‘This Has Been Going on for Years’: Boeing’s Manufacturing Mess
wsj.com
wsj.com
If you squint, could apply some of those observation to the world of software.
For a TL;DR just skip to Hart-Smith's recommendations list at the end of the paper. Here are the ones I liked:
> Look continuously at the entire activity. Do not minimize costs in isolation. Understand that one global cost minimization is worth far more than even 20 sub-optimum cost reductions.
> Retain sufficient in-house production manufacturing that it is possible for future engineers to acquire the skills needed to develop new products, without which all businesses will fail. Even the work that is out-sourced requires internal expertise to write the specifications.
> Acknowledge that cost-saving techniques that work in other high-volume industries are often quite inappropriate for low-volume industries like aerospace.
> Listen more to your own employees about how to save cost than to any outside business consultants who have never run a factory producing your kind of product. In any event, if the advice they offer changes every year, it cannot possibly be correct.
Damn, that really reminds me of a previous company I worked for, that wanted to replace important core internal libraries with open source libraries. My argument was always that we should always have in-house knowledge of the core technologies. I think a lot of companies fail to think long-term.
> Listen more to your own employees about how to save cost than to any outside business consultants who have never run a factory producing your kind of product. In any event, if the advice they offer changes every year, it cannot possibly be correct.
This one is the difference between management-driven company and engineers-driven company.
Importantly, we can sit around and bond over bitching about how bad one of those libraries is. If the authors are or were internal, we are now being divisive and unprofessional.
That's the biggie. I think the entire US tech industry has done a gigantic face-plant, when it comes to this.
We have not only outsourced the work, but we have interrupted the transfer of knowledge and expertise.
I have friends that run manufacturing businesses, and they explained how they believe that the US will never regain what it has given away, in the last couple of decades.
Working at a cable company where they contracted out to vendors most of their software development. They had a few internal systems that they developed in-house and would only hire 'senior' developers. I was curious how they expected to have a steady supply of 'senior' skills without ever hiring, training, and promoting a junior.
I also saw they had no idea how to manage their vendors, partly because they didn't have in-house skills to serve as a sanity check on what vendors were charging. As a result, their vendors profited hugely from the company's ignorance (I know because I also switched to work for one of the vendors).
But under 35 (they don't usually say that part, out loud, though).
That's my pet peeve.
Put another way ... most companies just really suck at hiring software engineers, and the ones they hired before weren't good enough, so it seems they need to hire at a higher level ...
For a period when these issues occurred the business could say that they wanted the issues patched, but they never understood why there were so many issues to begin with. It was only until they brought a few people in house to try to bridge conversations between the business and the team of outsourced developers that it was finally raised that the code was completely unmaintainable. And following this an in house team was recruited to bring development back in-house. Of course, when we sorted 90% of the problems the business started questioning why we were needed again and we were all outsourced for a second time...
But this same thing obviously happens in a lot high-tech industries. Without people who are technically competent overseeing what's happening you can only dictate requirements at a high level. You cannot dictate all of the NFRs because you simply do not have the knowledge or ability to oversee them. So what you have is something that at a surface level does what you wanted, but the execution is so horrendous that it's unsatisfactory and no amount of saying "please fix this", "please fix that" will actually resolve the fundamental issue at play.
And the problem is even worse when you want to be an innovator because innovation is impossible when you don't know what is and isn't possible. To push boundaries you first need to know where the hard limitations are and what's just a engineering problem.
This is a key point, and I believe the reason why software projects are always late and why it’s impossible to estimate them generally, in a non-domain specific way.
You cannot aggregate all the estimates and recorded performance of past work and use regression towards the mean to have any predictive capacity of how long a new project will take or cost, even when it has similar high level requirements.
This is why 10xers exist, or the perception of them exists. There are people who have seen similar pitfalls in the implementation stage enough times to know how to avoid them and they don’t need to redo things as much.
This is why rewrites are dangerous, even when existing code bases are cumbersome to deal with and expensive to develop. The deep magic of low level NFRs will ruin attempts to replace them.
Some are clever and try to use linters and static analysis tools to avoid this, but these will always be opinionated, domain specific in some way, and incomplete. They can frustrate development when taken outside their domain.
What I'm touching on here is more related to how outsourced teams typically lack the ownership and motivations that internal technical teams will generally have.
The specifics will vary depending on the outsourcing model, but outsourcing to a remote software development agency is typically the worse of all possible options. The reason for this is that code quality and maintainability is rarely ever a priority for an agency because they're typically judged purely on whether they can deliver what they promised to the client on time. It's very hard to tell a client that a feature is coming 3 months late and will cost extra, but that time is needed to ensure the developers are happy with the code quality.
Additionally, if there are any bugs that's often a good thing for a software development agency because not only will you now be paid for the initial feature development, but you'll also be paid for any subsequent bug fixes.
If outsourcing is done directly then the results are typically better because the remote team tends to have more agency. The business might still ask for a feature as soon as possible, but now the remote team isn't going to receive extra work for bug fixing the crappy code they deliver. They also don't have multiple clients and are going to be working solely on that single codebase so can't just hand off any issues to the next guy who comes along. With direct outsourcing the incentive to deliver crappy code no longer exists so typically the quality increases. Additionally the business might trust the remote employees enough to judge their own performance for which they can include NFRs instead of judging performance purely on the speed at which features are delivered.
However, even if directly outsourcing employees are rarely seen as equal to other employees at the company. The business basically just sees them as cheap code monkeys and the code monkeys know that's all they'll ever be too. Employees working at head office on the other hand might be motivated to go above and beyond because they want to be recognised by their bosses, and if they do a good enough job they might even get a promotion. This just never going to happen to a code monkey in India who can barely speak English no matter how competent they are.
Additionally, a team at head office is also likely to have more influence on business decisions and be able to feed technical input into the decision making where useful. This increased influence also means employees are more likely to care about the company since they feel closer and more involved in decision making.
The reason outsourced teams are bad isn't necessarily because they're not hiring enough 10x developers (although they're often not incentivised to do that either), it's more that there's usually little real reason for anyone to produce anything of quality. No one is going to be promoted, no one has any influence, developers are mostly just being judged on how fast they can deliver features because that's the only metric non-technical individuals can assess their productivity by, and finally they're disconnected in just about every possible way (location, culturally, hierarchically, etc).
