Boeing forced to take another $250 million charge on Starliner
Because of the continuing problems getting its Starliner manned capsule operational, Boeing has now taken another $250 million charge on the project, raising the total spent of its own money to $1.85 billion.
The company’s original fixed-price contract with NASA to deliver the capsule was $4.2 billion. The bulk of that won’t be paid until Starliner begins flying astronauts commercially, and NASA has now delayed that until 2026 at the earliest. The company’s new CEO, Kelly Ortberg, has now made it clear that he is focused on imposing changes to fix the bankrupt engineering management culture that has caused it so many failures in so many of its recent projects, not just Starlner. In his remarks announcing the company’s third quarter results, he said this:
The trust in our company has eroded. We’re saddled with too much debt. We’ve had serious lapses in our performance across the company which have disappointed many of our customers.
In addressing these issues Ortberg listed a whole range of changes, many of which focused on getting managers more closely involved in design and construction, or as he said, management needs “to be on the factory floors, in the back shops and in our engineering labs.”
Whether he will succeed is unknown. Its factory workers today rejected a new contract offer, continuing their now six-week strike that has halted work on company’s airplane business. In addition, Boeing reported a loss of $6 billion in that third quarter report.
One thing Ortbeg did make clear this week however: Boeing is not walking away from its Starliner contract with NASA. At a minimum it will complete that initial fixed price contract. Whether it will go on to fly more Starliner missions however Ortberg left open. I suspect he remains in negotiation with NASA over this issue.
On Christmas Eve 1968 three Americans became the first humans to visit another world. What they did to celebrate was unexpected and profound, and will be remembered throughout all human history. Genesis: the Story of Apollo 8, Robert Zimmerman's classic history of humanity's first journey to another world, tells that story, and it is now available as both an ebook and an audiobook, both with a foreword by Valerie Anders and a new introduction by Robert Zimmerman.
The print edition can be purchased at Amazon. from any other book seller, or direct from my ebook publisher, ebookit.
The ebook is available everywhere for $5.99 (before discount) at amazon, or direct from my ebook publisher, ebookit. If you buy it from ebookit you don't support the big tech companies and the author gets a bigger cut much sooner.
The audiobook is also available at all these vendors, and is also free with a 30-day trial membership to Audible.
"Not simply about one mission, [Genesis] is also the history of America's quest for the moon... Zimmerman has done a masterful job of tying disparate events together into a solid account of one of America's greatest human triumphs."--San Antonio Express-News
Because of the continuing problems getting its Starliner manned capsule operational, Boeing has now taken another $250 million charge on the project, raising the total spent of its own money to $1.85 billion.
The company’s original fixed-price contract with NASA to deliver the capsule was $4.2 billion. The bulk of that won’t be paid until Starliner begins flying astronauts commercially, and NASA has now delayed that until 2026 at the earliest. The company’s new CEO, Kelly Ortberg, has now made it clear that he is focused on imposing changes to fix the bankrupt engineering management culture that has caused it so many failures in so many of its recent projects, not just Starlner. In his remarks announcing the company’s third quarter results, he said this:
The trust in our company has eroded. We’re saddled with too much debt. We’ve had serious lapses in our performance across the company which have disappointed many of our customers.
In addressing these issues Ortberg listed a whole range of changes, many of which focused on getting managers more closely involved in design and construction, or as he said, management needs “to be on the factory floors, in the back shops and in our engineering labs.”
Whether he will succeed is unknown. Its factory workers today rejected a new contract offer, continuing their now six-week strike that has halted work on company’s airplane business. In addition, Boeing reported a loss of $6 billion in that third quarter report.
One thing Ortbeg did make clear this week however: Boeing is not walking away from its Starliner contract with NASA. At a minimum it will complete that initial fixed price contract. Whether it will go on to fly more Starliner missions however Ortberg left open. I suspect he remains in negotiation with NASA over this issue.
On Christmas Eve 1968 three Americans became the first humans to visit another world. What they did to celebrate was unexpected and profound, and will be remembered throughout all human history. Genesis: the Story of Apollo 8, Robert Zimmerman's classic history of humanity's first journey to another world, tells that story, and it is now available as both an ebook and an audiobook, both with a foreword by Valerie Anders and a new introduction by Robert Zimmerman.
The print edition can be purchased at Amazon. from any other book seller, or direct from my ebook publisher, ebookit. The ebook is available everywhere for $5.99 (before discount) at amazon, or direct from my ebook publisher, ebookit. If you buy it from ebookit you don't support the big tech companies and the author gets a bigger cut much sooner.
