Can Boeing rebuild trust after safety scares?

Sam Hawley: Imagine sitting on a flight when a piece of the plane blows off. You might remember that terrifying scenario on an Alaska Airlines flight earlier this year when a hole opened up in the side of the plane. Ever since, the spotlight’s been on Boeing, the maker of the aircraft. Today, Jerry Useem from The Atlantic magazine on how Boeing switched its focus to stock price and what that meant for the safety of its planes. I’m Sam Hawley on Gadigal Land in Sydney. This is ABC News Daily. Jerry, just tell me a bit about your long-term work looking at Boeing because you have a fair bit of knowledge about Boeing at this point, don’t you?

Jerry Useem: Yeah, Boeing is a company that I’ve been writing periodically about for the last 25 years or so. It’s afforded a long-term perspective that I think really helps when you’re talking about the commercial airline business because this is a very, very long-term business with multi-billion dollar investments that take decades to play out. These troubles that seem to have sprung out of nowhere on Boeing in the last couple of years, to me, did not come from nowhere. The seeds of these problems were sown really in a series of decisions made around the year 2000 and the years just subsequent.

Sam Hawley: Let’s go back to 1916 because you wrote a piece in The Atlantic recently which was fascinating because to understand Boeing today, it is good to think about how it’s changed over time. In 1916, you paint this picture of Bill Boeing on the workshop floor watching the aircraft being built. He’s taking a really keen interest in this, isn’t he?

Jerry Useem: Yes. This is back in the golden age of American manufacturing when we not only made stuff but were coming up with the methods of making stuff. The story I tell is about Bill Boeing, the company founder, appearing on the factory floor as a matter of course to actually watch the process of his planes being assembled because what could be more important? The anecdote I tell is he walks up to one guy who’s sawing one of the spruce ribs of a wing. Planes were made of wood back then. He holds it up to his eyes for close inspection like he’s looking at a pool cue almost and casually drops it on the floor and then stomps on it to bits silently. But the point is made that the boss will only take quality work.

Sam Hawley: Yes. No imperfection.

Jerry Useem: Yeah. It’s a story from 1916 but I think it also is fairly illustrative of Boeing’s culture as it existed for almost up to the year 2000 which was this was a very unique business that functioned first and foremost as a society of engineers devoted to technical excellence first and foremost and financial results second or maybe even third and that changed.

Sam Hawley: Quality over profit.

Jerry Useem: Yes.

Sam Hawley: And Boeing grew and grew and grew from 1916 and it was building the aircraft that we all know today. The 737, the 747, the 777.

Jerry Useem: Exactly. The 707 is what launched the Jet Age. I think it was Qantas’ first jet purchase.

Archive: Flight time from San Francisco to Sydney was 16 hours 25 minutes. That is nearly half the time which it takes us on our old super constellations. Now we have other Boeing 707s being delivered. We’ll have seven in all delivered within a few months.

Jerry Useem: Each of these were decisions that if you had asked a Wall Street analyst should you go ahead and build this plane Wall Street analysts would have said no. That is too risky and who knows there might not be demand for it. And Boeing was known for just going and doing it. Partly that had something to do with the fact of where it was located which is in Seattle in the Pacific Northwest thousands of miles from the financial hub of New York and Wall Street. Today it’s absolutely much more connected to the rest of the US but back in the day it was a little bit of a remote outpost. They could operate sort of without feeling those financial pressures that you might feel say on the East Coast of the US.

Sam Hawley: Alright well then fast forward rather rapidly to the year 2000 and the culture was changing wasn’t it? Along with the whole idea of manufacturing in America.

Jerry Useem: Yes. One they had bought the massive military contractor McDonnell Douglas. That was very much a finance first company. It was their executives that became sort of ascendant in Boeing. Around this time it moved its headquarters out of Seattle to get physically distant from the actual engineering unions that designed the planes and did the manufacturing the actual assembly process. At the same time like a lot of other American companies they were coming to see manufacturing as a thing of the past. Which is very odd since Boeing is a manufacturer. They came to see manufacturing as a place to cut costs. As a place where you could outsource it send some of it overseas have some of it done here. But for financial reasons that made a lot of sort of short term financial sense offload a lot of the risk. A lot of the pesky labor unions. We’re talking about the actual engineers here. Onto someone else’s shop floor. It sort of divested itself as much as possible from the actual process of making planes.

Sam Hawley: Very different from 1916.

Jerry Useem: Yes. Boeing had come to see itself as a kind of final integrator. Kind of like a gluer together of sort of precast model plane parts that you might build with your dad or something. Increasingly the executive suite was people who did not speak the language of manufacturing and engineering in particular. And when problems arose people Boeing have told me over the years became increasingly difficult to communicate to management like well what the nature of the problem was.

Sam Hawley: Boeing’s balance sheet was looking really good though. Its stock rose more than 600 percent from 2010 to 2019. Yes. So good for the shareholders.

Jerry Useem: Right there that was the short term payoff lasted for a solid 10 years and it was huge.