I think what might work is have a great development team in house who can make all right high level technical calls, then outsource the grunt work while assessing them both on speed and on quality. A almost every company I've worked for there are talented people wasting time on nonsense like bumping project project dependencies and replacing deprecated code. I'd guess that work could be outsourced with near-zero downside and a significant cost saving.
It's unthinkable and insulting that some of the lower orders might have actually have valuable skill or important agency.
The primary product of corporations has always been hierarchical status for the owners.
But sometimes there's been some sense of generosity and mutual obligation. Now there's none - just myopic selfishness which often leads to disastrous consequences, sometimes affecting those afflicted by it.
So, the result will be even worse, with people not even having jobs and left to fight for scraps instead. Or maybe one of the hot wars will eventually go global and humanity will be nuked down to 1% of the population, Fallout style. Who knows.
You can also see this in their personal behavior. Those at the top of the top have enough money to do anything. And what they end up doing tends to be work until they drop dead, in some cases literally - with 93 year old Buffet being the poster boy there, engage in mundane hobbies and activities - same as anybody else, and then start directing lots of money towards philanthropy. But the myopia tends to again strike there often making the philanthropy awkward and largely ineffective in effecting any sort of meaningful and lasting change -- unforeseen and unintended consequences, alongside a simple mixture of inability, abounds. The philanthropy ran exactly as they ran their businesses.
Once one of those things happens, they start to squeeze blood from the stone. The quality of the product drops, the prices are inflated, jobs are outsourced or eliminated, they pivot into providing other goods and services (which will also get worse later), etc.
None of these things are mutually exclusive with that "next quarter" mindset.
I actually blame the stock market for a lot of this. Private companies can, in theory, settle for just making a nice profit year after year. As long as they come out profitable they don't need to expand. Once you're publicly traded though, you have no choice but constant expansion.
The boom and bust cycle has been happening for a long time now.
Is part of the problem, that people making the decisions have asymmetric incentives - the gain from the boom is greater than the penalty from the bust?
The value of a stock is base on its long term value, not its short term value. Sabotaging the future of the company to drive short term results is something you'd have to keep secret.
I've worked in a major company ( global - 10s of thousand of employees ) where the chairman and CEO were changed and it was like night and day.
The company changed from one that was driven too much by short term pressure from money men investors, to one that took a much longer term view and invested in R&D and inhouse skills.
Note the change in management was instigated by some of the larger, longer term investors ( pension funds etc ) - ie not all capital is short term.
The new CEO put together that long term vision - said investment now ( and so lower EPS now ) will result in substantial longer term bottom line growth - had to persuade the markets etc.
They were successful, and it's sort of self-fulling - the short term capital leaves and you get more longer term investors that matches that longer term vision ( obviously the spiral can go the other way ).
However - that's the easy bit - delivering growth - at some point it's not possible to sustain that level of growth - then selling the idea you need to invest to standstill is much harder.
The CEO - also have to fight-off opportunists - where the problem is the maths is often in favour of buying a company, stripping/milking the assets and sacking the people.
Note sometimes it's only capital efficient because the capital doesn't need to pay the full social costs of the company destruction - it's governments job to make sure they do.
there have been some clawbacks -- government regs, realizations that low-cost means you get what you pay for -- but it was going hard before, and will keep going.
a significant portion of HN is either automating, offshoring, or else working next to these trends (if they're not making them happen).
Is that legal in the United States? In many European countries, you can't just leave your employer and go work for a client/partner due to the potential of you using the business secrets to disadvantage your former employer
From the FTC rule finding (1/2023): https://www.ftc.gov/legal-library/browse/federal-register-no...
> "About one in five American workers—approximately 30 million people—are bound by a non-compete clause and are thus restricted from pursuing better employment opportunities. A non-compete clause is a contractual term between an employer and a worker that blocks the worker from working for a competing employer, or starting a competing business, typically within a certain geographic area and period of time after the worker’s employment ends. Because non-compete clauses prevent workers from leaving jobs and decrease competition for workers, they lower wages for both workers who are subject to them as well as workers who are not. Non-compete clauses also prevent new businesses from forming, stifling entrepreneurship, and prevent novel innovation which would otherwise occur when workers are able to broadly share their ideas. The Federal Trade Commission proposes preventing employers from entering into non-compete clauses with workers and requiring employers to rescind existing non-compete clauses. The Commission estimates that the proposed rule would increase American workers’ earnings between $250 billion and $296 billion per year. The Commission is asking for the public’s opinion on its proposal to declare that non-compete clauses are an unfair method of competition, and on the possible alternatives to this rule that the Commission has proposed. "
You can do it, but since you're relying on others to build the pipeline, you're going to have to pay a lot more salary to the seniors than you would if you promoted them.
Maybe that makes up for the salaries of juniors and the portion of time spent by seniors on mentoring juniors. But then some seniors want to do mentoring, and you're not providing that opportunity, so more reason for them to demand more pay.
IMHO, it's workable, if not necessarily desirable, if you want a small team. If you want a big team staffed with only seniors, I think it's going to be a challenge.
Not really, because people aren't loyal to companies, it's not the 1980s.
If Company A trains a junior to a senior and fails to pay senior rates, what stops that new senior moving to Company B?
Company A and Company B thus have to pay roughly the same, who did the Junior->Senior transition doesn't matter
Some things are easy wins for retention -- my company gives extra holiday as tenure extends for example, and people of a certain age still have a defined benefits retirement plan which has significant value. The extra holiday costs companies nothing, but an extra day each year really helps, start with say 28 days, but after 5 years you're on 33 days. It's harder to put a monetary value an extra day off, so harder to make the jump-ship calculation.
Sure we can. It requires pivoting into stealing or otherwise replicating China's insane level of industrialization, but it's a little funny seeing people become despondent at the idea of merely losing clear economic hegemony over the world and becoming #2. We didn't lose anything in the last 5 decades we can't gain back faster.
Here's hoping China's reign comes with fewer invasions.
