Boeing's troubles could be traced to McDonnell Douglas purchase
By Mark Lacter | January 29, 2013 9:51 AM
With its 787 Dreamliner still grounded after battery fires on two planes, and no sign of when the wide-body aircraft will be back in the air, Boeing is under fire on many fronts. Too much outsourcing, too little testing, too great a technology risk - it's a full-fledged corporate nightmare. But to fully understand what happened, it might be helpful to revisit the 1997 acquisition with McDonnell Douglas (based in St. Louis but with a major operation in Long Beach). Seems as if the bean counters took control of the engineers - never a good thing. From New Yorker columnist James Surowiecki:
Technically, Boeing bought McDonnell Douglas. But, as Richard Aboulafia, a noted industry analyst with the Teal Group, told me, "McDonnell Douglas in effect acquired Boeing with Boeing's money." McDonnell Douglas executives became key players in the new company, and the McDonnell Douglas culture, averse to risk and obsessed with cost-cutting, weakened Boeing's historical commitment to making big investments in new products. Aboulafia says, "After the merger, there was a real battle over the future of the company, between the engineers and the finance and sales guys." The nerds may have been running the show in Silicon Valley, but at Boeing they were increasingly marginalized by the bean counters.
Under these conditions, getting the company to commit to a major project like the Dreamliner took some doing. "Some of the board of directors would rather have spent money on a walk-in humidor for shareholders than on a new plane," Aboulafia says. So the Dreamliner's advocates came up with a development strategy that was supposed to be cheaper and quicker than the traditional approach: outsourcing. And Boeing didn't outsource just the manufacturing of parts; it turned over the design, the engineering, and the manufacture of entire sections of the plane to some fifty "strategic partners." Boeing itself ended up building less than forty per cent of the plane. This strategy was trumpeted as a reinvention of manufacturing. But while the finance guys loved it–since it meant that Boeing had to put up less money–it was a huge headache for the engineers.