Plenty has been written about how the “financialisation” of Wall Street and the City of London over the last 40 years has created in these places – and hence by extension in Dalal Street – a toxic culture of greed is good, a culture that values short term share price gain over long term franchise building. This article focuses on the “financialisation” of a once venerable American giant, Boeing. It describes poignantly how engineers were put in the back seat at Boeing and the financiers were put in charge.
The article begins by describing how Boeing’s decisions to shift it corporate HQ to Chicago in 2001 – even as manufacturing stayed back in Seattle – was a colossal mistake. “The isolation was deliberate. “When the headquarters is located in proximity to a principal business—as ours was in Seattle—the corporate center is inevitably drawn into day-to-day business operations,” Condit explained at the time. And that statement, more than anything, captures a cardinal truth about the aerospace giant. The present 737 Max disaster can be traced back two decades—to the moment Boeing’s leadership decided to divorce itself from the firm’s own culture.”
This Wall Street-type culture of celebrating the stock price arrived at Boeing in an unexpected way: “The shift had started three years earlier, with Boeing’s “reverse takeover” of McDonnell Douglas—so-called because it was McDonnell executives who perversely ended up in charge of the combined entity, and it was McDonnell’s culture that became ascendant. “McDonnell Douglas bought Boeing with Boeing’s money,” went the joke around Seattle. Condit was still in charge, yes, and told me to ignore the talk that somebody had “captured” him and was holding him “hostage” in his own office.”
Post the reverse merger, the new management of Boeing (i.e. the former management of McDonnell) went on a cost cutting drive (with a McDonnell executive as CFO keeping score) which was celebrated by Wall Street: “McDonnell’s stock price had risen fourfold under Stonecipher as he went on a cost-cutting tear, but many analysts feared that this came at the cost of the company’s future competitiveness. ““There was a little surprise that a guy running a failing company ended up with so much power,” the former Boeing executive vice president Dick Albrecht told me at the time. Post-merger, Stonecipher brought his chain saw to Seattle. “A passion for affordability” became one of the company’s new, unloved slogans, as did “Less family, more team.” It was enough to drive the white-collar engineering union, which had historically functioned as a professional debating society, into acting more like organized labor. “We weren’t fighting against Boeing,” one union leader told me of the 40-day strike that shut down production in 2000. “We were fighting to save Boeing.””
Then the company decided to split up its operations into three parts & three locations (all of which would be overseen by the bean counters in Chicago): “The company would put its eggs in three baskets: military in St. Louis. Space in Long Beach. Passenger jets in Seattle. And it would watch that basket from Chicago. Never mind that the majority of its revenues and real estate were and are in basket three. Or that Boeing’s managers would now have the added challenge of flying all this blind—or by instrument, as it were—relying on remote readouts of the situation in Chicago instead of eyeballing it directly (as good pilots are incidentally trained to do). The goal was to change Boeing’s culture.”
In a way the rest is history. After this Boeing has gradually slid into a morass of scandals of passenger safety disasters: “Its rocket division was found to be in possession of 25,000 pages of stolen Lockheed Martin documents. Its CFO (ex-McDonnell) was caught violating government procurement laws and went to jail. With ethics now front and center, Condit was forced out and replaced with Stonecipher…And when Stonecipher had his own career-ending scandal (an affair with an employee), it was another GE alum—James McNerney—who came in from the outside to replace him…
Boeing vice president, Mike Sinnett, told American Airlines pilots that the MCAS software system implicated in the 737 Max crashes didn’t have “a single-point failure,” as reported—asserting that the pilots themselves constituted a second point of backup—showing both a misunderstanding of the term and a sharp break from Boeing’s long-standing practice of having multiple backups for every flight system. Meanwhile, experienced Boeing engineers rolled their eyes as some software-development tasks (not specific to MCAS) were outsourced to recent college grads earning as little as $9 an hour, who were employed by an Indian subcontractor set up across from Seattle’s Boeing Field.”
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