That's just the tooling keeping up with the times. The Chinese don't do this by hand either.
They're just way better at doing it at volume.
Compared to China's absolutely staggering industrialization it has!
first of all, there's no point in having all kinds of low-added-value industry in high-income places as long as there are millions of people willing and able to do it all in the same place close to a port.
second, US industry suffers from two major problems. protective tariffs keeping productivity low, and the 'exorbitant privilege' of the USD being reserve currency of the world, which counterintuitively hurts export of every non-finance sector
If you can’t completely automate something, there are by definition, still useful things to learn.
Outsourcing the advancement of low level work to automated work puts a business’s competitive edge in jeopardy.
I think it is fair to expect that everything will get automated in an economically advantageous way.
And if the solution is novel & challenging, it is likely to provide valuable unexpected side benefits & capabilities.
The automation question is just: when, how, and by who.
this is not a black-and-white thing, outsourcing makes sense in many cases and doesn't in others. the automotive industry does it for quasi-standardized components. (and there's a competitive market, for airplane parts, not so much it seems.)
and on top of all this for things that have inherent safety critical aspects there is no real difference between outsourcing or doing it in-house, there's a need for controls (organizational, quality, independent testing lab with random sampling).
the fucked up process of gutting companies for short-term profits happened just as well for non-outsourced departments too.
as industries mature, companies grow and became organizationally more complex training and advancement itself becomes a challenge. (and many companies just put their heads in the proverbial sand, and hire clueless recruiters - or outsource it - and end up with paper tigers, who have absolutely no idea WTF is going on in the company, but quarterly reports look amazing.)
...
finally, if market forces push for short-term thinking (and simple, wrong, but fancy 'solutions') that's what we'll end up. and if society and politics also has the same mindset it's not surprising that industry will mirror it. (and to overuse the overused cliché gestures wildly )
Second, productivity in the US is fine. The problem is the profits are very unevenly distributed.
You can't run a consumer economy by underpaying your consumers, forcing them into debt, and bankrupting them with - for example - health care costs.
Third, the kindest thing you can say about outsourced manufacturing is that it's strategically unwise. It's good if you want cheap Chinese chips with unknown abilities in your military and civil infrastructure, but not so good if you stop to wonder if perhaps that isn't all that good an idea.
what I'm trying to point out is that having a first-class industrial base, with enough experts, well running supply-chains, and so on, is different from eclipsing China in straight to trash gadget output.
that said, of course, as the article and the comment section clearly shows there are a lot of high profile cases where the trope of bean counters ran the business into the ground has been very unfortunately true.
productivity of the whole economy is fine, but aggregates hide a gigantic mountain of first- and second-order effects that hurt millions directly and indirectly. (as you mention wealth, income, health and other kinds of inequalities are mostly reinforced by a lot of powerful systems. and, just to emphasize this, US social mobility is on par with Spain's, despite the latter known for generous welfare programs, but almost all developed countries have serious tensions between rural-urban groups, generational wealth transfer due to real estate prices spiraling out of control, and so on.)
there are other countries besides China, and there are other sectors besides pew-pew and let's say nuclear power plants, or train safety systems.
the obvious (well, of course not to everyone) problem is that there's no serious effort for economic integration with US allies. the US still has a lot of protectionism dressed up as national security. from the Jones Act shenanigans (oh think of the shipbuilders, oh only one left basically in a zombie state), and the baby formula oopsie (oh think of the horror of Canadian baby formula or European, but no Abbott knows best), and there's some pork for the textile industry too, and so on.
show me the numbers
> what I'm trying to point out is that having a first-class industrial base, with enough experts, well running supply-chains, and so on, is different from eclipsing China in straight to trash gadget output.
Absolutely true! But we're nowhere near able to do the latter, so what's the point in caring?
> social mobility
Unrelated, but this is a misnomer. The correct term would be "economic mobility". Social concerns are necessarily orthogonal (i.e. intersectional) to economic ones. I understand that social mobility is the common term but it's extremely disingenuous when it only intersects with social interests through economic interests.
Economic mobility is also strictly less interesting than wealth disparity—being able to move up the social ladder doesn't matter much if there's still self-aggrandizing ghouls controlling most of the economy and the market fails to represent the public.
> market fails to represent the public
what are you talking about? the public buys shit from China and uses Amazon, and votes for idiots who then dismantle the rest of the system around them. sure, we can console ourselves that it's not the majority, but hundreds of millions of them are part of the problem.
The point is economic and social stability. If you don't value that over short-term economic efficiency (i.e. profits), of course, I can understand why you would be resistant to this line of thought.
Also, this betrays your belief that "high income places" have significant-added-value compared to low income places! I don't believe this is true, especially over the long term. This is an illusion formed from wealth-extraction.
This is something that takes generations to build, but can get lost, very quickly.
Folks, these days, aren't actually any smarter than our ancestors. We just have a vast social infrastructure that raises the baseline for our starting point.
Sure, hence my assessment of 5 decades.
I used to run architectural ideas by operations people who would - and occasionally did - tell me I was full of shit. Maybe 1 in 10 of us are brave enough to to this, 1 in 6 if we are generous, but now there is nobody to tell us we are being stupid before we steer the ship toward an iceberg.
Paid them to design a thing, then paid them to implement the design, as well as project manage themselves. SOW lacked meaningful acceptance criteria / objective tests.
Of course, it was non-stop debacle of new things being discovered during implementation. Weekly status calls just turned into recrimination sessions with fingers pointed in all directions as to who is responsible for the time/cost.
You can't rent knowledge.
I've worked at 2 companies now that have been eaten by bigger ones and pretty much instantly moved to lower income countries. Both in manufacturing, one in aerospace.
Having to write complex specs for an outside organisation to implement is an anti-pattern, because:
- the more complex a spec the harder it is to write and understand
- there's potential for endless disagreements / lawsuits on what was actually promised and delivered
- the overhead of having a complex spec that must be understood by people in both orgs.
