Boeing Becomes a Felon
I am like the dog who not only caught the car, but a large truck.
When I wrote my first column on the Boeing Company I did not think that it would be the first of several columns about the quality and moral collapse of one of the greatest American companies of the 20th century.
In my first column, published on 3/19/24 I wrote about the 737 Max disasters and the blown-out door event. Okay, bad enough
In my second column, published on 4/16/24 I wrote about the ongoing problems with the new 777 aircraft.
In my third column on this quality clusterfuck that goes by the name of Boeing, I wrote about how this quality failure has now expanded to space. The spacecraft that Boeing manufactured had quality issues, making the astronauts who went up to the ISS on it, perhaps have to stay for months rather than days at the ISS.
Maybe, maybe this will be the last Boeing-quality issues column. It depends on how the now criminal company operates going forward.
Boeing becomes a felon
Earlier this week, Boeing agreed to plead guilty to criminal fraud charges for their 737 crashes. As this CNBC article states:
“Boeing has agreed to plead guilty to criminal fraud tied to the fatal 737 Max crashes, a decision that brands the U.S. aerospace giant a felon but allows it to avoid trial while it tries to turn the page from safety and manufacturing crises.
Under the deal, Boeing would face a fine of up to $487.2 million, though the Justice Department recommended that the court credit Boeing with half that amount it paid under a previous agreement, resulting in a fine of $243.6 million. The plea deal requires the approval of a federal judge to take effect.
If the deal is accepted, it could complicate Boeing’s ability to sell products to the U.S. government as a felon, though the company could seek waivers. About 32% of Boeing’s nearly $78 billion in revenue last year came from its defense, space and security unit”.
U.S. law prohibits convicted felons from supplying the government, so this is going to be interesting as to what happens going forward with all the contracts that Boeing has with the U.S. government.
In addition to the close to $500 million penalty, Boeing will also have to pay some $455 million in compliance and safety issues. So close to $1 billion dollars of judgement against Boeing this week.
Most of Boeing’s quality control issues – and usually for most companies – comes from cost controls, or cutting corners or using lower-cost parts or workers. The question here is pure and simple corporate leadership. What do the CEO and board of the company think is the most important allocation of financial resources?
Boeing has made that very clear: stock buy-backs. In the past decade, Boeing has spent $43.4 billion in stock buybacks. Stock buybacks are when companies buy back their own shares to lower the total number of shares and thus increase the profit per share. A financial effort to help those who own stock in the company.
Think of it this way. Boeing spent 43 times its financial resources to buy back stock rather than to focus on quality control. A cruder way to say it is that Boeing leadership has prioritized stock price over safety. How can one come to any other conclusion?
The CEO and perhaps others in the Boeing C-suite get paid in part based on stock price performance, so top leadership is compensated if the stock buyback works. I would imagine that there is no executive compensation for the lack of passenger deaths, up to the quality issues of the past few years.
As a futurist, I see the reality of Joseph Schumpeter’s theory of creative destruction. He theorized that capitalism will eventually decline as large firms replace entrepreneurs and undermine private property. Creative destruction occurs when technological innovation or inventions create a new reality that supersedes the past one. For example, the internal combustion engine in autos replaced the horse-and-buggy industry.
In this case, Boeing and its big corporate model are being superseded. In space, SpaceX has literally been to the ISS and back numerous times, while Boeing, with its low-quality/high-stock buyback culture, has repeatedly failed.
The other dynamic that Boeing represents is the necessity of reinventing capitalism. Right now, it is okay for capitalist companies to prioritize stock value over the safety and lives of their customers. Maybe one way to reinvent capitalism is to outlaw stock buybacks for 15 years for any company that has committed fraud or done something illegal.
I had two flights this week. The first was on a Boeing plane, and the second was on an Airbus. I was relieved when I sat down and saw the Airbus information card on the second flight. Whew! It's not a Boeing plane. The passenger next to me, seeing me look at the Airbus safety card, stated “I am glad it is not a Boeing plane”.
I hope that this is my last column on the clusterfuck that is Boeing. We will see.