Boeing's troubles could be traced to McDonnell Douglas purchase

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.

More by Mark Lacter:
American-US Air settlement with DOJ includes small tweak at LAX
Socal housing market going nowhere fast
Amazon keeps pushing for faster L.A. delivery
Another rugged quarter for Tribune Co. papers
How does Stanford compete with the big boys?
Those awful infographics that promise to explain and only distort
Best to low-ball today's employment report
Further fallout from airport shootings
Crazy opening for Twitter*
Should Twitter be valued at $18 billion?
Recent Aerospace stories:
Why they keep flying into Santa Monica airport
Morley Builders says CEO and son were in SMO crash
Deaths in jet crash at Santa Monica airport
Boeing to end C-17 production in Long Beach
How much longer can C-17 production last in Long Beach?

New at LA Observed
On the Media Page
Go to Media

On the Politics Page
Go to Politics
Arts and culture

Sign up for daily email from LA Observed

Enter your email address:

Delivered by FeedBurner

Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
LA Observed on Twitter and Facebook