"The correctness of the author's position' on these matters is easily confirmed by two facts. It was the suppliers who made all the profits on the extensively out-sourced DC-10s, not the so-called systems-integrating prime manufacturer. (The same thing has happened on aircraft assembled by Boeing, in Seattle, too.) Also, when plans were being formulated for the proposed MD-12 very large transport aircraft, almost all potential suppliers indicated a preference for being subcontractors rather than risk-sharing "partners". Could they have known more about maximizing profits, minimizing risk, etc., than the prime manufacturer who sought their help even though it could borrow money at lower rates of interest than potential suppliers could? The DC-8 was manufactured and assembled almost entirely within the Long Beach plant, with only the nose coming from Santa Monica. That policy was changed after the acquisition of the former Douglas Aircraft Company by the former McDonnell Aircraft Company, but the change did not improve the company's profitability. It is time for Boeing to reverse this policy."
This closing also caught my eye -
"The fate of the former Douglas Aircraft Company, which was reduced to a systems integrator in the early 1970s by excessive outsourcing of DC-10 production, is a clear indicator of what will happen to other companies which fail to sustain the conditions under which it is possible to launch new products. It is hoped that this sacrifice can save the new and expanded Boeing from a similar fate."
Boeing in the end took the track that led to DAC functionally going out of business, putting thousands out of work in the end. It's not too late to undo it however - buying Spirit back would be one way to go about doing it - but I dont know if the Boeing management is aware enough being that the headquarters is in Arlington, VA, far away from any engineering or manufacturing centers that this is what must be done.
Whats even more astounding to me, this made the Seattle Times in 2003(!), https://archive.seattletimes.com/archive/?date=20030309&slug...
> “The performance of the prime manufacturer can never exceed the capabilities of the least proficient of the suppliers,” Hart-Smith wrote. “These costs do not vanish merely because the work itself is out-of-sight.”
This x1000 is what has led so many large government projects - no matter if in IT, construction, healthcare, military - go completely nuts.
When there is no one to write the specifications, the "consultants" writing the specifications instead will write them in a way that allows their closely related industry friends to deliver bullshit, and since the government doesn't have experts any more (because they are "too expensive" for shoestring budgets), it can't realize that it's being led by the nose.
When there are no experts to audit a project, no one can detect bullshit being designed, built or delivered until it's such a colossal failure that it cannot be hidden any more.
When there are no experts to maintain a project that miraculously got completed and delivered after years of delays and billions of overruns, eventually even the best project will go and rot.
And even in the private sector, this same concept holds. Just ask any F500 employee whose company "outsourced" their IT or anything else not "core of the business" to India or Pakistan to the cheapest bidder, or their building cleaning service or facility management, about what service quality they receive and how much upper management cares about that.
The general ideology of outsourcing everything that's not "core of the business" is the single utter scourge of modern ultra-capitalism.
> At the time, then-Boeing executive Alan Mulally said selling the factory to a private-equity firm would let Boeing focus on final assembly, where it could add the most value to its airplanes.
By now I think we’ve learned that products made in factories owned by PE firms should carry warning labels. They are proactively anti-quality organizations, focused on extracting the maximum cash out in the short term at the cost of long term value.
It all depends on who is in charge... And unfortunately self-serving people tend to reach the top more easily in both scenarios. You don't get Dan Price's very often (relatively).
In public companies, there is more public information, but that doesn't stop a company from doing "bad" things of the short term stock movement is good enough.
Look at all the merger promises that are broken. They all know what they are doing. Uphold the promise a year, then it's to late to undo the merger when you start to ignore the promise.
Can also look at all the fines companies get for willfully breaking laws (or treading the line).. (fine < profits)? success!
The PE model is: - buy company with debt. - after purchase company assumes the debt (pays off PE company) and pays further fees to acquirer - company therefore cannot make a profit, cuts staff which cuts output over time - company goes bankrupt
This is the canonical business model from the big PE companies like Bain (Romney), KKR, Blackstone, CVC, Carlyle, etc.
Your 401k in 2008 or whatever had some shitty balanced fund that held 0.5% of assets in some toxic shit like Sears/K-Mart for the "high yield" portion of the fixed income component. So you make some money on government, agency and Apple/Exxon bonds, and get a high yield on K-Mart that goes poof a year later.
tl;dr: the "observation" is made-up and false.
In any case, I and several others were able to find many, so it's okay that you weren't. Sometimes a person who has made up their mind and doesn't want to change it, ignores anything that might, and further effort committed to them is just a lost cause.
I don't see any evidence it is, so the "observation" seems made up, and thus there is nothing to explain. It's possible you misunderstand how the process works.
If the claim is that it is pathological and parasitic because it leaves employees and customers worse off that's another argument, and I could see myself agreeing, but it's a value judgement, not a financial or economic one. In principle there's nothing that PE can't do that owner-operators can't also do. The objection is to the outcome, not the means they use to get the outcome.
> In principle there's nothing that PE can't do that owner-operators can't also do.
As others have got at, in bankruptcy owners (of any sort) get paid last; debt gets paid first. Borrowing to pay the owners makes "wind down the company" more attractive by letting the relevant decision-makers cut in line. Outside of PE you see a similar dynamic with funding stock buybacks with debt.
(Having said that I'm not a corporate accountant so I'm open to correction, but no one has posted any technical details about this matter that make me think I'm mistaken, yet.)
> Borrowing to pay the owners makes "wind down the company" more attractive by letting the relevant decision-makers cut in line.
This bit I don't understand. It reads like a criticism, but what's wrong with winding down a company that's not deploying its capital as efficiently as it could be? (Wrong economically/financially, that is; I've already explained that I'm in sympathy with the effect on customers and workers.)
That is the observation which is false. Nobody claimed that would happen to the extent that the bank loans couldn't be repaid, with interest and fees. I'm not sure where you got that idea. The value destruction comes from the fact that the company is destroyed in the process, and even though the banks got more than they would have if they kept the company alive, the total value is less.
tl;dr: banks are willing to tolerate the company value going down as long as they make money, which they do, because they, like the private equity firms, are effectively transferring value from the company accounts into their accounts.
The bit you quoted is not the observation (as I understood it); the observation is the whole conditional "if A then B". "A is false" is one of the ways the observation can be true.
