Its [sic] lots of individual groups that aren’t working closely and being accountable…. Sometimes you have to let things fail big so that everyone can identify a problem.”
• Pierson saw that reports of issues—malfunctioning equipment, missing inspections, incorrect parts—had risen 30 percent. He decided to go outside the chain of command. Pierson wrote to the general manager of the 737 factory, Scott Campbell, telling him, “Frankly right now all my internal warning bells are going off. For the first time in my life, I’m sorry to say that I’m hesitant about putting my family on a Boeing airplane.” Campbell assured him in his response that safety and quality came first. A month later, with conditions only worsening, Pierson asked for an in-person meeting. He laid out all of the evidence that quality was suffering and asked Campbell to shut down the line. “We can’t do that. I can’t do that,” Campbell said. Pierson replied that he had seen operations in the military shut down over less substantial safety issues. Campbell answered tersely, “The military isn’t a profit-making organization.”
• Over the previous two years, Bahrami proudly said, enforcement actions had dropped 70 percent. “We used to measure success by how high our stack of hate mail was,” he said. “That’s no longer the case.”
• “It’s basically putting the regulatory decisions into the hands of those who are being regulated,” he said.
• On October 24, just days before a single fateful vane on an Indonesian plane would malfunction and go undetected, Boeing reported that third-quarter free cash flow jumped 37 percent to $4.1 billion, more than double analyst estimates, sparking a 3 percent jump in its share price. “The cash is the cash, you can’t deny it,” said Ken Herbert, an analyst with Canaccord Genuity.
• But even within the fraternity, there’s an omertà in aviation accidents, and it applied here. Partly this is for self-protection: if someone writes openly about a flaw, it exposes the manufacturer to additional liability for having known about the issues in advance. In the wrangling over the Boeing rudder design blamed for two crashes back in the 1990s, litigation had eventually turned up a memo titled “We Have a Problem,” in which engineers acknowledged—even before a second crash—that a rudder valve had the potential to jam. Some pilots had seen the anguish it caused colleagues who were asked to explain themselves years later, and they became more careful about what they put in writing.
• What most alarmed pilots was that this new feature overturned decades of Boeing design philosophy, the thing the manufacturer had always claimed set it apart from Airbus. “If it ain’t Boeing I ain’t going,” pilots would say, proud of the fact that a computer would never take the plane out of their hands. Now the colossus of American aviation was casually telling them it had done exactly that.
• And even if the FAA’s more generous analysis of the risk was accurate, it should have been eye-popping. Fifteen crashes would be comparable to the number for the Boeing 757, 767, 777, 787, and the newest 747s over the previous three decades combined. Still the MAX kept flying. That “six weeks–ish” stretched into months.
• When James Burke, the chairman of Johnson & Johnson, learned in 1982 that cyanide-laced bottles of Tylenol in Chicago had killed seven people, he asked two questions: “How do we protect people? And second, how do we save the product?” The answer to both questions turned out to be the same: By putting safety first, Tylenol saved the product. Burke told consumers to stop buying Tylenol, withdrew advertising, halted production, and pulled the pills off shelves. It was a huge financial blow—Tylenol accounted for 19 percent of the company’s profits—but the swift action ensured no further loss of life. Burke’s response is now considered a classic in corporate crisis management. The test of faith and leadership Muilenburg had confidently talked about onstage had arrived. He led a late-night discussion soon after the crash with senior leaders including Anne Toulouse, the head of communications. Much like Burke, he zeroed in on two key questions, starting with safety. “Is the MAX safe? And was MCAS involved?” But unlike the Johnson & Johnson chairman, he’d already convinced himself of the answers—and protecting the product came before people. “We need to make a strong statement on the first, and be clear that there are no supporting facts on the second,” Muilenburg wrote later that day to Toulouse, who was in the midst of drafting the company’s response.
• The FAA issued the order that Wednesday, three days after the crash. It was the second such admission of failure in just six years for a new Boeing model, following the Dreamliner—a grim milestone that even much-maligned McDonnell Douglas never reached. Its only grounding was the DC-10.
• The statements from Boeing read, as one PR expert put it, “like an engineer and a lawyer wrote it together”—a fair summation of the culture as it had evolved at Boeing.
• Dominic Gates, the Seattle Times beat reporter who would win a Pulitzer Prize for his reporting that year on Boeing, asked in his cutting Irish accent why Boeing couldn’t just admit it had made a mistake. “Never mind the processes,” he said. “What you came up with was flawed, was it not?” Muilenburg again couldn’t muster an answer that sounded human or reflective. “We followed exactly the steps in our design and certification processes that consistently produce safe airplanes,” he said.
