On Saturday, March 9, 2024, at dawn, lightning stormed in Charleston, South Carolina, USA, and lightning lit up the sky over the historic city like a sharp blade. Just after 10 a.m., Rob Turkowitz was sitting in an upscale law firm in the heart of the city, waiting for his client, John Barnett, to testify.
At the previous day's trial, Barnett dramatically described the production problems he had seen up close in the Boeing workshop, and he will continue to tell his story today. He worked for a long time at the Everett, Washington, USA plant, and in every sense of the word, he takes pride in the aircraft his team assembles.
From late 2010 to 2017, Barnett served as Quality Manager at the North Charleston facility, which assembled the 787 Dreamliner. In that role, he alerted executives to "numerous violations of legal processes and procedures" that he had identified, and insisted that his reminders had been ignored.
In the years since he left his job, Barnett has become the most famous "Boeing whistleblower," whoever you are willing to listen to tell you about "all the quality control mispractices he've witnessed."
Mr. Barnett was not able to testify on time that day, and Turkewitz was not particularly surprised. He recalled: "It was raining heavily in downtown Charleston that day, and the water was rarely severe. At 9 a.m., I called John's room at the Holiday Inn and asked if I wanted to pick him up, but no one answered. ”
Barnett's past allegations have once again been in the public spotlight against the backdrop of a Boeing 737 Max flying 1282 flight in January after its hatch fell off from Portland, Oregon, and a series of other accidents have followed. In an interview after the door failure, Barnett sharply criticized Boeing's negligence and blamed the disaster on the recklessness he had "witnessed and pointed out many years ago at the North Charleston facility."
Accidents continue to occur: In the wake of the Portland hatch off-fire incident, a series of flight accidents have been staged on Boeing-produced aircraft. IMAGE CREDIT: NTSB/GETTY IMAGES
But late that Saturday morning that week, Barnett was found dead in his truck parked outside the Holiday Inn. Charleston County coroners determined the cause of death to be "self-inflicted injury," and a police report showed a "blank piece of paper-like paper" in the passenger seat. The contents of the note have not been disclosed. (Boeing issued a statement saying, "We are saddened by Mr. Barnett's passing and extend our sincere condolences to his family and friends.) In addition, the company did not respond further on this matter. ）
In the three months leading up to Barnett's death, Boeing, the world-famous aerospace company, was already in trouble, with negative news one after another, including passengers discovering loose bolts on board, then losing tires during takeoff, and then a 25-year-old 737 plane that found that the exterior panels of the fuselage were missing during flight, and even worse, a bizarre accident occurred on a flight from Australia to New Zealand, because a flight attendant accidentally pressed the button in the pilot's seat and caused the plane to fall rapidly. The passenger's head hit the ceiling. Barnett's death is the latest shocking turning point.
At the same time, the impact of the catastrophic Alaska Airlines incident was transmitted to Boeing's entire management. In February, Boeing swept the 737 program's production executives and commercial aircraft business executives out of the house. In late March, Boeing's chief executive, David Calhoun — a 26-year veteran of General Electric (GE) who took office in 2020 to address the 737 Max crisis — announced that he would step down at the end of the year, acknowledging that the time had come for a change in Boeing's leadership.
Regulators appear to have their eyes on the troubled aircraft maker. The U.S. Department of Justice has launched an investigation into the company to determine whether the mistake that caused the door to fall off was enough to invalidate a previous agreement not to criminally prosecute Boeing (the Lion Air and Ethiopian Airlines crashes that killed 346 people five years ago). At the same time, the Federal Aviation Administration took an extraordinary step to limit production of the entire Max family, including the 737-8 and 737-9, to 38 aircraft per month before the door disengagement incident. The move hit Boeing hard because it had planned to gradually increase production of the 737 Max to 50 aircraft a month by 2025 or 2026. The Federal Aviation Administration has also decided to hold off on approval of Everett's 737 Max production line until Boeing has made the required progress. Boeing's management is committed to elevating its work. But in a press release, Federal Aviation Administration Administrator Mike Whitaker warned: "Boeing's business cannot return to the normal business that it used to be." ”
Boeing's story will be one of the most important mall dramas of the century. In 2023, the U.S. will carry more than 900 million air passengers, an increase of more than 25% from 2013 and roughly the same as before the pandemic. Of the 29,000 commercial aircraft currently in service worldwide, approximately 40% are produced by Boeing. The company ushered in the jet era, creating the world's first wide-body aircraft, the legendary Boeing 747, and is the third-largest U.S. defense contractor after Lockheed Martin and Raytheon Technologies, and has long been the largest U.S. exporter. But instead of capitalizing on the momentum, Boeing (and arguably its employees and passengers) fell victim to the company's strategy spiraling out of control.