Based on your lack of response to the substance of my post, I take it you understand and agree with that part, and your quibbles are purely semantic.
My concern was that it sounded to Tom like people were disputing "if A then B", rather than disputing B by negating A, and that people were therefore talking past each other.
> I take it you understand and agree with that part,
I wasn't weighing in on that part in the first place. I don't dispute or endorse what you've said, but (if you care) do readily acknowledge that it is of the correct structure to address "the observation" if they in fact match reality. I said at the start that I don't know whether that's the case.
> and your quibbles are purely semantic.
I was weighing in on the semantics because it seemed to me like a semantic mismatch was leading to misunderstanding and increasing hostility, and I hoped I could help clarify.
But the PE firm owns the company. Why shouldn't it transfer money from the company accounts to its own accounts? That's called "paying a dividend".
If we're on the same page there, then we can build off that shared understanding, and perhaps discuss issues like whether that's a net loss or net gain to society as a whole, or to specific individual stakeholders, and what so-and-so should or shouldn't do. That's if were on the same page on the above matter, first.
Do you feel we are? Recall this digression started because a couple people were confused how banks were involved in the matter, and thought the banks were losing money somehow. They definitely aren't. I just want to make sure we're all on the same page there, first, is all.
I agree that banks are not losing money by participating in PE deals. What else do we need to get on the same page on?
Again, who said banks would go bankrupt?
This is the first time in the thread that "banks going bankrupt" has been mentioned by anyone.
> Assuming the company can pay off all their debts
This, too, seems to be unfounded assumption that turns out to not be correct, as explained above.
If you'd please review https://news.ycombinator.com/newsguidelines.html and stick to the rules when posting here, we'd appreciate it.
You just can't generalize like that. My step dad was brought on as the CEO of a small Ag manufacturing company when it was acquired by a PE firm. He is an engineer. He's been in charge now for close to 10 years. He has developed new products, invested in procedures and protocols, and in general focused on an increase in quality and repeatability of procedures while bringing new products into development. He cares deeply about the company (and has in fact tried at least once to buy it from the PE firm)
This might very well be a non-central example (I certainly don't have industry wide stats to argue either way), but the point is that there is nothing inherent to PE that means companies have to be cut to the bone and stripped for parts. Yes, it absolutely can and does happen, but it's not because it's PE that's doing it.
I'm fully willing to believe that the big PE firms that everyone thinks of when they make statements like yours have exactly the track record you claim. But it's not because they are PE. Smaller PE firms like the one my step dad works for is proof-by-existence that responsible PE is not an oxymoron.
If you don’t want your stepdad associated with those monsters, find a different term to describe his work.
What you said happens various times, especially with the big PE firms, but it’s not the norm.
You really think banks will be lending to PE deals if the business model is to make the company bankrupt?
The buyer, and sometimes even taxpayers, are left holding the bag when things start breaking. The PE firm knows exactly what it's doing
Thames Water is the classic example:
https://www.dailymail.co.uk/news/article-12245021/Thames-Wat...
The large PE asset management firms don't need the banks to lend them money.. they have more than enough capital to fund their investments.
What else can a "businessperson" do if they don't have the acumen to build up corporate value at all compared to those who came before and laid the foundations to begin with?
The purpose of the stock exchange was to make it possible for a diverse bunch of investors to come together and fund the growing needs of a growing country.
IOW the type of shareholders that this was designed to be suitable for are those who are actually investing in the registered corporations so those corporations can level up to accomodate unmet demand and grow capabilities to reach a more prosperous stability, thereby providing a fair but lucrative return for the investors over time. As the corporations grow in value so do the shares, naturally.
OTOH once the market has been established, and especially in case it grows faster than the underlying value for a long enough period of time (like longer than one human lifetime, or longer than a single business career[0]), then a sizable amount of "investment" capital can end up manipulating the system to extract established value through their trading[1]. Especially when it comes to things like voting shares and mergers & acquisitions. Probably the longer a corporation has been publicly traded can figure prominently since that can be a corporation living longer than a human lifetime too.
So rather than investing value beneficially, you end up with large chunks of capital actively working to extract value parasitically[2], which is like a double-whammy, and eventually the stock exchange and the market it spawned are not working as intended at all.
Maybe just the opposite.
IOOW with Boeing the value was lost a long time ago with an unfavorable merger, and every stakeholder has been doing without ever since. It's just becoming unbearably impossible to ignore any more.
It just so happens that with an aircraft company, it's not only the shareholders, employees, and customers of Boeing who make up the majority of stakeholders. The flying public (who pays for it all to begin with) participates in far greater numbers and depends on the product aircraft with more of a life-or-death risk factor than the stakeholders who are on the financial receiving end.
And it all comes down to integrity.
Some business operators are still traditionally astute enough to create value where everyone financially involved gets their money's worth.
Others never will be able to accomplish this, and lots of them know who they are from the beginning and have had a lifetime focusing their efforts on ways not to give people their money's worth. Sometimes with the most insidious strategies.
And that's merely from poor integrity, even when ethics are not fully compromised.
Now look what happens when the ethics go out the window too . . .
Well that whooshed by and most people never saw it coming.
[0] where some may rake it in and retire early from a relatively short career.
[1] often including long-ago established value or utility that is now irreplaceable economically or legally.
[2] from anything smaller or less powerful in their path, with who knows what kind of motivation not aligned with the growing needs of a growing mother country.
That was pretty much Silicon Valley Bank as I recall. Very high risk business model; turns out the plan when the bomb exploded was to change the regulations so that someone else held the risk.
Sure, as long as they get their money back before bankruptcy occurs.
As an example, the PE firm owning our company recently mandated that we switch our tooling from X to a more expensive Y, because Y is owned by the PE firm, and doing so makes the PE firm more money, at the expense of our company. This pattern repeated for multiple solutions we used.
Sometimes the PE firm will literally tear the company apart to sell the pieces, inventory, equipment, etc. The goal is to make money. That might come from making the company stronger and more competitive long-term, but in my experience and observation, that is not how a lot of PE firms approach the goal
Yes, just like banks sold houses to unqualified buyers and packaged them up as overinflated securities to dump on the public. The people authorizing the deals get bonuses now and leave other suckers holding the bag later.