• When it was the CEO’s turn to speak, he took five or six questions, revealing little. It could have been a moment to ditch the script, perhaps even reflect on those deeper worries about Boeing’s engineering soul that had shadowed it ever since the McDonnell Douglas merger and still dominated conversations among the Boy Scouts in the aisles. Instead it was, as one engineer put it, “a nothingburger.”
• Within just a month of the plane’s grounding, Boeing had to sell $3.5 billion in bonds and draw on a $1.5 billion line of credit from its banks to raise money, a sign of how close to the edge it operated, and how little it had set aside for such rainy days. So much cash had been shoveled back to shareholders—not to mention Boeing’s board members and executives—that there was little left when MAX deliveries stopped and revenue dried up.
• Boeing’s total equity—just like a house, a measure of its debt compared to its assets on hand—stood at $410 million by the end of 2018. It had been $13 billion in 1997, before Stonecipher and his successors started hollowing out the company in the drive to boost the all-important return on net assets.
• “The rule of law must be invoked to ensure justice for the deceased and the next of kin and explicitly signal strong deterrence to those who would be tempted to place material profits and short-term gains over the supremacy of life and safety,” Nader said.
• Claybrook remembered that her broker had invested $35,000 in Boeing stock for her retirement account three years previously. When she hung up, she called the broker to ask what the stock was now worth; it had appreciated by $100,000. “It just shows,” Claybrook told the crowd, “that this company was not putting money into the airplane and into flying, it was putting the money into profit—of course, from which the members of that executive board and others profited as well.” She said she could no longer see it as anything but “blood money.” Claybrook sold the stock and donated the proceeds, in Samya’s name, to the Nader museum.
• To Tarek, the FAA managers were a crowd of dim bulbs, mindlessly repeating what Boeing had told them and promoting half-baked methods of statistical analysis, like the spreadsheet meant to calculate the risk of keeping the MAX flying. He couldn’t believe the FAA had treated a very rough estimate—the guess that one out of one hundred pilots would struggle with the new checklist—as if it were a definitive, observed rate. When he raised his concerns in emails to FAA officials, the conversations went nowhere. “They say ‘data-driven,’ but they have no clue what it means,” he said. “These are people who talk about science as though it’s some type of magic power you sprinkle on things.”
• He asked for criminal prosecution of Boeing and its executives, who, he pointed out, “have been the primary beneficiaries of this strategy to extract wealth from this storied company.”
• Bahrami said he had a daughter of his own and couldn’t imagine losing her. Tor asked him if there was anything he’d learned from the accidents or wished he could have done differently. He said he couldn’t think of anything. They left the office more enraged than ever.
• The lot eventually housed 250 factory-fresh MAX planes, inventory worth about as much as a mission to the moon.
• He wanted to watch Muilenburg crack, to make the imperturbable engineer feel the weight of guilt. But as Njoroge talked about the daily pain his life had become, the anguish Boeing had caused, he broke down himself. What he got from Muilenburg was a look that in that moment, to him, felt pitying. It wasn’t what he wanted at all.
• Debbie Mucarsel-Powell of Florida, who concluded, “This is a story about a company cutting corners, taking short cuts, sacrificing safety to achieve maximum profits.”
• With Muilenburg’s ouster, Calhoun was installed as CEO. A board member since 2009, he had collected $3.4 million in compensation and served through every stage of the MAX’s fraught birth and frenzied development. An old friend of Jim McNerney’s, he used to play a regular foursome of golf with Jack Welch at GE. The face at the top of Boeing may have changed, in other words, but the playbook had not.
• As the federal investigation into the crashes continued, the move appeared to be part of a coordinated strategy to paint their actions as isolated, a bit of rot that Boeing was efficiently cutting out. (The messages were part of a “micro-culture” that didn’t represent Boeing, as Calhoun put it in one of his few press conferences.) It left untouched managers like Michael Teal and Keith Leverkuhn, the men who had led the MAX program. The disasters had done nothing to slow their careers. Teal, who’d already collected a bonus for his work on the plane, moved on to become the chief engineer of Boeing’s next new aircraft, a derivative of the 777. Leverkuhn became vice president of the propulsion division before retiring as planned.
• Calhoun described the experience at Nielsen as one of the most satisfying of his career. “For five years of operating in a purely private environment before we went in the IPO, I got to do everything I ever wanted to do as fast and as hard as I ever wanted to do it,” he said.