The audiobook is also available at all these vendors, and is also free with a 30-day trial membership to Audible.
"Not simply about one mission, [Genesis] is also the history of America's quest for the moon... Zimmerman has done a masterful job of tying disparate events together into a solid account of one of America's greatest human triumphs."--San Antonio Express-News
It seems Ortberg has handed Boeing a bullet to bite on as he begins performing some much-needed surgery – perhaps even including some amputations – without benefit of anesthesia.
If Boeing wants to turn itself around, it should sell the St. Louis plant and everything associated with McDonnell Aircraft. They’re cursed.
I’m actually serious.
I don’t blame you Larry.
My Dad called me a jinx–cars that worked just fine when he drove them always went dead and stranded me across town. I don’t know what good luck is, having never had any.
”If Boeing wants to turn itself around, it should sell the St. Louis plant and everything associated with McDonnell Aircraft.
What a great plan! Sell off the only part of the company that actually works and keep the parts that don’t. That should lead to profits.
mkent: It is interesting to me that over the years I have had many Boeing people tell me that the merger with McDonnell Douglas in St. Louis was the beginning of the end of the company. I have no inside knowledge, nor do I have any idea if this is right or not. I have always remained skeptical.
I’d love to hear some conversation about this from anyone with experience.
I worked as a contractor during the transition years. After the acquisition, there was a notable darkening of the company atmosphere. Usually, acquiring a major competitor would be cause for ‘Hell, yeah!”. People I worked with, was more like “deleted.”
Blair Ivey: I am disappointed in you. You have been a regular here for years. I would think you’d obey the rules about obscenities.
You are suspended for a week.
Keith Cowing of NASA Watch fame once posted a graphic of the Star Wars Death Star with the Boeing logo on it claiming that Boeing was the Evil Empire. That is false. Lockheed Martin is clearly the Evil Empire, and I can tell a dozen stories from my days in the aerospace industry showing that it is so. You need to look at a different sci-fi franchise to find Boeing.
Boeing is the Boerg (spelling intentional): You will be assimilated.
To understand Boeing’s problems, the first thing you need to understand is geography. Boeing achieved its current state by merging with or acquiring over a half dozen major geographically distributed aerospace companies, each with its own history and culture. Because of their size and distance apart, those companies largely retain their original culture today.
There was Boeing building commercial airplanes in Seattle, McDonnell building jet fighters in St. Louis, Douglas building large transports in Long Beach, North American managing the Space Shuttle in Seal Beach, Hughes Helicopter building attack helicopters in Mesa, Vertol Helicopters building cargo helicopters in Philadelphia, and Stearman building fuselage sections in Wichita. Then there are the sites of Charleston, SC building (but not designing) the 787 and Huntsville, AL doing space and defense work for NASA Marshall and the Redstone Arsenal, respectively. Those last two were not mergers or acquisitions. They were spun up as remote sites directly by Boeing Seattle.
Now look at where Boeing’s billion-dollar screw-ups (in current-year dollars) have been the last 25 years.
First there was DCAC-MRM, then Boeing’s JSF entry the X-32 Monica, then the 767 tankers for Italy and Japan and the 737 Wedgetail for Australia, then the 787 (a $27 billion financial hole in the ground), then the KC-46 tanker, then the 737 Max (a $25 billion financial hole in the ground), and now the new Air Force One. All of those are Seattle programs. The first two were before the merger with McDonnell Douglas and the next two were coincident with it, so there’s no way McDonnell Douglas could have caused them.
Now look at the space side. There’s the Ground-based Midcourse Defense (GMD) whose Pentagon program manager once publicly stated that his top priority was to replace Boeing as the prime contractor, Ground-Based Strategic Deterrent (GBSD) whose Pentagon program office (rumors say) orchestrated the acquisition of ATK by Northrop Grumman to fence Boeing out of the program, SLS (enough said), EUS, Starliner, and finally Human Landing System (HLS) and Gateway Logistics Services (GLS) whose proposals were so bad that NASA declared them noncompliant and formally refused to evaluate them.
All of these are Huntsville programs. OK, Starliner is a special case. It started out at the former McDonnell Douglas Astronautics (MacDAC) in Huntington Beach but got moved to Houston when that site was sold to developers and disbanded. Then around 2014 or 2015 a corporate reorganization took upper management of that program away from St. Louis and gave it to Huntsville.
While all those programs were failing, the programs from the former McDonnell Douglas were largely succeeding: the F-15EX Eagle II, the F/A-18 E/F Super Hornet, the EA-18G Growler, the C-17 Globemaster, the AH-64E Longbow Apache, JDAM, SDB, Delta II, Delta IV, SpaceHab, and numerous X-planes.