The problem is that Boeing's quality deficiencies are deep-rooted, and it's hard to get rid of its heavy dependence on a network of distant suppliers. As whistleblower Barnett put it, over the course of more than 20 years, Boeing's management has made a series of decisions under the leadership of four CEOs that have eroded its once-lauded factory quality control and troubleshooting systems, creating loopholes that have left many flaws "out of the net," many of which are not related to aviation safety, but also cause long delays, not to mention some of which have serious tragic consequences. A former Boeing supplier executive added: "The seeds of quality problems have been planted for a long time. After years of hiding, these problems will always come to the fore at a certain moment. ”
The structural problems that arose in Boeing's aircraft manufacturing process can be traced back to a strategic blunder more than three decades ago.
Surprisingly, the first major blunder occurred during Philippe Condit's tenure as CEO, an engineer by training who was deeply influenced by a tradition of prudence, safety and design excellence. In 2001, Condit persuaded the board to move Boeing's headquarters from Seattle, where executives were a short drive from the giant factories in Renton and Everett, which generate most of Boeing's revenue, to Chicago. Condit's idea was to create a "neutral" nerve center to facilitate business between headquarters and the rest of the company, including the Defense & Space business unit in Arlington, Virginia. In 2022, Boeing's headquarters moved again, this time to Arlington.
For several Boeing suppliers and customers interviewed by Fortune, it was a serious mistake to keep the company's top management away from its biggest and most problematic business. In an interview with Fortune magazine about the background, a former Boeing customer executive said, "I don't understand why the world's top manufacturing companies should leave behind their past successes and why they should take management away from the front-line workers who drive the company." This operation, combined with the various practices of outsourcing operations, has turned Boeing into a 'Frankenstein' who lacks sufficient command and control. ”
Currently, Boeing's executive staff is extremely dispersed. While the heads of the commercial aircraft division are all in Seattle, Chief Financial Officer Brian West and the treasurer are based in the suburbs of Connecticut, while the heads of human resources and PR are based in Orlando. We don't know how much time Calhoun (who held the chairmanship before his appointment as CEO) was at Renton or Everett before the Portland incident. He once said, "Where Brian and I are, Boeing's headquarters are there." The 66-year-old owner owns two properties, one on the edge of a lake in New Hampshire and the other in a gated community in South Carolina.
In mid-1997, Boeing acquired defense contractor McDonnell Douglas, marking a landmark shift in the company's direction. Prior to the merger, the aircraft manufacturer had been "a group of engineers dedicated to building great flying machines," people who, in the words of journalist Jerry Usim, valued design and quality above anything else. He wrote a Fortune article based on an extensive interview with Boeing in 2000, when the struggle between the company's engineering and profit-boosting camps was raging. The main driver of this change was McDonnell Douglas CEO Harry Stonesever, who worked at GE for 27 years and later became Condit's second-in-command. As the son of a Tennessee coal miner, Stonesever admired former U.S. President Harry Truman's decision to bomb Japan with nuclear weapons. (Stonespher's favorite quote from Truman: "I didn't let them go to Hell, I just told them the facts, and they thought it was Hell!") Most importantly, when it comes to improving shareholder value and reducing costs, Stonesever is a standard hawk. He often calls on employees to "not live like a family, but fight like a team."
