23 votes

How a merger in the 1990s ruined Boeing, and why the government will have to step in to save the company

Posted by spit-evil-olive-tips
Tags: business, boeing, aviation, mergers, history, corporate structure, substack.big by matt stoller, author.matt stoller
https://www.thebignewsletter.com/p/the-coming-boeing-bailout

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Title
The Coming Boeing Bailout?
Authors
Matt Stoller
Word count
779 words

5 comments

  1. [3]
    SourceContribute
    Link
    Now this is very compelling if you are in the tech industry. The engineers actually unionized in order to avoid cost-cutting which severely impacts quality of product, not just quality of life.

    The merger sparked a war between the engineers and the bean-counters; as one analyst put it, "Some of the board of directors would rather have spent money on a walk-in humidor for shareholders than on a new plane." The white collar engineers responded to the aggressive cost-cutting and politically motivated design choices with the unthinkable, affiliating with the AFL-CIO and going on strike for the first time in the company’s 56-year history. "We weren't fighting against Boeing," said the union leader. "We were fighting to save Boeing."

    Now this is very compelling if you are in the tech industry. The engineers actually unionized in order to avoid cost-cutting which severely impacts quality of product, not just quality of life.

    12 votes
    1. [2]
      onyxleopard
      Link Parent
      It’s an interesting facet of unregulated capitalism that corporations, in seek of profit, will manage themselves into failure modes that are so egregious so as to make calling the original...

      It’s an interesting facet of unregulated capitalism that corporations, in seek of profit, will manage themselves into failure modes that are so egregious so as to make calling the original decisions 'cost-cutting' deeply ironic. How much actual cost is associated with these decisions? No one will ever likely bother to determine the total cost, because Boeing will not be totally liable. The real cost will be spread out across government agencies and individuals.

      I understand the idea of limiting liability for corporations, because most couldn’t afford to operate if they were forced to bear the brunt of unfortunate happenstance. But this was not unfortunate happenstance. This was mismanagement.

      I guess what I’d like to see is more accountability. I have to imagine we can come up with some kind of corporate insurance system to deal with it rather than simply passing on the risks of corporate idiocy to the public. If you’re a C-level executive in a corporation and your decisions have the potential to do a lot of damage, there should be a market for buying that risk. If you screw up like this James McNerney did, the market would decide that insuring such a nincompoop to make high level decisions would be prohibitively expensive. If the government mandated corporate executives to be insured (just like it is mandated for driving motor vehicles), then I imagine that capitalism might be able to sort itself out eventually.

      8 votes
      1. SourceContribute
        Link Parent
        Too big to fail. With all the subsidies, and the DoD procurement is a massive subsidy. Without it, Boeing would have to rely on getting actual customers and turning a profit. But once those...

        How much actual cost is associated with these decisions? No one will ever likely bother to determine the total cost, because Boeing will not be totally liable. The real cost will be spread out across government agencies and individuals

        Too big to fail. With all the subsidies, and the DoD procurement is a massive subsidy. Without it, Boeing would have to rely on getting actual customers and turning a profit. But once those subsidies are factored into the revenue...well there goes any connection to real costs.

        there should be a market for buying that risk

        Agreed, I'm glad someone else has been thinking about this. Unfortunately, we're stuck with a very general way of doing this, shorting the stock, or buying the stock and being an activist investor and pushing the board for more transparency.

        If the government mandated corporate executives to be insured (just like it is mandated for driving motor vehicles), then I imagine that capitalism might be able to sort itself out eventually.

        Now that's another interesting idea.

        6 votes
  2. [2]
    Comment deleted by author
    Link
    1. NaraVara
      Link Parent
      In this case it doesn't seem like they were actually doing any sort of austerity. They were just moving money away from producing the good or service they were supposed to and into the pockets of...

      "Cost-cutting" or austerity is a parasite that destroys everything it touches, whether at public institutions or private corporations.

      In this case it doesn't seem like they were actually doing any sort of austerity. They were just moving money away from producing the good or service they were supposed to and into the pockets of shareholders. If anything, it's looting.

      9 votes
  3. aaronfitz
    Link
    Al Jazeera did an investigative journalism report on the 787 which is an interesting watch if you have the time: https://www.youtube.com/watch?v=rvkEpstd9os

    Al Jazeera did an investigative journalism report on the 787 which is an interesting watch if you have the time: https://www.youtube.com/watch?v=rvkEpstd9os

    3 votes