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**monkspider** · January 23, 2004, 00:23

Argh, this is bad news for my hometown (Wichita).

**Colon™** · January 23, 2004, 00:25

Is there a Boeing plant in Wichita?

**Whoha** · January 23, 2004, 01:19

yea, they make 4 tail deallys? there and 10 in China for the 7E7.

**Main_Brain** · January 23, 2004, 02:56

Good News everyone!
For my Continent anyways.

**Spiffor** · January 23, 2004, 03:01

It's good to see Airbus is finally in the process of becoming equals with Boeing

**Colon™** · January 23, 2004, 03:47

I'm not interested in silly nationalism bites.

What fascinates me about Boeing is that this company made huge gambles in the past to build revolutionary new planes, the 707 (world's first commercial jet airplane) and the 747 are good examples. Only a couple of years ago it seemed they'd establish a monopoly by merging with McDonnel Douglas.
These days they've been too chicken**** to rise to the challenge of Airbus' superjumbo and they've lost their market leadership in large civilian aviation. Next to that they've been embroiled in a bribery scandal and now they're getting a big blow in a market that was previously almost solely theirs.

So as case of study in corporate management: what's ailing Boeing?

**Spiffor** · January 23, 2004, 03:49

Originally posted by Colon
So as case of study in corporate management: what's ailing Boeing?

Maybe the quality/cost ratio of their planes isn't that great?

**Colon™** · January 23, 2004, 04:17

On the defensive
Nov 25th 2003
From The Economist Global Agenda

Boeing has sacked its chief financial officer and a former US Air Force official for improper dealings over contracts for military aircraft. This comes as the aircraft-maker faces a probe into industrial espionage and trouble across its range of businesses

A DECADE ago Boeing ruled the skies, dominating the commercial airline business, in which Europe’s Airbus was a rude pretender. Then, in the late 1990s, the American giant decided to project this dominance into a range of other businesses: defence, space and aviation services. But, however wise this strategy, its execution has been a mess.

Boeing’s space programme has cost it billions and Airbus has done so well in Boeing’s commercial-jet heartland that the Toulouse-based manufacturer will deliver more planes than Boeing this year. Defence had been the most promising part of the picture. But a long-running case of alleged industrial espionage by Boeing against Lockheed Martin led the Pentagon to remove $1 billion in orders from Boeing this summer. Now, Boeing is at the centre of another industrial-espionage row, over a $22 billion contract to supply America’s air force with 100 refuelling tanker-planes. On Monday November 24th, the row led to the sacking of Mike Sears, Boeing’s chief financial officer, and Darleen Druyun, who had been the air force official responsible for negotiating the Boeing tanker contract before joining the company. Mr Sears recently admitted to The Economist, in discussing Boeing’s dispute with Lockheed Martin: “We had an issue and it came back to bite us.” By firing him and Ms Druyun, Boeing is trying to defang this particular issue before it can do the company any more damage.

One of the reasons why the contracts are so sensitive is that the original deal for Boeing to lease tankers to the air force that Ms Druyun negotiated has been criticised as being terrible value for the government and has had to be rewritten. Senator John McCain, a former Republican presidential candidate, claimed that the deal, which extended demand for Boeing’s 767 mid-size airliner and enabled the firm to keep the 767 production line open, was little more than corporate welfare. Earlier this month, the Senate approved a compromise deal, under which 80 of the 100 planes would be bought rather than leased, saving up to $5 billion for the government.

The sacking of Mr Sears is particularly embarrassing for Boeing, since he had been seen by many as the company’s next chief executive. The charges against him are that he broke company rules by “communicating directly and indirectly with Druyun about future employment when she had not disqualified herself from acting in her official government capacity on matters involving Boeing”, and that the pair had attempted to conceal this infraction from company lawyers investigating the matter. It has also been alleged, during a Senate investigation earlier this year, that Ms Druyun broke the law by passing on to Boeing employees confidential information about how Airbus had priced its bid for the tanker contract. Ms Druyun’s role in negotiating this contract is also being investigated by the Pentagon's inspector-general. Eyebrows have also been raised at the fact that Ms Druyun’s daughter and son-in-law both work for Boeing.

Whatever the extent of Ms Druyun’s contacts with Boeing before she was hired, Boeing cannot afford to be anything other than squeaky clean in its dealings with the government. Phil Condit, Boeing’s chief executive, acknowledged this in his letter to staff about the sackings: “Even the appearance of impropriety can damage the reputation of the company,” he wrote. This is particularly true of defence, which is now arguably the most important part of Boeing’s business, given the mess the commercial airline industry is in.

Airlines have experienced their worst crisis ever in the past couple of years thanks to a combination of terrorism, the war in Iraq and the SARS virus. Not surprisingly, the main aircraft-makers have suffered along with their customers: Boeing will deliver around 275 aircraft this year, compared with 620 in 1999. Airbus has been hurt too, but not so badly, hence the expectation that it will overtake Boeing in deliveries this year. Thanks to Airbus’s new A380 super-jumbo, demand for Boeing’s flagship 747 jumbo has fallen. Boeing has also had to write off ambitious plans for its faster Sonic Cruiser after realising that in today’s super-competitive market for air travel, airlines value efficiency over speed. So the company is pinning its hopes on its new 7E7—the E is for efficient. This would replace its ageing 767 and compete with the A330-200.