• Another guest offered, “If you cut through the red tape we’d see even more amazing companies started.” Calhoun answered, “Absolutely. I just look at governance in general as—it just slows down everything about a company’s performance, both in the public and in some cases the private markets. It’s just not helpful.”
• Two months after Calhoun’s lament, engineers at Boeing handed over to the FAA their incomplete safety analysis of the MCAS software, a design that would have been questioned, the government later said, if the FAA’s own flight controls experts had known the details of how it worked.
• Multiple family members said they didn’t want anyone from Boeing inside the tent for the eulogies; already, it felt as if the killer was planning the funeral. That came as a surprise to Keating, who said, “If we’re paying for it, we’ll be there.”
• As they headed for the elevator, Stumo mentioned that his daughter had actually met Feinberg once, at a UMass alumni event in 2017. The famous mediator preened. “Oh yeah, I remember that speech—how’s your daughter?” he asked automatically. “She’s fifty feet under the ground in Addis Ababa,” Stumo answered tersely.
• The company ultimately managed to avoid a bailout by raising $25 billion in debt in April from private lenders, who clearly viewed the last U.S. builder of commercial jets and number two defense contractor the same way as the president did: too big to fail.
• In October, Calhoun chose South Carolina for its wide-body jetliner operations, completing the decade-long exodus to the nonunion South. Boeing lost $11.9 billion in 2020. (The loss that Harry Stonecipher had shamed Boeing employees for back in 1997 had been a comparatively modest $178 million.)
• A manufacturing R&D center on East Marginal Way—the name of the street finally befitting Boeing’s growth prospects there after a hundred years—was shuttered. The last of the 747s built by the “Incredibles” at Joe Sutter’s Everett factory will roll off the lines in 2022, with no new wonder to fill the world’s most vast empty space.
• In the end there was little of that, with cost-sensitive fliers seeing few hassle-free ways to avoid the MAX. That first week, even during the pandemic, the flights were more than 90 percent full. People reflexively trusted in the industry’s safety record.
• He had the impression, before he first started taking depositions of Boeing engineers, that they’d be rocket scientists. “And they’re not, they’re ordinary guys,” he said. “They take a design like the 737, and they make some changes. I’m concerned that they don’t put enough thought into it. Sometimes I think they don’t have the big picture: Who’s watching over everybody?”
• The author of the letter, a current FAA staffer, wrote that managers had told engineers to expect little change as a result of the law. “Posing for the cameras” is how the top certification official, Earl Lawrence, had summed up the congressional inquiry in one staff meeting.
• In the view of some of the engineers who know the plane best, who can picture its systems just as clearly as the wires and pipes in an old basement, not enough has been done to fix what might go wrong. “With its unique systems design, the 737 operates in some scenarios at reduced safety margins compared to modern aircraft,” as one Boeing employee, less eager to get the plane back up in the air, wrote in his own comments to the FAA.
• Thirty years after the 1986 Challenger disaster, an engineer at Morton Thiokol, the firm that had designed the shuttle’s infamous O-rings, called one of his former managers. Bob Ebeling was eighty-nine now, and in hospice. Before the infamous launch, both had tried to alert NASA to the risks the Challenger faced, to no avail. Nearing death, Ebeling told the former manager, Allan McDonald, that he’d never stopped replaying the events of the tragedy in his head. He wished he’d made his case better. He asked why God had chosen a loser like him for such an important job. “I said, ‘Bob, a loser is a person who does nothing,’ ” McDonald recalled. “You did something and you really cared.” McDonald went on to write a book, Truth, Lies, and O-Rings, about the lessons to be drawn from the disaster. He lectured at universities and tried to get engineering schools to make courses in ethics a requirement of graduation. By many accounts, a cultural reckoning like the one that followed the Challenger disaster never took place at Boeing and its regulator.
• Through the end of 2020, more than six hundred MAX orders had been canceled, a loss of another $33 billion at typical selling prices. If buyers don’t return, the Boeing MAX debacle could approach the more than $65 billion that BP lost in the Deepwater Horizon blowout, the most expensive corporate disaster in history.
• The amount of the criminal penalty was only $243.6 million, which, as the complaint noted, was about what it would have cost Boeing to let MAX pilots train in a simulator in the first place.
• To their coworkers, it was bizarre that the managers—men who heaped on the pressure, reaped the rewards, and then disappeared when the whole deadly blunder was exposed—never paid any price. After seeing the Justice Department’s settlement of “the 737 Max Fraud Conspiracy,” as the press release put it, a pilot who worked with Forkner and Gustavsson suggested a different headline. It would say that Boeing got away with murder.