Oh boy do I have bad news for you.
https://www.seattletimes.com/business/seattle-celebrity-ceo-...
Air travellers by and large choose their travel based on price. If a subset started paying a premium for Airbuses, the market would sort them and remain relatively equally profitable for those flying Boeings.
Given how quickly Delta's Comfort+ seats sell, I'd be surprised if they don't install more of those. Given their brand, a row or two of Basic Economy (for e.g. college students), a small main, a healthy Comfort+ and a solid front cabin might be the play.
That data, which I'm sure Delta has and looks at, could strongly influence how many overall rows of seating to remove in order to fit more rows of Comfort+.
I have never flown top tier air travel, but even the best experience is somewhere on the scale of cattle-car-in-the-sky. It is a necessary evil to get me to somewhere in a way that is faster than driving. Paying a premium has rapidly diminishing returns when you are stuck in a shared space with the public.
To varying degrees. Air travel is a product where cost dominates more than with other services.
> even the best experience is somewhere on the scale of cattle-car-in-the-sky
This is most Americans. I personally find lay-flat seats worth the premium from time to time, though not always.
I don't see it that way. I see it as a necessary evil to get me somewhere in a way that is much, much, much faster than a ship.
Mostly Boeing? Sure.
But if you book Ryanair, you'll board a 737.
As in everything, humans and their motivations cannot be ignored. Firms are conglomerates of people, and it matters which people are on the top.
Private firm - no public trading of stocks.
Private equity - a business model created by syndicates that borrow money to buy companies, saddle the companies with that borrowing, demand a quick return (-> layoffs, selloffs, and wage cuts), then bankrupt the company when all the value and productivity have been extracted.
It's the sub prime mortgage thing all over again
Spirit was created and sold to the investment firm (Onex) in 2006, and Onex turned around and sold its the last of its stake in Spirit in 2014. Onex got over $3 billion for their initial $375 million stake in Spirit. The cost, as we're rediscovering, is that quality of Spirit's product went to shit and the long-term viability of Spirit is in question.
Fact that it sold for more doesn't mean it was in good shape. There are many potential reasons why people would pay more, even if Spirit was in bad shape.
I'd say basically the same thing but from a different perspective. Outsourcing is used to simplify management, as it allows companies to shift away from building quality organizations into the easier task of using coersion towards external organizations to drive down cost and avoid any liability due to loss of quality. Outsourcing is a cheat code for managers, and one which invariably causes serious harm to the company while shielding any decision-making exec from being held liable for nuking the company.
OK I posted that spinning off a portion of your manufacturing is bad, but I think your statement overstates the issue. Ford used to be so vertically integrated that they raised sheep for the wool in their seats! It makes sense to buy bearings from companies that specialize in the metallurgy and precision of good bearings. Focus on what you’re good at and what really makes the difference to your customer.
I once visited a home generator factory in India. They bought billets of aluminium and copper and manually machined the two stroke engines, drew the wire and made the generators, and so on. They hadn't updated their design since the 80s. If they’d sourced the engine from an engine company and the generator from a generator company the two could have advanced separately based on the demands of a larger customer base.
I was addressing the statement of "(...) selling the factory to a private-equity firm would let Boeing focus on final assembly (...)", which corresponds to outsourcing manufacturing of everything and anything used in a plane, up until the last step of the manufacturing process.
It's one thing to leverage existing third-party products in your own product line. It's an entirely different thing to aim for an Ikea-like approach of buying everything and just put the thing together once you get all the parts.
Nothing good ever seems to come from it, despite their claims.
Don't let them avoid pension commitments - force them to pay decent redundancy or support employees in finding new jobs.
Stop them splitting off liabilities and then having that part go bankrupt etc etc.
PE is just a type of company that participates in the act of buying and selling businesses.
You can't outlaw buying and selling businesses. You can't outlaw people working together to buy companies with financing.
Yes, there are a lot of PE horror stories, but there are also 100X more invisible private equity style buyups that you never hear or think about because nothing is going wrong.
Many of them actually improve when they roll up the company. My local eye doctor was bought out by a PE firm. They came in and installed all new diagnostic equipment that was standardized across their locations. They now nail my prescription on the first try and it's faster than ever before. The service is also more streamlined. This is the kind of thing that nobody ever thinks twice about, but it happens all over the place.
Sure you can, and I'll argue that we should.
Competition is the only thing that keeps businesses honest, and acquisition is the antithesis of competition. Shut it down and force companies to compete rather than for the richest to snap up their competitors, and to force startups to dream of sustainability rather than a fat exit.
That really makes no sense at all. That would mean you can't sell your stake in any company which not only makes IPOs, and having a stock market in general, impossible, it would also kill VC funding of start-ups. The only thing that would still be possible is bootstrapping your own company, because you also cannot get any bank loans as using the company as collateral is impossible. This idea is a guaranteed way of completely destroying your economy.
All new equipment and better service is great for you. There are serious disadvantages for your eye doctor though: he no longer enjoys the autonomy and freedom of his own medical practice. Lack of autonomy is a major cause of insatisfaction in medicine. Hopefully he got some fat stacks of cash to compensate for that. As a society though, nothing compensates for the fact we're approaching the fabled "you'll own nothing" future.
As usual, the underlying issue is a lack of government regulation and enforcement (and thus the fault of the people). And, frankly, most people don't care about these problems because they're abstract (to them) and the price of goods on the local multinational corporation's shelves are what they really care about.
I personally spend an awful lot of time being careful about what I buy and who I buy it from. Most people even if they have the resources to do so and spend 2x-5x the low price will just refuse to do any research in the first place.
The point is, they don't care about us. We are just clogs on a machines and we are one type of resources just like coal and iron.
The only way to struck fear is by some collective methods but then everyone got spooked by "Socialism", so the whole thing becomes a perfect loop for the aristocratics.
If things are so bad just let the company go bankrupt and sell off their assets. If things are recoverable then PE isn’t going to help because they’re going to put on too much debt.
It doesn’t make anything better. It doesn’t fix the companies that are too far gone. It doesn’t fix the companies that could still be saved. All it does is make the investors a bunch of money at the expense of everyone else.
