Boeing at X-Roads?
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The problem is you need at least a 10 year horizon for an aviation manufacturer. …..:. Boeing said they need 50 Billion for their next product, but they spent 40 Billion in the last 10 years on stock buybacks. Seems to me we probably wouldn't be having this conversation if that 40 Billion had been spent on airplanes rather than used to juice the stock price to inflate C suite bonuses.
It appears that someone at Boeing used a 50 billion dollar number. Which sounds like ‘quite a lot’.
So with everything that comes from Boeing since 2018, I would be interested in understanding who said this, based on what, with what intention, and for which audience.
Until now, in my perception, the buyback money was far far more than required.
A bigger problem for Boeing in my perception is that in order to really compete with Airbus … they would need to completely overhaul their conceptual approach to how you design multiple models of aircraft in combination (from single to multi aisle).
In the early 90’s it was clear in my view that Airbus beat them on that. And since then my perception was that Airbus would start outselling Boeing in the future if they did not address this. Quarter based thinking makes it hard to compete in a by definition long cycle industry. People (senior to me and very good at their job) laughed at that at the time, but Boeing did not start to turn the ship, and the change in the market is undeniable.
Boeing will have to do more with less.
A problem facing publicly traded US companies, not sure what rules apply abroad, is that if they have sufficient cash on hand to provide a safe cushion, it is possible to leverage a controlling interest in the company for less than that via buying outstanding shares and then liquidate the company. Some have noted that this is how McD got control of Boeing in the first place. It is how companies such as Sears Roebuck, Toys R Us, and a great number of other companies, were taken over by vulture capitalists and parted out.
A problem facing publicly traded US companies, not sure what rules apply abroad, is that if they have sufficient cash on hand to provide a safe cushion, it is possible to leverage a controlling interest in the company for less than that via buying outstanding shares and then liquidate the company. Some have noted that this is how McD got control of Boeing in the first place. It is how companies such as Sears Roebuck, Toys R Us, and a great number of other companies, were taken over by vulture capitalists and parted out.
While it would be relatively easy for the federal government to put laws into place to prevent such pension fund abuse, those who control the government have no interest in stopping this abuse.
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A problem facing publicly traded US companies, not sure what rules apply abroad, is that if they have sufficient cash on hand to provide a safe cushion, it is possible to leverage a controlling interest in the company for less than that via buying outstanding shares and then liquidate the company. Some have noted that this is how McD got control of Boeing in the first place. It is how companies such as Sears Roebuck, Toys R Us, and a great number of other companies, were taken over by vulture capitalists and parted out.
Football club Manchester United is an interesting example. American LBO of a UK ‘business’ (supporters who call it football see it as a club and not as a business ;-) ). As a consequence ManUtd has some problems similar to Boeing.
Last edited by A0283; 29th Mar 2024 at 18:50.
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It's also why large public companies have become leery of providing defined benefit pension plans for their employees. By law, such pension funds must be funded as they are incurred (unlike the government, which normally takes a 'pay as you go' approach such as with Social Security). However, big pension funds make the company a takeoff target - corporate raiders come in and takeover, use accounting tricks to effectively cancel the pension (bankruptcy is a common ploy), dissolve the pension and use that pension fund to pay for the takeover.
While it would be relatively easy for the federal government to put laws into place to prevent such pension fund abuse, those who control the government have no interest in stopping this abuse.
While it would be relatively easy for the federal government to put laws into place to prevent such pension fund abuse, those who control the government have no interest in stopping this abuse.
Dont know about the UK, but do know at the time Maxwell plundered the pension funds of companies he took over. Interesting book available about this case, which also included a set of financial parameters by which you could count red flags about the financial doings of a company.
Example was growing income per share (investors love that). You can do that by increasing income, but also by reducing the number of shares. So if you sell off your (best) assets you can increase income, and if you use part of that by buying up your own shares… your share price goes up till a sudden collapse because there are not assets left.
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But isn't that exactly the current situation - and the problem? Those "results" are almost always defined in financial terms: increased earnings, higher share prices, etc. Those quantitative measures drive behaviour that leads to offshoring, contracting out, share buybacks, etc., which in the near term may have positive financial benefits, but is ultimately detrimental to long-term success. Quantitatively measuring things like engineering prowess and corporate reputation is much tougher. I bet having a claw-back clause that cancelled half of your deferred incentives if there was a "quality control" failure under your watch (such as fuselage plug unexpectedly departing mid-flight) would certainly drive different leadership behaviour. Unfortunately, I just can't see corporate America adopting (or a prospective applicant accepting) such terms.
The hard part is setting the metrics for "the good stuff", not keeping the overly financial focus muted.
And if the decline and fall of engineering excellence and the rest is so important, how can it be then said that only financially motivated management cadres will be available? If the engineering and other good stuff is important, isn't the task at hand to get the people in C-suite and Board who want to emphasize those things??
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The problem is you need at least a 10 year horizon for an aviation manufacturer. A 2 or 3 year pay out would turbo charge the profit now at any price mentality that got Boeing into its current state.