Until the beginning of the century, most of the key components of Boeing's aircraft, from the fuselage to the landing gear, were manufactured in-house. As the debate within the company over whether to adopt a new low-cost outsourcing model heats up, a Boeing engineer named John Hart-Smith submitted a white paper arguing that the company may not be able to provide adequate on-site technical support to contractors and that quality control may be flawed after adopting a new decentralized production approach. "As a manufacturer, the quality of our products will be limited by the quality of our suppliers. The risk does not diminish because we can't see it. Hart-Smith wrote.
With the strong support of James McEnany, another GE veteran and new director, Stonesever, then president, and Alan Muraly, head of commercial aircraft, began pushing Boeing to build a new "zero-problem" wide-body aircraft at a fraction of the cost of the old Boeing 777. Both Boeing and Airbus have a long tradition of using subcontractors, but the main systems are manufactured in-house. However, for the Boeing 787, Boeing is not just a new aircraft, but a completely new business model. Boeing has signed a number of "partners" who have to pay billions of dollars in advance for projects in order to secure long-term contracts for the supply of key components for the aircraft. These include General Electric, which provides the engines, Rockwell Collins, which provides the traffic alert system, and Spirit AeroSystems, which provides the airframes.
Boeing's management believed that by adopting this new business model, Boeing would be able to speed up its actions and prevent the then forthcoming Airbus A380 from stealing its own orders. In contrast, Airbus does not need funding from partners, but relies on the support of the French and German governments to ensure that the development of new aircraft is progressing steadily.
With the Boeing 787 program, Boeing has completely changed its aircraft development model, differentiating itself from its main competitors by adopting a smaller capital investment model, and has begun to focus more on those areas where it can create the most added value, namely overall design incubation and final assembly services.
But the Boeing 787's "partnership" model requires a completely different manufacturing blueprint than the subcontractor model of the past. Richard Safran, a former aerospace engineer at Northrop Grumman and now an analyst at Seaport Research Partners, said: "The 787 got a little carried away with Boeing. Boeing says to its suppliers, 'You design the part or component, and then tell us what production process you're going to use.'" You're also responsible for doing the integration. In this way, all the suppliers have become 'Boeing'. Suddenly, design and engineering were their tasks, not just making Boeing-designed components.
Under this system, it was difficult for Boeing to control quality, and it is still the same. In Safran's view, Boeing has never lacked first-class engineering talent. The problem is that Boeing's successive CEOs, starting with Stonesever, have been obsessed with cutting expenses, an approach that conflicts with Boeing's traditions and sows the seeds of chaos. "The culture of cost reduction is the culprit," he said. Stonesever was the initiator, and his successors followed the culture. ”
Whether it's the Boeing 787 Dreamliner or Boeing's outsourcing work, it has gone through many ups and downs in its initial stages. Deliveries of the first batch of Boeing 787s were delayed for three years, and it was not until 2011 that they reached the major airlines. For years, Boeing's assembly plants near Charleston and Everett in South Carolina have been making money on Dreamliners. Additional costs have skyrocketed due to design errors, production delays, and Boeing's mistakes in assembling systems made in Japan, South Korea, Italy, France and Sweden, adding to the cost burden from an outsourcing model that should have resulted in significant cost savings.
In a 2011 speech, Jim Arbord, a Boeing executive, said that if Boeing had had a more robust grip on technology, there would never have been such a huge overrun.
Despite this, the Boeing 787 was a great success. "It makes perfect sense for Boeing to launch such a long-range straight aircraft, and Airbus' competitor, the A380, is an aircraft that serves the hub network," Safran said. The Boeing 787 emerged victorious.
Airlines prefer this kind of aircraft with a longer range and a 'point-to-point' model. Pat Shanahan, the new head of Boeing's 787 program, was recently appointed chief executive of troubled Boeing supplier Musty Sharp, and in 2008 he simply lived at the Everett plant to try to get production running smoothly.
