On May 9, 1917, William Boeing reincorporated the Pacific Aero-Products Co. as the Boeing Airplane Co. It was only 14 years after the Wright brothers’ first flight.
For the next 84 years Boeing was synonymous with the Puget Sound region. It built the famous B-17 bomber for World War II — dubbed the Flying Fortress by a Seattle Times reporter; the B-52 Stratofortress for the Cold War (still in service); the 707 which revolutionized air travel.
This was “Jet City,” with good union Boeing jobs underpinning a solid middle class. Boeing was synonymous with quality, driven by an engineering culture. “If it’s not Boeing, I’m not going” was a phrase that symbolized the company’s reputation versus competitors such as Douglas Aircraft and Lockheed.
But in 2001, Boeing moved its headquarters to a swanky skyscraper in Chicago, less than four years after its merger with McDonnell Douglas. Since then, little by little, Boeing’s birthplace is fading in the company’s rearview mirror. In 2021, Amazon surpassed Boeing as the state’s largest private-sector employer, even though the Commercial Airplanes division remains headquartered here.
Given the shifty nature of the C-suite, it’s no surprise that the company said earlier this month that Boeing is abandoning Chicago for a new headquarters near Washington, D.C., in Arlington, Virginia.
Chief Executive Dave Calhoun’s statement read oddly that the move, “makes strategic sense … given its proximity to our customers and stakeholders.”
Which customers and stakeholders? Certainly the military-industrial complex, exemplified by the nearby Pentagon. And proximity to federal regulators and politicians. The company is still under scrutiny from the mishandling of the 737 MAX disasters.
But proximity doesn’t equal constructive moves.
No wonder aviation analyst Richard Aboulafia told my colleague Dominic Gates that Boeing returning its headquarters to Seattle would have sent “an incredibly powerful message” about fixing Commercial Airplanes, its most important unit. And the biggest single source of U.S. manufactured exports.
“Boeing’s problem is not with government relations,” Aboulafia said. “I don’t see doubling down the emphasis on D.C. lobbying as a breakthrough moment. It looks like a recipe for more of the same.”
In other words, adhere to the First Rule of Holes: “When in a hole, stop digging.”
Boeing’s problems are neglect of the engineering culture that built the company and the desperate need to rebuild trust, with employees and the traveling public. Instead, for perhaps 25 years the culture has been captured by financial engineering.
CEO Phil Condit led the merger with McDonnell Douglas, but the latter’s bean-counter culture began to infest the company. This became ascendant when Condit was ousted in a 2003 defense procurement scandal, replaced by Harry Stonecipher, who had been head of McDonnell Douglas.
The mordant joke was that McDonnell Douglas bought Boeing with Boeing’s money.
Stonecipher was the first in a line of future Boeing CEOs influenced by General Electric’s Jack Welch, one of the most poisonous individuals in American business since the robber barons.
The massive layoffs and cost cutting he ordered at GE earned him the nickname “Neutron Jack” (after the neutron bomb, which leaves buildings standing but kills people). But Welch pumped up the stock price and profits, becoming lionized by the business press as well as the prototype celebrity CEO.
James McNerney, Boeing chief executive from 2005 to 2015, came up under Welch and lost out in the battle to succeed him. After Dennis Muilenburg was fired in 2019 amid the MAX crisis, he was replaced by Calhoun, another Welch acolyte who rose through GE for 26 years.
Isolating themselves from Commercial Airplanes allowed the brass to focus on the stock price. They no longer lived in the same community as their workers. But it set the table for disaster, first with the long-delayed 787 Dreamliner and later with the 737 MAX.
The Dreamliner was saved by union machinists. Their reward: Assembly of the airliner was moved to nonunion North Charleston, South Carolina. Manufacturing problems there, and elsewhere, contributed to financial losses.
The massive Everett plant is nearly empty because of the 787 move and delays on the 777X. To be sure, it received a boost with a Lufthansa order this month, but the new widebody isn’t expected to enter service until 2025 because of delays and high costs.
So, what now?
There’s no way the 737 moves anywhere. It’ll be in Renton until it’s done. Moving it would be too expensive. Likewise, the $1 billion composite wing plant in Everett makes that location secure for the 777X.
Following Welchian logic, Calhoun could think defense is the company’s future and split the company apart.
Not that Boeing is doing well with its bungled tanker for the Air Force or the errors and cost overruns in its space program. Boeing’s space contributions go all the way back to Project Apollo, which landed men on the moon. Now the business for low-orbital launches and space travel is advancing with companies like Jeff Bezos’ Blue Origin and Elon Musk’s SpaceX.
Musk wants to colonize Mars. Boeing is struggling to make a successful, uncrewed launch of its Starliner spacecraft this month after a failure in 2021. Starliner is Boeing’s high-profile attempt to carry NASA astronauts.
Meanwhile, the wolf is always at the door.
Airbus roared ahead of Boeing for new jet orders in April. It also intends to add 1,000 new jobs at its assembly site in Mobile, Alabama. China, Boeing’s biggest overseas customer, gained more time to produce its long-sought domestically produced airliner.
In hindsight, Washington state’s billions of dollars in tax incentives for Boeing might better have been spent on luring Airbus. But by the turn of the century, Boeing was pitting states against each other for the work. No incentives might have caused a huge economic hole here.
Headquartered in the other Washington, Boeing is on a very different glidepath than envisioned here in 1917. We should brace for a hard landing.