This is Bloomberg Business Week with Carol Messer and Tim Steneveek on Bloomberg Radio. Well. Shares of Boeing have shed more than a fifth of their value since the beginning of the year, much of that in the wake of the near calamity on a seven thirty seven Max nine flight operated by Alaska Airlines earlier this month that prompted authorities to ground the model and step up security of
the company's manufacturing in Carol. Now, the chorus of Boeing critics has grown louder as more top airline execs have called out the planemaker over a series of quality lapses that have upended the operations of a number of carriers.
All right, well, we've got the guy who literally wrote the book about how Boeing got to this place.
Very pleased.
We've been looking forward to it all week. To welcome our colleague, Bloomberg News Projects and Investigations reporter Peter Robinson. He is the author of the New York Times Business bestseller Flying Blind, The seven thirty seven Max Tragedy and the Fall of Boeing. The book, by the Way, a behind the scenes look at the dysfunction that contributed to one of the worst tragedies in modern avia, of course, the twenty eighteen and twenty nineteen crashes of the Boeing seven thirty seven.
Max. Peter Tim joining us on Zoom from our Seattle bureau.
Hey Peter, good to have you.
Look.
We've been thinking about you a lot in the last few weeks because a lot of the discussion over what happened on that Alaska Airlines flight has had to do with manufacturing flaws in the culture at Boeing. And I'm wondering if anything that we've seen from Boeing this month, from the actual door plug blowing off to the grounding of the planes, the course of executives venting their frustration, has any of that surprised you.
I think what happened didn't surprise me, and I in my book, I actually wondered what the prospects for Boeing would be if there were another Max accident, because I wondered in the book if Boeing's reputation could survive it. And I think we're seeing the answer to that in real time, that there's real disappointment and frustration that Boeing
hasn't ironed these problems out. And I wrote in the book about how the culture had shifted over many years, and what happened after the crashes was that the management basically remained in place. Dave Calhoun, who had been on the board since two thousand and nine, stayed in place. So what you're hearing from many people from Wall Street, from Congress, from employees is that there needs to be a true shakeup of the management ranks at Boeing.
So, Peter, you talked a little bit about the lack of a culture shift following the first two seven thirty seven MAX tragedies in twenty eighteen and twenty nineteen. But I'm wondering how far back we have to go to understand a culture shift that happened at Boeing when it turned from a company that was really focused on engineering to one that was focused on financial engineering. When did that happen?
You have to go back a very long time, and it may seem like events from the late nineties and early two thousands cannot possibly be related to something happening now. But the aircraft business is such a long cycle business, and it takes so long for these aircraft to be
developed and then produced. And what happened was that Boeing bought McDonald Douglas, which was really they also ran in commercial aircraft production, and many of the McDonald Douglas executives came into high ranks at Boeing, and that included Harry stone Ceipher, who'd been an executive at General Electric and was really a disciple of Jack Welch and took the
approach that what matters is return on net assets. What matters is the balance sheet, and stone Cipher was actually one of the main proponents of selling off what was then called Boeing Wichita, which makes the fuselage for the seven thirty seven, and the reason was that it would
lower Boeing's costs. And at the time there were many people warning Boeing that you would lose control of your production system, that you needed to have insight into what was happening at the very lowest levels of the production system.
And it appears that what those people had worried about has now come to fruition because the problems on this max plane were apparently if a whistleblower who wrote on an aviation website what happened, it appears to be for work by the supplier in the now independent company in Wichita and rework at Boeing and miscommunication and Boeing lost control of its production system as it tried to sell it off and save costs.
Well, you know, it's like a shark circling the waters, the bloody waters, those.
Being the ones that Boeing is swimming in.
And you know, we had a headline today about Boeing excuse me, Airbus looking to persuade customers to return some aircraft delivery slots that it could then hand over to United and they're basically going out, you know, all out for the rare chance to snatch a marquee order away from Boeing.
Like it's getting nasty.
So what does Boeing need to do? Does it need to be nationalized? I don't know, how are you looking at it?
I think bringing in a management team that that truly puts safety and quality first, that was raised with that approach. Maybe they do need to bring in a team from an entirely different company that can look at things with
fresh eyes. Because the team at Boeing, although it has talked a very good game since the since the ouster of former CEO Dennis Muhlenberg, is a team that traditionally had put schedule first, and as the as the attention uh shipped away from Boeing again, you know that emphasis on on schedule first came to the four at Boeing.
Peter, what about making sure an engineer is an executive at the company, is a CEO of the company. We haven't had this moment where the last few CEOs have had backgrounds that have not been engineering backgrounds. And I mean this place used to be the gold standard when it came to American aviation, when it came to American ingenuity, when it came to American engineering. There's certainly been a brain drain. We've reported on that in the past few
years outside out of Boeing. But what's the importance of having the person at the helm being an engineer?
Well, ironically, Denis Muhlenberg was an engineer, and what was proofed unable to communicate to the public of what Boeing was doing. The one that got away at Boeing, though, is really Alan Malallely, who could have been the choice for CEO, even going back to the early two thousands, and instead he went to Ford and turned around Ford.
Wow, all right, so what do you think needs to be done? Because you know, it's interesting if indeed United somehow, you know.
Change is where it wants to buy its planes.
I mean that would be a huge loss right and a huge sign to Boeing and really the overall industry.
It would what's Boeing is hanging on to its now forty percent share of the narrow body market. And that's a complete turnaround from when I started covering Boeing in the late nineties, and it was it was an icon. It could seemingly do no wrong. It had sixty percent of the narrow body market, and it gradually it sort of followed the same paths McDonnell Douglas, and that path was failing to invest in new aircraft, in modern technology. And the way forward for Boeing is to invest, is
to believe in commercial aircraft. And the seven thirty seven is failing in the marketplace not only because of the quality problems, but because the A three twenty simply has more modern avionics, It has a more modern crueler system and buyers ultimately see that. But Boeing is protected in some ways because there are only two manufacturers and airbuses production slots are essentially sold out. But as you're describing, it's it's still finding ways to maneuver around that.
Peter.
Going back to though, what I asked is like, does bowe need to be nationalized because it is the largest exporter right for the United States?
This is an important company.
Huge defense contractor huge.
Defense contractor just got about thirty forty seconds left. Is there some role that the government needs to play?
I mean, it kind of turns capitalism, you know, upside down. But I'm just wondering.
I couldn't say whether Boeing itself needs to be nationalized, but what is through in this case is that the FAA is taking a much more active role in overseeing Boeing, even to the point of limiting the production expansion that Boeing plans, and that you could say as a form of nationalism, and that the regulators telling Boeing it cannot expand unless it's satisfied that it will do so in a safe manner.
Yeah, it's just it's really fascinating after you know, so many years of just trying to get the seven thirty seven max, you know, back in you know, operation, and then to kind of come out and look like things were getting better, and then to see to find themselves that here is just kind of staggering. Yeah, it's just amazing though, Peter, really great. We've been hoping to get some time with you and so appreciate it. So thank you,
thank you, and have a great weeknd. Bloomberg News Projects and Investigations reported Peter Robinson joining us from our Seattle bureau.
Check out his book Flying Blind, The seven thirty seven Max tragedy in the fall of Boeing