But for McEnany, Boeing must step up cost control because of the continued losses caused by the 787. In 2011, he launched what is now infamous as "Partnering for Success," which involves pressuring all contractors to lower prices, typically by 10 to 15 percent, or more. Contractors who refuse to reduce prices are often placed on a "blacklist" and banned from bidding on new projects. McEnany declared that it was an "anomaly" for suppliers to make higher profits than Boeing. McEnany threatened to produce his own wings and other critical systems as a means of cutting costs. A former executive at one of Boeing's key contractors said: "One moment he says the supplier is incompetent, and the other he says he has to hand over more and more business to the supplier."
But neither of these claims is accurate. As long as the supplier does it better than you and the cost is competitive, you should rely on them. "Both within Boeing and among suppliers, McEnany is known for his image of "planning the big picture and not going deep into the operations." In 2014, he said that he did not plan to retire at the age of 65 because "the heart is still beating and the employees are afraid," a remark that angered ordinary employees.
Since around 2011, Boeing has begun to make full efforts. The 787 became the best-selling wide-body aircraft, and the 737 Max family, which began receiving orders in 2011, was also a big hit, with fuel-efficient GE LEAP engines and huge orders from American Airlines, United Airlines and Southwest Airlines.
In 2015, Dennis Mulenberg succeeded McEnany as the new head of Boeing, continuing to aggressively reduce costs and deliver strong returns to shareholders. From the end of 2010 to 2018, Boeing's financial performance was extremely impressive. During that eight-year period, Boeing's free cash flow tripled sixfold and its stock price soared from $70 to $425. Its total annual return reached 29.5 percent, surpassing Microsoft's 21.7 percent, Apple's 19.6 percent and Alphabet's 18.0 percent. From these figures, you can see how profitable Boeing is if there are no quality problems to plague.
But a design problem with the new version of the flight control software system led to repeated nose downpressure failures on the new 737-8 Max, and two crashes in 2018 and 2019, which brought the company's dreamy earnings performance to an abrupt end after eight years. The two crashes exposed problems that Boeing had been lurking for years. Ed Pearson witnessed the whole thing happening.
A former Navy flight officer, Pearson served as a senior manager on the Renton factory floor during Boeing's golden age from 2015 to late 2018. Today, he is the executive director of the Foundation for Aviation Safety, a newly formed nonprofit. In 2019, he testified before the U.S. Congress as a whistleblower, warning that he had witnessed firsthand on the work that the 737 Max had potential manufacturing safety issues. These problems are due in large part to the complexity of Boeing's supplier network and the soaring demand for new aircraft.
Pearson told Fortune: "Sometimes CFM LEAP-1B engines don't arrive on time. In this way, the aircraft can only enter the next station on the assembly line without engines and other components. When the parts arrived, the workers in the front had to run to the back stations with tools to interrupt the assembly and install the parts that should have been installed a few days ago. This out-of-order approach is very dangerous. ”
He also claimed that Boeing had modified its quality inspection procedures to speed up inspections. He said that many senior quality inspectors had been laid off as a result, and that Boeing had replaced manual inspections with "modern inspection techniques," random statistical analysis, and an increase in the proportion of self-inspections by assembly line workers. According to him, although the quality inspection work is still being carried out, it has decreased compared with the past. "In 2018, we left hundreds of production employees working overtime on weekends. Now because the number of quality inspectors is small, the remaining quality inspectors are in a state of serious overload. ”
In addition, Pearson said Boeing also failed to address the problems identified by frontline workers in a timely manner. "The reality is that sometimes no one listens to workers when they ask what they find," he said. In many cases, even if someone listens to them, the problem often goes unsolved. Because Boeing doesn't have the resources or capacity it needs, the people who listen can't do it even if they try to solve the problem. Pearson concluded: "It's obviously dangerous and unstable. The culture of the Boeing factory is: 'Production is production.' Just finish your work. ’”
Boeing has publicly stated that while it announced plans to lay off 900 quality inspectors in early 2019, it has not been implemented, and that the number of quality inspectors has increased by 20% since 2019.
In the aftermath of the second crash, Mr. Mulenberg's actions made it seem that he was most concerned with shareholders rather than passengers and airlines. He claimed that "the safety systems of the aircraft involved were 'properly designed' and that it was the pilot's failure to 'fully' comply with Boeing's procedures to prevent misoperation that led to the accident, which killed 346 people." The FAA didn't buy his remarks.
