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An engineering company deriving value through corporate tactics

by Abdur-Rahmaan Janhangeer

When a company derives value through engineering, if it seeks value through business practices, will simply tank. When Airbus launched the A320 Neo engine, it led to a series of events, which showed Boeing’s disregard for engineering boomerangs back hard.

Airbus decided to launch a 15% more efficient engine, which companies can use to lower their fares. This was so attractive that even American Airlines decided to buy the planes from Europe. This prompted Boeing to work on a competing product. Everybody expected a robust engineering response, one which polishes the American prestige, but, unfortunately, it revealed that the company officially stooped to flying-coffins levels long ago.

Boeing readied the 787-Max as a response. But, soon it became clear that something was wrong as planes crashed. It was revealed that the company had changed from being an engineer’s paradise to a hotbed of sheer incompetence. Probes into the company revealed that even employees did not trust to fly their families on Boeing planes. The shift started when Boeing merged with McDonnell Douglas, a company rooted in General Electric’s (GE) management style. The merger found Boeing’s key staff being replaced by cut-throat business-minded people. Within 2 years, under the pretense of cost-saving, the R&D budget was cut by a staggering 60%. Then the usual patterns of other cost cuts appear, including the selling of plants and firing of people, including its most valuable assets. “If you hire a team that you think is really good and they’re performing well, why in the hell would you eliminate 10 percent every year?”

Before the 787-Max, the Dreamliner, a plane produced under the draconian leadership was plagued with quality issues due to replacing quality with cost at each turn. Continuing under the same tone, the 787-Max design was influenced by cash flow more than everything else. They developed great, efficient engines that were too big and had to be refitted further up the wings. This resulted in a change in the centre of gravity which could be solved by the expensive change in tail design. Instead, they found a cheaper alternative by programming the software of the board computer to automatically push the nose of the airplane down by moving the small horizontal stabilizer wing at the back. This relied on unreliable sensors, which Boeing tried hard to hide from regulators and escaped expensive fixes to the system as more and more problems emerged. Pilots in turn could not find anything to help them when erratic behaviours emerged leading to fatal crashes.

Even after two 787-Max crashed, the company was hailed as a true dividend rockstar. But, as with the Dreamliner, increasing production rates increased further quality defects leading to backlogs and canceled contracts. The net result was that eventually, Boeing asked the government for a 60 billion USD bailout, the amount it spent on buybacks and dividends between 2013 and 2019.

This is what is happening to hashtag#Google.