Source? The data I’ve seen don’t show quality differences based on ownership model except when there is family ownership.
That said, fuselages do seem to be a core aspect of making planes!
Lots of people and companies use identical chips. Only boeing uses boeing airplane bodies.
Spirit in particular just feel like financial engineering bullshit. From a quick google, in 2020, the 730 max accounted for more than 50% of Spirit's annual revenue. I struggle to understand how it's good for Boeing or Boeing's customers for T Rowe Price and Vanguard to own a supplier like that.
What is right is a very complex question that can never be answered with 100% confidence. However your simplistic analysis isn't helpful in figuring this out.
Most of this is his fault, and the board who hired him.
Short to mid term, "woah, the stock is going up, this guy is a genius!"
Until there is no more company left to juice the shares with buybacks. This is how the GE engineering culture was destroyed as well.
Private Equity is like that, only much accelerated. There is no pretense of "management".
And of course the "incidents" are always "different and not related", but as any very complex system goes, these "incidents" always end up happening due to the same root cause.
And yet again another evidence nobody learned anything with the latest big scandal of 2018/19, Boeing actively lobbied to reduce and get even more exceptions for QA and safety rules AFTER 2019.
During the 00's it was already clear many of their planes were clearly not the best on the market for various reasons, but a few phone calls from key people in the US government to the prospective buyers would always "help" the customer to make the "right buying decision", so new orders were always arriving, money coming in, stock and compensations for the big wigs was obviously sky high so anyone who raised any concerns was always ignored or fired, but by that time Boeing was already rotten.
I just pray I'm wrong and all of those planes don't crash until they are retired, but the new ones seem to be even worse.. so I don't know..
I was under the impression it was quite nice and had partially eaten the lunch of Airbus' A380 by making longer flights with smaller plane economically advantageous.
That being said however, the kind of workmanship negligience we have reason to suspect of Boeing means absolutely no Boeing aircraft manufactured during the timeframe(s) concerned can be considered safe until inspections are done.
For now we don't have reason to suspect this extends beyond 737 MAX 9, but that could change drastically depending on what FAA finds.
Boeing in 2023 deferred 787 deliveries again because the manufacturing process was found to not have been properly followed. In the past they also found debris left on planes.
Maybe this issue specific to the MAX 9 but manufacturing issues at Boeing are not at all an isolated thing.
Concept: Lithium-ion batteries are great tech.
Design: Boeing outsourced the electrical system design work to Thales, and the first production airliner designed around lithium-ion batteries seemed like a great idea until they started catching fire.
Execution: Relying heavily on sub-contractors to build big chunks of the 787 was a great idea to save money, until the subs couldn't maintain the pace Boeing wanted for the price Boeing was willing to pay. So Boeing bought the South Carolina facility.
And Boeing keeps insisting on learning the hard way. Last year the FAA halted deliveries of the 787 for a few months due to quality issues.
I am not, in general, a pro-union guy, so I’m arguing against my natural bias here. But Boeing fucked up big time moving production out of Washington.
I could see that the point of that was to be able to spin up new production sites effectively, and the main value in that was not building a million planes but leverage against the unions.
I think buying SC was crocodile tears at best.
At any rate, I'm not trying to start an argument about unions. I only brought it up to underscore my point that despite completely sympathizing with their motivations, I still think Boeing's management made a mistake. It's not cognitive dissonance to have a nuanced view of the world and to acknowledge that there are real world exceptions to what I might otherwise believe based purely on my general biases. If that's difficult for you to understand, I am genuinely sorry for you.
You and Kenny are coming across as the type of people who see everything in simplistic black-and-white terms in which everything that ever goes wrong in the world, goes wrong because someone went against with your opinions which are Obviously Right And Impossible To Disagree With In Good Faith. That’s not how I see things and I am glad to make crystal clear that my criticism of Boeing’s decision is not rooted in any sort of unthinking pro-union tribalism, but rather in a considered appraisal of the situation in which I am willing to not only question but even reject the easy answers my own biases would otherwise lead me to.
But it was also a program that went hilariously over budget. Nearly costing as much as the A380. It had a whole bunch of problems and still has problems today. Lots of production issues.
This had lead to a situation where they will need to sold literally 1500 or more planes to break even on the program. And 1500 is a gigantic amount of wide-bodies.
The 787 didn't really eat A380s lunch. Its more like 2 companies both thought about what the best investment would be for the future. Boeing picked the right plane. Airbus picked the wrong plane. The competitor to the A380 was the 747-8 and the 777.
Had Airbus not totally misread the market and invested in totally the wrong market. The Dreamliner could have backfired on Boeing. If Airbus had a 787 serious competitor out at the same time, the 787 might never have sold more then 1500 times. They already have total order of around 1800 and there are likely gone be many more because Airbus doesn't have a perfect competitor plane.
In the wide-body market, Boeing is still totally competitive with Airbus. Its the narrow body market where Airbus is kicking Boeing ass.
Roughly, it used to be A330 vs 767 and A340 vs 777, the A330 and the 777 were the winners in these segments. The 787 was built to beat the A330, and it did, and the A350 was built to beat the 777, and it might.
Airbus reacted to the 787 with a re-engined A330, the A330neo, which was not a great success, but not a total flop. Boeing re-engined and enlarged the 777 to create the 777X, whose smaller variant positioned against the A350 is a slow seller, but whose larger variant, which has no direct competitor, has seen some sales - if Boeing manages to get it out of the door, the program is again hugely delayed and over budget.
Airbus had 3 as well. Those are A320, A330, A350. Then added A220.
That basically covers the majority of the market.
RIP C-Series
Incidentally, that also sold a shit-ton of 737 MAX. Maybe not the best metric to choose.
> Had Airbus not totally misread the market and invested in totally the wrong market.
Missed the market by so much, they are pulling the A380s out of storage.
> They already have total order of around 1800 and there are likely gone be many more because Airbus doesn't have a perfect competitor plane
The A350 _is_ the perfect competitor. The two planes are, by their design, not competing in the same segments.
You have to think about the difference between narrow and wide bodies.