Then, at the end of 2019, Mulenberg made a public statement that the Federal Aviation Administration would allow the 737 Max to fly again by December of that year, a move that further angered the FAA. Stephen Dixon, who served as the Federal Aviation Administration's administrator from 2019 to 2022, told Fortune: "I couldn't sit idly by and called him to my office. I told Dennis: 'Don't speculate about what the FAA will decide, it's useless. It's up to us to decide. There are important cultural issues that are beyond Dennis's reach. They need to make a change. Eleven days later, Boeing's board of directors fired Millenberg.
For example, Dixon said that after the crash, Boeing worked with the Federal Aviation Administration to implement a new protocol called the Safety Management System, which encourages workers on the production line to report quality problems and other safety hazards, helping Boeing more systematically eliminate risks in the production process. The FAA also removed Boeing's authority to independently approve the issuance of "airworthiness certificates" (aircraft can only be delivered to customers after they have been issued "airworthiness certificates", and the FAA requires all signatures to be completed by the agency's inspectors). In the aftermath of the Portland incident, the FAA multiplied the number of on-site inspectors at the Renton plant. Also in the aftermath of the incident, Calhoun repeatedly highlighted the importance of the latter's voice on quality and safety issues in his meetings with frontline workers.
To illustrate the cost of relying on suppliers, the best example is undoubtedly Boeing's main supplier, which is bound to be sharp. The company is the fuselage manufacturer of Boeing's best-selling aircraft, the 737 and 787 families. The company's Wichita plant, which produces the aircraft's giant cigar-shaped fuselage, has been owned by Boeing for nearly 80 years. But in 2005, Boeing sold its Wichita plant to Onex, a Canadian private equity firm, which led the company to a take-public in late 2006 and significantly expanded its product and system categories through acquisitions.
"The idea was that the big supplier was no longer owned by Boeing, so it would be able to produce systems for Airbus, Bombardier and others, and that arrangement would reduce Boeing's overhead," Safran said. Still, Boeing maintains a close working relationship with such credible contractors. This is also one of Boeing's initiatives to reduce costs. ”
However, due to the grounding of the 737 Max after the plane crash and the impact of the new crown epidemic, it was forced to lay off thousands of experienced production and quality inspection personnel. From the end of 2019 to the end of 2023, the company's stock price fell by nearly 70%, and it lost $1.9 billion in free cash flow. The inevitable sharp problem, in turn, dragged Boeing down. From the fall of 2020 to 2023, Boeing and its suppliers discovered a number of quality issues, including defects in the airframe and other components, that led to delivery delays for several years.
As recently as 2023, Boeing discovered that the 737 Max's tail pressure bulkhead (which is bound to be sharpened) had problems with improper drilling and misalignment of holes, and had to spend a lot of time repairing it, resulting in delivery delays. Boeing and its suppliers solved all the problems, but the massive rework put Boeing in a difficult situation with delivery delays and increased costs.
In October 2023, the CEO of Inego suddenly resigned. He was succeeded by Pat Shanahan. Prior to his new appointment, Shanahan spent 31 years at Boeing, where he parachuted into the Everett plant as a "fire captain" and saved the troubled 787 by streamlining all aspects of production. That same month, Boeing offered a comprehensive financial assistance package to the company, including an immediate cash injection of $100 million to invest in machining tools, while also planning to pay $455 million over the next two years to the company for the purchase of parts for the 787.
However, even after the relevant parts were delivered, Boeing's production line still had a loose style and lack of communication, which obviously laid the foundation for the well-known hatch falling off accident. An anonymous whistleblower noted that during the final assembly of the 737, Boeing would remove the door plugs for repairs, but none of the four bolts would be replaced during the process of installing them back, so "when Boeing delivered the aircraft, the bolts were not properly installed." Our own records reflect this. According to the whistleblower, Boeing's quality inspectors were not reminded to inspect and sign for the door plug because two defect reporting systems were not functioning.