Personally, and I realize I am being hopelessly naive here but the solution is to incentivize investment in products over short term profits. Banning stock buybacks would IMO be a good first step. Boeing said they need 50 Billion for their next product, but they spent 40 Billion in the last 10 years on stock buybacks. Seems to me we probably wouldn't be having this conversation if that 40 Billion had been spent on airplanes rather than used to juice the stock price to inflate C suite bonuses.
Personally, and I realize I am being hopelessly naive here but the solution is to incentivize investment in products over short term profits. Banning stock buybacks would IMO be a good first step. Boeing said they need 50 Billion for their next product, but they spent 40 Billion in the last 10 years on stock buybacks. Seems to me we probably wouldn't be having this conversation if that 40 Billion had been spent on airplanes rather than used to juice the stock price to inflate C suite bonuses.
On paper, an enlightened Board could resolve to forego buybacks for the relevant stretch of years. Depending on institutional investor support .... but again, are the institutional investors willfully opposed to restoring engineering preeminence and excellence, safety and quality, and innovation? Then they should unload their shares.
Last edited by WillowRun 6-3; 30th Mar 2024 at 01:36.
Like I said hopelessly naive, but are the institutional investors so blind as to not realize that there is no future for their investment, unless they force a radical refocus in Boeing going forward ?
Sadly I fear the vultures are probably already measuring up the sickly corpse that is Boeing and strategizing on how to profit from its dismemberment.
Sadly I fear the vultures are probably already measuring up the sickly corpse that is Boeing and strategizing on how to profit from its dismemberment.
Like I said hopelessly naive, but are the institutional investors so blind as to not realize that there is no future for their investment, unless they force a radical refocus in Boeing going forward ?
Sadly I fear the vultures are probably already measuring up the sickly corpse that is Boeing and strategizing on how to profit from its dismemberment.
Sadly I fear the vultures are probably already measuring up the sickly corpse that is Boeing and strategizing on how to profit from its dismemberment.
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The subthread was about what sort of career portfolio the next CEO should possess in order to turn the company around with respect to those qualitites of excellence - especially engineering - Boeing has lost. Probably hundreds of millions of words have been published vigorously criticizing their loss. So if the view held is the vultures will swoop in, they're looming and about to descend, and dismember the company, I don't suppose there is any constructive dialogoue to be had about the next CEO's optimum or desirable career background, let alone about a Boeing turnaround in general.
The next CEO can only do what the investors/board want. The investors will let the board pick their choice of CEO. Boeing needs more of a different investors strategy with more long term investments instead of just new faces at the top.
Ecce Homo! Loquitur...
Prospect magazine:
https://prospect.org/infrastructure/...ission-boeing/
Suicide Mission
What Boeing did to all the guys who remember how to build a plane
https://prospect.org/infrastructure/...ission-boeing/
Suicide Mission
What Boeing did to all the guys who remember how to build a plane
And if the decline and fall of engineering excellence and the rest is so important, how can it be then said that only financially motivated management cadres will be available? If the engineering and other good stuff is important, isn't the task at hand to get the people in C-suite and Board who want to emphasize those things??
One of the names is interim Spirit CEO and Former Boeing lifer Patrick Shanahan
- Bachelor of Science (B.S.) degree in mechanical engineering.
- Master of Science (M.S.) degree in mechanical engineering from Massachusetts Institute of Technology
- Master of Business Administration (MBA) from the MIT Sloan School of Management).
An engineer and an MBA
Edit: At 61 though I don't knows ... a bit on the wrong edge of what Boeing (should be) looking for
- Bachelor of Science (B.S.) degree in mechanical engineering.
- Master of Science (M.S.) degree in mechanical engineering from Massachusetts Institute of Technology
- Master of Business Administration (MBA) from the MIT Sloan School of Management).
An engineer and an MBA
Edit: At 61 though I don't knows ... a bit on the wrong edge of what Boeing (should be) looking for
" MIT LGO began in 1988 as Leaders for Manufacturing (LFM) at a time when Japan and other overseas rivals were challenging U.S. manufacturing dominance in areas including the automotive industry. LGO students, who earn both an MBA form MIT Sloan and an SM from one of seven MIT School of Engineering program in two years, go on to become leaders in manufacturing and operations. MIT LFM's founding directors were Thomas Magnanti, a former dean of the MIT School of Engineering and later the founding president of the Singapore University of Technology and Design; and H. Kent Bowen, an MIT faculty member in materials science and engineering and electrical engineering and computer science who is now the Bruce Rauner Professor of Business Administration, Emeritus at Harvard Business School "
https://en.wikipedia.org/wiki/Leader...bal_Operations
I have no opinion on the individual. However in answer to Willow-Run's question, yes this need was foreseen and was provided for 30-years ago. Note carefully, Boeing was one of the founding companies, pre McD.
(Personally I suspect there is no risk-free pathway for Boeing, and one of the risks will be a need to reach deeper into the available cadres and bring through people earlier than one might have hoped.)
