"One business scandal that only just got its 15 minutes of media heat involved the crash of two Boeing 737 MAX airliners. Boeing had insisted after a Lion Air jet tumbled into the Java Sea, in October 2018, that the plane was safe. Less than five months later an Ethiopian Airlines 737 MAX went down too. In total, 346 people died.
An uproar ensued, and the 737 MAX -- Boeing's upgrade to its venerable 737 -- was grounded while the company worked on a fix. Hearings were held, lawsuits filed, the company's chief executive was sent packing. Still, once the pandemic hit, the controversy faded. Peter Robison's "Flying Blind: The 737 MAX Tragedy and the Fall of Boeing" is a disturbing account that will return much-deserved scrutiny both to Boeing and to its regulator, the Federal Aviation Administration.
Boeing remains one of America's leading manufacturers, but it is reduced in reputation as well as equity. The "fall" that Mr. Robison's subtitle alludes to is the corrosion of a culture that had emphasized quality. Boeing was founded in Seattle in 1916 by William Boeing, a wealthy engineer who took flying lessons and decided he could build a better machine. It quickly became an icon of American engineering, and the attention to quality extended to the top. Typical was Jim Johnson, a longtime executive who made a point of leaving the factory through different doors so he could talk to as many workers as possible.
By the early 1990s (when Mr. Johnson left), Boeing had adopted the business-school approach to maximizing shareholder value, including cost-cutting and share buybacks. The headquarters moved to Chicago, away from the plants, and the workers were scattered.
Mr. Robison is upset that Boeing followed the unremarkable philosophy of the Business Roundtable (recently revised under woke pressure) that the first duty of any company is to its shareholders. He says that Boeing focused on metrics that "tend to favor investors over employees and customers." This is an easy but misworded critique. In the long term, the interests of shareholders and customers are aligned. A manufacturer that disregards either customers or employees will eventually not have profits to distribute.
In fact, Boeing forgot that its long-term success depended on its reputation for superior engineering. Executives like Alan Mulally, project leader in the 1990s for the costly but highly successful Boeing 777, were passed over for the top job. The corporate metamorphosis was accelerated by the 1997 merger with rival McDonnell Douglas. The executive suite was colonized by such figures as McDonnell's Harry Stonecipher, a Jack Welch protege who was explicit about changing the culture. His intent, he said, was to run Boeing "like a business rather than a great engineering firm." Increasingly that meant doing whatever it took to hike the share price. Phil Condit, the CEO who orchestrated the merger, pushed his managers to quintuple the stock in five years, which suggested that his eye was on Wall Street and not on the planes.
Financial engineering was in vogue across corporate America, but airplanes like the 737 depend on real engineers. Drab but dependable, the 737 had found its niche after the airline industry was deregulated in the late 1970s. Carriers needed fleets of short-haul planes that could siphon traffic into feeder hubs; the 737 became their workhorse.
By the 2010s, the 737 was providing a third of Boeing's profit but was in need of an overhaul. Mr. Robison, an investigative reporter at Bloomberg, argues convincingly that concern for costs compromised this effort. He portrays his subject under intense pressure from Airbus, its European rival, and making a questionable decision to upgrade the 737 rather than, more expensively, design it anew.
Test flights showed a tendency for the MAX to pitch up. Designers corrected the problem on the cheap, with software that pushed the nose down. Somewhat perilously, a single sensor measuring the angle of the wings against oncoming air could force the plane into a downward trajectory. An optional cockpit indicator -- alerting pilots that the sensor might be faulty -- was not included on cheaper models. And the sensors, which sat outside the plane, were vulnerable to bird strikes or improper installation.
Pilots could correct for a bad reading, but they had to follow steps from a written manual rather than, as in newer planes, being prompted by an electronic checklist. Since they had only about 10 seconds to make a correction, training was key. Yet Boeing went to great lengths to get the 737 MAX certified without the requirement that pilots train on a simulator. Lion Air, the Indonesian airline, requested such training, but Boeing said it wasn't necessary.
During the pre-crash certification process, Boeing misled the FAA on the importance of the software (this later led to an indictment of a supervisor). Still, the FAA, as Mr. Robison shows, was compromised by years of having adapted its regulatory role to promote manufacturers. Even after the first plane went down, it kept the MAX flying -- despite an agency analysis predicting more crashes. Nor would Boeing's CEO, Dennis Muilenburg, admit that the company had been at fault. After the Lion Air crash he went to a ribbon-cutting. The board awarded him a $31 million paycheck, including a bonus. After the second crash, he woodenly stayed on script: "We followed exactly the steps in our design and certification processes."
Yet various insiders had protested Boeing's level of risk-taking. One manager sent a note to the 737 factory head: "Frankly right now all my internal warning bells are going off." The brass was said to have pressured Boeing's internal regulatory unit. Said one eyewitness, "it was push, push, push, shove, shove, shove, to get the airplane into the customer's hands." In the end, cutting corners was not only tragic; it was bad business. Far more money was spent on lawyers, victims' families, retooling and lost flight time than on Boeing's supposedly quick fix." [1]
1. Downward Trajectory
Lowenstein, Roger. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 29 Nov 2021: A.19.
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