A preliminary report released by the National Transportation Safety Board on Feb. 6 confirmed that Boeing workers removed bolts from the fuselage panels and that the bolts were missing at the time of the accident. As the whistleblower described, Boeing's production process was "chaotic and problematic, and it was only a matter of time before something went wrong." ”
Where does Boeing go from here? For Boeing, investors and customers, the biggest concern is a repeat of previous delivery delays, which caused the manufacturer to build up a huge backlog of aircraft backlogs. From 2019 to 2021, the resulting loss was as high as $16.7 billion. After the first crash in 2018, Boeing continued to produce the aircraft at high speeds, even though the Federal Aviation Administration's decision to ground all 737 Max aircraft had made it impossible for Boeing to continue delivering the aircraft.
The company even emptied its employee parking lot to make it easier to store the aircraft produced. However, the delivery of the 737 Max continued to experience delays after the FAA approved the return to service at the end of 2020 due to various quality issues, new design requirements from the FAA, and routine maintenance of the aircraft that had been in storage for many months. Today, the Boeing 737 Max and 787 still have 200 and 50 aircraft in stock, respectively. The vast majority of these planes are parked in what Boeing calls "shadow factories," where they undergo extensive costly maintenance and rework. As Calhoun said on the fourth-quarter earnings call, "We are still not getting out of the impact of the delayed delivery of the aircraft. We spend more time in shadow factories maintaining these aircraft than we did in the first place. ”
It's all the plane's fault: CEO David Calhoun, torn between angry customers and intense regulator scrutiny, will step down at the end of 2024. IMAGE CREDIT: AARON SCHWARTZ—NURPHOTO/GETTY IMAGES
The Portland incident did not have an impact on Boeing's aircraft deliveries, which Calhoun expects will complete by the end of the year almost all of the aircraft in its inventory. China's major airlines have already taken delivery of 85 737 Max aircraft (which have been pending delivery since 2019 due to the impact of the US-China trade friction).
On March 20 this year, Boeing's chief financial officer Brian West revealed at a conference in London, England, that in the first quarter of 2024, Boeing's cash outflow will reach $4 billion to $4.5 billion. The company still expects its free cash flow to reach $10 billion by 2025 or 2026, but West made it clear that it is more likely to do so later in the window. Boeing's management acknowledges that it now appears to be taking much longer than previously expected to make a comeback, even compared to a few weeks ago.
Coupled with the fact that there is no way to know when the Federal Aviation Administration will lift the 737 production restriction order, all of these factors have dragged down Boeing's stock price. As of March 20, the company's share price is down 11% in the last three weeks, falling to $183. In a potentially key shift in strategy, Boeing announced on March 1 that it was in talks to acquire the company, a move that would bring airframe production for the 737 and 787 back in-house. But positive financial projections and reduced reliance on outsourcing won't solve the culture problems that have exacerbated these problems.
Although his time in Renton was not as good as it could have been, Pearson still remembers those years: "Before I started production, I worked as a flight test at Boeing Field in Seattle, where I was surrounded by very good professionals and reliable leadership who helped us a lot. Every Boeing executive and board member should ask themselves a key question about whether they are leading the right way, Pearson said. It's simple, you just have to ask yourself, 'How much time did you spend on the factory floor listening to the company's mainstay, the employees, in 2023?' If the answer is 'never,' then you're clearly not fit for the job."
But Pearson still believes that if Boeing can rediscover the kind of leadership that inspired test pilots of the past, if the company's CEO can go to every corner of the factory, value expertise, listen to the people who build these extraordinary aircraft, be pragmatic and open-minded, and the safety culture can spread throughout the company.
In other words, as long as frontline workers are given a voice, Boeing can get back on track. (Fortune Chinese Network)
Translator: Feb
Fortune magazine launched the "Fortune China Technology 50" list for the first time this year, trying to find these technology companies that were born in China and are influencing the world. Their success lies not only in their technology and products, but also in the spirit of innovation and global vision they represent. We look forward to these Chinese companies making more outstanding achievements in technological innovation and global expansion, and making greater contributions to technological and commercial progress.
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