Cap compensation for any position in the company at $1M/annum including benefits and bonuses. Eliminate stock and option grants -- RSUs for everyone! Executives, like other employees, are welcome to buy shares with their own money during trading windows.
Set board compensation at $100/hr of work.
The non engineers will flee. Some engineers will realize they can still eke out a living with those terms.
Set board compensation at $100/hr of work.
The non engineers will flee. Some engineers will realize they can still eke out a living with those terms.
About both posts sighting vultures, there is no denying that such creatures unfortunately do populate financial landscapes here and in other parts of the world.
The subthread was about what sort of career portfolio the next CEO should possess in order to turn the company around with respect to those qualitites of excellence - especially engineering - Boeing has lost. Probably hundreds of millions of words have been published vigorously criticizing their loss. So if the view held is the vultures will swoop in, they're looming and about to descend, and dismember the company, I don't suppose there is any constructive dialogoue to be had about the next CEO's optimum or desirable career background, let alone about a Boeing turnaround in general.
The subthread was about what sort of career portfolio the next CEO should possess in order to turn the company around with respect to those qualitites of excellence - especially engineering - Boeing has lost. Probably hundreds of millions of words have been published vigorously criticizing their loss. So if the view held is the vultures will swoop in, they're looming and about to descend, and dismember the company, I don't suppose there is any constructive dialogoue to be had about the next CEO's optimum or desirable career background, let alone about a Boeing turnaround in general.
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It's all because Boeing became a monopolist . . .
Noted economist Dorothy Robyn has published a thorough rebuttal and refutation to a recent speech by U.S. Federal Trade Commission (FTC) Chair Lina Kahn in which Ms. Kahn applied some version or ideas of antitrust law and policy to Boeing's descent to the (above-referenced) X-Roads.
A description of the professional portfolio of the author, Dorothy Robyn, is linked in the article, published by ITIF, Information Technology and Innovation Foundation.
https://itif.org/publications/2024/0...onal-champion/
A description of the professional portfolio of the author, Dorothy Robyn, is linked in the article, published by ITIF, Information Technology and Innovation Foundation.
https://itif.org/publications/2024/0...onal-champion/
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Boeing in a nutshell
To put it very simply, Boeing has 3 problems:
1. A key aircraft with an aging, flawed design (737) - on which it relies for revenue.
2. Massive quality issues in manufacturing - putting off both customers and passengers, and with big costs.
3. A flawed, heavily financialised business model with management who know nothing else.
Design, manufacturing and management. Put together that’s potentially fatal. At best it will take a decade to recover.
The case studies should be being written about Boeing on how that financialised model, as taught in businesss schools, rips the heart out of good businesses, whilst profiting Wall Street in the short term. Everything that was learnt in the 80s about quality (Demming and Toyota) has been thrown away. Time for Boeing to go back to those principles. Sucking on the teat of defence subsidies won’t be enough to keep them going.
1. A key aircraft with an aging, flawed design (737) - on which it relies for revenue.
2. Massive quality issues in manufacturing - putting off both customers and passengers, and with big costs.
3. A flawed, heavily financialised business model with management who know nothing else.
Design, manufacturing and management. Put together that’s potentially fatal. At best it will take a decade to recover.
The case studies should be being written about Boeing on how that financialised model, as taught in businesss schools, rips the heart out of good businesses, whilst profiting Wall Street in the short term. Everything that was learnt in the 80s about quality (Demming and Toyota) has been thrown away. Time for Boeing to go back to those principles. Sucking on the teat of defence subsidies won’t be enough to keep them going.
To put it very simply, Boeing has 3 problems:
1. A key aircraft with an aging, flawed design (737) - on which it relies for revenue.
2. Massive quality issues in manufacturing - putting off both customers and passengers, and with big costs.
3. A flawed, heavily financialised business model with management who know nothing else.
Design, manufacturing and management. Put together that’s potentially fatal. At best it will take a decade to recover.
The case studies should be being written about Boeing on how that financialised model, as taught in businesss schools, rips the heart out of good businesses, whilst profiting Wall Street in the short term. Everything that was learnt in the 80s about quality (Demming and Toyota) has been thrown away. Time for Boeing to go back to those principles. Sucking on the teat of defence subsidies won’t be enough to keep them going.
1. A key aircraft with an aging, flawed design (737) - on which it relies for revenue.
2. Massive quality issues in manufacturing - putting off both customers and passengers, and with big costs.
3. A flawed, heavily financialised business model with management who know nothing else.
Design, manufacturing and management. Put together that’s potentially fatal. At best it will take a decade to recover.
The case studies should be being written about Boeing on how that financialised model, as taught in businesss schools, rips the heart out of good businesses, whilst profiting Wall Street in the short term. Everything that was learnt in the 80s about quality (Demming and Toyota) has been thrown away. Time for Boeing to go back to those principles. Sucking on the teat of defence subsidies won’t be enough to keep them going.