That one site can have a string of successes with only a few failures while another site of the same company can have failure after failure with only an occasional success (P-8 Poseidon) strongly suggests that the sites’ different culture is what determines success or failure. And in that case it makes no sense to destroy the culture of the successful site and replace it with the culture of the failing site.
Yet many people online (not just here) argue for just that.
Now that you know the geography of Boeing, I can summarize the cause of Boeing’s current crisis with just three words: Harvard Business School.
Let me explain.
About the time of the merger I was working in Seattle for Boeing’s JSF entry, the X-32 Monica. I was putting in a lot of overtime, and late one night I stopped by my boss’s boss’s office on the way out the door. Boeing had recently hired her away from the Navy, and that night she decided to tell me about Boeing’s formal management philosophy.
Boeing’s formal management philosophy (and this goes back well *before* the merger) is that managers are professional decision makers, and thus they don’t have to have any expertise — or even any knowledge — of what they’re making decisions about in order to make good decisions. In fact, if a manager has knowledge of what he’s making a decision on, then that manager is biased. Good managers should be completely unbiased, meaning they should have absolutely no knowledge of what they’re making decisions on.
Of course I laughed when she told me this. The manager in the next office, hearing our conversation, came over to assure that this was so. I laughed at him too. Not believing them but not wanting to argue about it, I headed out to get something to eat. As I was walking down the hall heading for the exit, I ran into another manager locking up his office. He asked me what I was chuckling about. I told him “[So and so] are trying to pull one over on me.” as I explained what they told me.
“That’s true.” he said. “That is the Boeing management philosophy, and it’s a good one.”
That gave me pause. Not wanting to believe them, I looked into it. It turns out they were (partly) right. That is Boeing’s management philosophy, but Boeing didn’t invent it. It came from Harvard Business School. That makes it worse, because it spread from there to every other business school in the country and from there to almost the entire Fortune 500 (which explains why so many companies are so screwed up).
But note that that is the Boeing management philosophy. It was not the McDonnell Douglas management philosophy. The different sites still largely retain their original (different) cultures. If you look at most Boeing St. Louis programs, you’ll see that program management is mostly made up of former structures, strength/loads/dynamics, or propulsion engineers. An electronic warfare program will often be run by a former avionics engineer. A support program will usually be run by a former logistics lead, and so on.
The guy running the factory will typically have decades of experience in manufacturing. The typical career path for that is shop foreman—>manufacturing planner—>get a degree—>manufacturing engineer—>manufacturing manager. From there he’ll run bigger and bigger back shops until he’s running the whole factory. It is most certainly not run a McDonalds franchise—>run a factory.
Once you know how Boeing works, it’s easy to see how the different management philosophies of the different sites have led to vastly different outcomes of the programs at the different sites. At its heart, it’s not a problem of geography but a problem of philosophy. But the geographical isolation of the different sites has provided an unintentional laboratory of how management philosophy can have a dramatic effect on program outcome.
But you have to learn the right lesson from the unintentional experiment.
mkent’s experiences and analysis are compelling and very different from the speculation (hypothesis) that I have heard. They may not be mutually exclusive, but the hypothesis would suggest a general degradation across the company, not just at specific plants.
I have heard speculation that the Boeing management had focused on engineering, and the McDonnell Douglas management had focused on stock price, making decisions that raised short term results for quarterly and annual reports at the expense of long-term prosperity. In addition, the MD management was said to have taken control of Boeing, giving us the saying that McDonnell Douglas bought Boeing with Boeing’s own money.
The Harvard management philosophy is something that I had heard, too, in the 1980s, though phrased in a similar but not quite the same way mkent related. That tale is: a Harvard Business School professor had been teaching his students in the 1970s, maybe earlier, that a manager is a manager, and any manager can manage any company interchangeably.* The proof in the 1980s was that the head of Pepsi, John Scully, moved seamlessly to Apple Computer, replacing its founder, Steve Jobs, in a management coup.**
In the mid 1980s I was working for an aerospace company but also wound up on the board of a $4 million company (mid-1980s dollars) in a very different industry. It didn’t take a rocket scientist to understand that the two companies were run very, very differently. Airlines and railroads are in transportation industries, but they, too, are run very differently. If you want to open a restaurant, you absolutely have to know the restaurant business in order to succeed. All these industries are very different with very different problems and solutions. The proof? A decade after Apple hired Scully the company was on the verge of bankruptcy, and the only thing that saved the company was to quickly rehire Jobs, who understood how to run a computer company, and even then he had to take immediate drastic action to avoid bankruptcy court. Scully knew how to run a beverage company, but that is different than a high technology company. Farmer Jones knows how to run his own family farming company, using high tech farming equipment with differential GPS location to within a centimeter, but that does not mean that he could run SpaceX or Boeing.