Boeing’s space ambitions, which inspired the acquisition of Hughes Electronics' space and satellite business in 2000, have been an expensive flop. Demand for satellites has collapsed with the bust in the telecoms market. And Boeing was in such a rush to put up satellites that it failed to check its equipment properly. They are now afflicted by a series of problems that could reduce their life span by as much as two-thirds. The faults are so grave that some insurers are talking of suing Boeing directly, the first time insurers of satellites would have gone after a manufacturer rather than an owner. Boeing withdrew from the commercial-satellite market in July. Within weeks of the announcement, the firm’s military space ambitions were hammered when the air force withdrew $1 billion-worth of business from a bigger contract for rocket launchers because Boeing had misused confidential documents from Lockheed Martin when bidding.

Boeing’s ambitions took another hit earlier this autumn when it did an about-turn on its Boeing Capital portfolio. Soon after the financing business was acquired along with McDonnell Douglas in 1997, Boeing decided to use it to finance not only its own products but also those of other companies, such as ships. But this led to tension with the airline business during the aviation downturn: Boeing Capital was turning down financing deals for airline customers that it deemed too risky in favour of deals in completely unrelated industries. Boeing’s management recently decided that Boeing Capital should go back to focusing on helping airlines. Analysts now expect the division’s $12 billion portfolio to shrink.

Boeing’s woes in the commercial-aviation, space and financing businesses, coupled with the growth in American military spending, explain why the company’s defence business is so vital. As it unveiled its third-quarter results last month, Boeing marginally raised its annual revenue target, acknowledging that it continued to benefit from American government spending on missile defence, homeland security and networks. (Boeing aims to be the lead systems integrator for the American military.) But government contracts are subject to much more scrutiny than commercial work, especially since the round of industry consolidation in the 1990s has left just two big American military plane-makers.

For all the criticism of Ms Druyun, few people (even, it is said, within Airbus) ever saw the French aircraft-maker as a serious supplier to the American government. However, Boeing’s recent troubles have prompted Noel Forgeard, Airbus’s boss, to muse about building military planes in America. The US Air Force flying French planes? That might sound fanciful now, especially in light of France’s hostility to America’s invasion of Iraq. But Boeing, given the seriousness of its strategic problems and the latest embarrassment, would do well not to treat it as a French farce.

**CharlesBHoff** · January 23, 2004, 04:22

Originally posted by Colon
I'm not interested in silly nationalism bites.

What fascinates me about Boeing is that this company made huge gambles in the past to build revolutionary new planes, the 707 (world's first commercial jet airplane) and the 747 are good examples. Only a couple of years ago it seemed they'd establish a monopoly by merging with McDonnel Douglas.
These days they've been too chicken**** to rise to the challenge of Airbus' superjumbo and they've lost their market leadership in large civilian aviation. Next to that they've been embroiled in a bribery scandal and now they're getting a big blow in a market that was previously almost solely theirs.

So as case of study in corporate management: what's ailing Boeing?

They lost some airlines bussien in the middleeast as they are seem as than arrogorent america corporation. Kuwait Airline is buying airbus planes to replace the ageing Boering airplane they have. The decision was base upton the growing anti-america mood in the middleeast.

**TCO** · January 23, 2004, 08:18

Originally posted by Colon
I'm not interested in silly nationalism bites.

What fascinates me about Boeing is that this company made huge gambles in the past to build revolutionary new planes, the 707 (world's first commercial jet airplane) and the 747 are good examples. Only a couple of years ago it seemed they'd establish a monopoly by merging with McDonnel Douglas.
These days they've been too chicken**** to rise to the challenge of Airbus' superjumbo and they've lost their market leadership in large civilian aviation. Next to that they've been embroiled in a bribery scandal and now they're getting a big blow in a market that was previously almost solely theirs.

So as case of study in corporate management: what's ailing Boeing?

They were smart not to do the superjumbo. I don't care what happens to Boeing. Even if the company went completely broke, someone would pick up the assets, perhaps multiple companies. The US is a big enough market for that. Companies come, go. Who cares.

**DeathByTheSword** · January 23, 2004, 08:54

well it is great news for the EU aerospace and my job oppertunities...but boeing is working not on a superjumbo but on a megajumbo...(to carry over 2000 people IIRC)

**The Viceroy** · January 23, 2004, 08:56

Just another sad example of a market leader, who forgot how it became so, and didn't react quick enough to emerging competition, business is littered with examples of this.

I don't think its the end of boeing at all, they need a decade in 2nd place to get a handle on what the customers want, and to once again challenge Airbus.

I think they will return with products airlines can afford and want.

When it comes to aircraft, I don't think many companies are in a position to let politics get in the way, they want cheap, flexible and safe aircraft, which allows them to make money and expand their business, who gives a damn if they are american and arrogant if the aircraft are ideal for the job

**Patroklos** · January 23, 2004, 08:58

Because when companies merge like that you can expect a serious loss in jobs, and Boeing has ALOT of emploees. And god only knows where those jobs will go.

**DeathByTheSword** · January 23, 2004, 09:02

well a nice story about politics in the aircraft business:

when suadi-arabia wanted to change its aging fleet of boeings they looks at airbus and boeing deals. they picked the airbus one...then the president of boeing called the president of the US with something like: 'we are losing that contract that means people without jobs and that is bad for you'. then the US president called the boss in suadi and told him something like: 'you buy american or you wont get military support'. after that call they bought boeing planes although the airbuss ones were more fit for that particulair job.

the major problem with the aerospace business is that it is so polarized. so that you get the 'us' and 'them' feeling

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