Sam Hawley: Yes. And then we fast forward of course to 2018 and 2019 and we have two devastating and deadly crashes.

News report: There are fears that almost 200 people have been killed in a plane crash off the coast of Indonesia. No survivors have been reported from the Lion Air flight which lost contact and was seen plunging into the sea shortly after takeoff.

News report: This is all that remains of Ethiopian Airlines flight 302. Just six minutes after departing from Addis Ababa airport bound for Nairobi it crashed outside the Ethiopian capital.

Sam Hawley: Lion Air flight 610 and Ethiopian Airlines flight 302 and they were Boeing 737s.

Jerry Useem: 737 Maxes which is sort of a new variant of 737. It had installed software that pilots couldn’t control.

News report: Indonesian authorities found a major cause of the crash was a new piece of automated software on the 737 Max known as MCAS. After the Max 8 was found to pitch its nose upwards in flight the new software was intended to make it safer by automatically moving the nose of the aircraft down.

Jerry Useem: And in both cases the software decided that the plane was doing something that it wasn’t and moved to sort of auto correct itself and overrode the pilots efforts to actually fly the plane. So Boeing is in the business of building planes that pilots can understand and its reactions right after that I think were really quite bad. Which is well these pilots didn’t know what they were doing they should have understood more rather than saying hey you know we’re Boeing it’s our job to make planes that pilots intuitively know how to control.

Sam Hawley: And 346 passengers and crew died on those two flights so yeah absolutely devastating. And of course now the spotlight is well and truly back on Boeing after a blowout of a side of a Boeing 737 Max 9 aircraft.

Jerry Useem: It was over the state of Portland luckily no one was injured but you know the video is dramatic.

News report: A gaping hole in the aircraft as part of the fuselage is blown out of this Alaskan Airlines jet just after takeoff from Portland.

Flight attendant: We need everyone to remain seated with their seat belts fastened right now.

Jerry Useem: There’s an emergency exit door that we’ve seen a thousand times when we go on planes and it simply just falls out mid flight and sucks you know someone’s headphones out the side. Luckily doesn’t suck any human beings out the side but needs to say this is unsettling when your plane literally disintegrates. Air travel is still extremely safe so I don’t want to you know make this be a scare story but it did speak to like what is Boeing doing?

Sam Hawley: Yeah an interim report from the US safety investigator revealed that the four bolts were missing altogether and you know it is terrifying for the people on board that’s for sure. Tell me Jerry what have you identified in the way Boeing was being run that led to these failures?

Jerry Useem: Well you know a lot of people have set it up as well this was a company that has put profit cost control over quality but I think that really oversimplifies things because you know any business has to keep costs down. The big shift is in how they went about keeping those costs down like they did it very crudely instead of like refining their expertise to figure out how to build planes smarter better. You know the way Japanese automakers bested Detroit at you know making cars better with fewer defects it just sort of said let’s get rid of this as much of this unpleasant manufacturing process as possible to run it as sort of a finance first company.

Sam Hawley: So do you expect that Boeing will come up with a new business model at this point I mean can we expect some new announcement or entirely new plane design or anything like that to salvage I guess the name?

Jerry Useem: It’s interesting I mean it is hard to predict I imagine there will be some more problems before all is said and done. They have indicated that they are changing tack they went too far got too far removed from the actual business of making planes looking to reacquire pieces of the business that sold off like the fuselage of the 737 used to make in-house no longer. Well it’s in talks to reacquire that company is called Spirit Aerosystems we’ll see how that goes. On its sort of next generation of planes it’s built a billion dollar facility outside of Seattle to build these state of the art composite wings. Because despite all this you know Boeing has made a set of very like sound decisions about what kind of planes to build you know to make them more efficient consume less fuel make them more long distance. It’s a pity really that they’ve sort of sabotaged themselves with these very short term business mindset that was really the antithesis of what Boeing was about. I mean I think what they need now is fully an operator someone who has like an intuitive feel of how all the parts of a plane go together the importance of each the trade-offs and different approaches.

Sam Hawley: Well of course Jerry most airlines fly Boeing aircraft Qantas here American Airlines there. So how do you feel about flying on Boeing made planes or on a 737 Max. I mean some people might be a little nervous.

Jerry Useem: People ask me that and honestly I don’t think about it. When you get in your automobile that’s far more likely to be hurt or have something bad happen than be getting the plane. But for people who are spooked or scared there’s also I understand that too like there’s something kind of viscerally scary about a door falling out and so it hasn’t changed my flying habits. I don’t know once I’m on a flight I will kind of peak like what kind of plane is this Boeing or Airbus or which is something I never used to do. So it’s put the seat of doubt in the back of even my mind who tends to not think too much about these things.

Sam Hawley: Jerry Useem is a contributing writer at the Atlantic. He’s been writing about Boeing for 20 years. This episode was produced by Bridget Fitzgerald with audio production by Sam Dunn. Our supervising producer is David Coady. I’m Sam Hawley. To get in touch with the team please email us on [email protected]. Thanks for listening.