The Harvard philosophy is a terrible one (dare I say stupid beyond belief, and perhaps a precursor to the fantasy philosophies universities in general seem to promote today?), and should never be applied — should have never been taught. It is similar to a philosophy that an aerospace engineer could seamlessly slip into a railroad engineering job. Aerospace requires light weight structures, because something that weighs too much will not fly, but railroads require minimum (not maximum) weights. If a locomotive is not heavy enough, its wheels will spin rather than start moving the train. Even railcars need a minimum weight to avoid bouncing off the rails when empty. Electrical engineers deal with high power and know that a relay could weld itself closed, but electronics engineers deal with low power signals and don’t know what a weld is. We engineers receive the same college education no matter where we will end up working, but our early years of employment are spent learning the ropes of the industry that we work in. The same applies to management. These ropes are different for different industries, otherwise we would have spent additional time in college learning all the ropes in order to be even more valuable to our employers.
So, yeah, when I heard that Harvard was teaching stupidity in its business classes, I was surprised. How could the premier business school be so stupid? But maybe I shouldn’t have been. About the same time, it was reported that Harvard had been teaching its business students that there is hidden value in many or most American companies. Corporate real estate is kept on the books at the original purchase price (or the latest appraised value, if it is used as collateral for a loan) rather than the higher prices that come with the high inflation rates of the 1970s, so an astute businessman, like Ted Turner, could buy a company and sell it for parts, as happened to the once-great MGM corporation. Other businessmen realized that pension funds could likewise be stripped off of a company and pocketed, and many workers lost their promised pensions in this way. ***
What did Harvard think would happen to America’s companies, workers, and population when these two philosophies were implemented? With such stupidities being taught to America’s college students, no wonder our teachers could teach other ludicrous philosophies and concepts. No wonder today’s students think they can have their own pronouns (and I lately heard of individually cohosen adjectives, but so far they seem to still be existing, not made up, adjectives). No wonder boys are so willing to pretend that they are girls so that they can watch the girls change and shower in the girls’ locker rooms. No wonder participation trophies are so popular, rewarding mediocrity and failure even more than winning and success. Stupidity is the rule of the day.
__________________
* Come to think of it, I have worked for companies that thought their employees were interchangeable with virtually anyone off the street. This may be somewhat true of the lowest-skilled employees (who cannot flip a burger?), but the higher the skill level, the less interchangeable. Management is a high level skill.
** This coup is supposedly also where out-of-control management pay came from, because Apple paid a million dollars per year for their new manager, Scully, an amount well above any other corporate chief, and other corporations declared their own management better than Apple’s by paying even more, causing a cascade of increasing (can a cascade travel upward?) pay packages for upper managers throughout America.
*** I almost did, too, at that aerospace company in the mid 1980s, but the government declared that, as a government contractor, the pension fund was paid for by the government and thus unavailable for the corporation’s use but would have to be refunded to the government if it were not paid to the retired employees.
Our Host suggested that the Recognition of Limits might best be treated in the Comments.
[Duhn-Duhn]
“Bailiff!”
“Pima County Superior Court docket number 0841701A. Failure to Recognize.”
“Mr . . . Ivey. Haven’t I seen you in my court before?
“Yes, your Honor.”
“*sigh* Seven days or seven quatloos.”
“Seven days, your Honor.”
[Bang!]
The [Words] In The Dark
Based on a poem by John Godfrey Saxe based on a parable from the Buddhist ‘Tittha Sutta’ c. 500 BC.
It was Five Commenters on BtB
To Space all much inclined
Who wandered into a dark room
Some Words they were to find
The First lay hands and began to grope
‘Begins with ‘P’, and four-letter scope
It feels to me, like a Slippery Slope!’
The Second felt, and put up a post
‘Starts with ‘D’, and four, at most
I fear the user will become a Ghost!’
The Third explored, by sense of touch
‘Also four: a leading ‘S’, when things get tough
In the user’s future, there is only Nope!’
The Fourth could only digitally observe, and spoke
‘The longest of all: upfront ‘G’ and fury invoke
This utterance will put the user on permanent Revoke!’
The Fifth felt warmth; their mouth ran soap
‘Sixth letter of the alphabet; in pain provides hope
But clear to me, the utterance here, will have the user Croak!’