Yes they sold many 737 MAXs but not compared to Airbus narrow bodies.
> Missed the market by so much, they are pulling the A380s out of storage.
Sure. Nice for them. But that doesn't change anything for Airbus, they are not gone sell more of them. There was never a question if A380 would go away competently, its the right aircraft for many airlines.
Lets be real, Airbus sold 250 A380 and is never gone build more. Boeing sold 1800 787s and will sell many more. Its not really a competition what was the better investment.
> The A350 _is_ the perfect competitor. The two planes are, by their design, not competing in the same segments.
Sure if you don't understand the industry.
The very biggest 787 is slightly competitive with the smallest A350. But that is not the focus of either of those planes design.
Airbus deliberately did not build a 787 competitor, they believed the market would would already be mostly captured. So they build a competitor to the 777 instead, with the goal of replacing older wide bodies like the 777, 747 and 380.
The A330 NEO is the more direct competitor to the 787 core business.
A380s are being pulled out of storage because they, like many other types of planes, were parked due to COVID and travel restrictions and are now returning to their previous service.
What does that have to the airliner market?
Yes, but not quite. They were put into storage with the understanding that it would be their final resting place, as the hub-and-spoke demand Airbus had anticipated lost, pre-COVID, to the point-to-point model. The airlines losing money during COVID and trying to save costs was the final nail in their coffin.
What they are finding out post-COVID is that, on some segments, the number of passengers grew more than the available slots. That, coupled with "sluggish" deliveries of other wide-body aircrafts, suddenly means that the capacity and economics of the A380 don't look that bad after all. To the point that some airlines are pushing for a re-engining, which would, despite the costs of running a 4-engine aircraft, be quite a game-changer. One of the issues with the A380 is that it came into service just at the time engine manufacturers made a generational leap in engine efficiency, making its economics worse than what they could be.
Several of the words in this sentence are doing very heavy lifting.
The point-to-point model DID clearly and significantly win over the hub-and-spoke model for the majority of air traffic. But life is not a zero-sum game and becoming the dominant model does not magically mean that all other models promptly cease to exist, nor does it magically change the Earth's geography. It makes zero sense to claim all A380s were being parked forever because point-to-point won out when airlines like Emirates and Qantas are basically nothing but hub-and-spoke (and cannot really be anything else).
And that's besides the fact that words mean things. A plane being stored is not an "understanding" that that's its final resting place, it means exactly what it says: that it's being stored. If an airline really wanted to send a plane to its final resting place it would retire it, as e.g. Air France did with its A380s (and you'll notice that none of them have been "pulled out of storage", because there actually was no intention of bringing them back into service).
https://www.corporatecrimereporter.com/news/200/john-barnett...
Also Boeing doesn’t have any factories in Seattle. They have factories in Renton and Everett. The 787 used to be made in Everett. Renton is kind of a suburb of Seattle but Everett isn’t even particularly close.
But I do find it weird that nobody claims that Apple, Google, and Facebook are all based in SF.
Everett isn’t in Seattle, but considering it part of the metro area isn’t a stretch. You never leave dense burbs between the two.
It’s hard to think of a traffic jam as being in a rural area.
Everett itself is farther north, but the turn to the factory and Paine field is before you hit town (but after you hit Everett speed traps)
It’s an hour and a half in traffic.
> Everett isn’t in Seattle, but considering it part of the metro area isn’t a stretch. You never leave dense burbs between the two.
On the other coast, you don’t leave dense burbs anywhere between Boston and DC. Therefore Boston is part of the NYC metro area.
Actually, it's weird to see headquarters in SF being called in SV ...
The airport at the Everett facility, Paine field (PAE), was recently renamed "Seattle Paine Field International Airport"
Their larger planes are assembled in Toulouse, but smaller planes are made globally.
They got something out of spawning a new corporate entity. Without a convincing TL;DR I think most of us will assume it's for reasons that sound good to Boeing business people, but not to outside people. (I. e. being a "new entity" to avoid existing labour contracts, or serving as a liability firewall in the event chunks of plane start flying off)
The military has a much higher tolerance for bullshit. The wings keep falling off the C-130 and the military keeps flying them (and the C-5).
Any more information?
https://www.iprr.org/comps/T82story.htm
https://encyclopediaofarkansas.net/entries/c130-crash-of-197...
https://www.defensedaily.com/hercules-crash-in-baghdad-point...
https://www.federalregister.gov/documents/2021/05/14/2021-10...
There were also serious issues with ejector sear components that affected dozens of other aircraft. [1]
Here's a depressing read: "All The Ways The F-35 Tried To Kill Its Pilot Prior To Eglin AFB Crash" [2]
[0] https://www.defensenews.com/breaking-news/2015/10/14/usaf-ac...
[1] https://www.defensenews.com/air/2022/08/15/all-us-air-force-...
[2] https://www.thedrive.com/the-war-zone/36970/all-the-ways-the...
I love how the URL says "breaking news". It literally is.
By the time they stopped communicating about the (800+) unsolved issues, they had more than 2 dozens potentially lethal for the pilots.
For the fun: https://archive.is/eA7Rr
The requirements of a commercial airliner are a lot different than those of a cutting edge fighter jet. The F-35 ejection seat is too powerful and might injure smaller pilots, sure. But if I’m flying in contested airspace with enemy air defenses and fighter jets trying to shoot at me, I’d still feel a lot safer in an F-35 than in an Airbus.
There has been a lot of FUD about the F-35 spread around the press, but a surprising amount of this FUD comes straight from Boeing. You see, Boeing makes the Super Hornet, and every F-35 sale Lockheed Martin makes is a potential Super Hornet sale that Boeing has lost. Don’t get me wrong, the Super Hornet is an awesome fighter, but despite what Boeing would have you think, it doesn’t come close to the capabilities of an F-35.
Obviously I would much prefer my country and its allies to buy fighter jets from some perfect aerospace company that makes completely flawless aircraft, even when those aircraft contain groundbreaking innovations at the bleeding edge of what is technically possible. Fingers crossed that enough lessons were learned that when NGAD comes out, it’s a lot faster and smoother than the F-35 process, but this stuff is hard for everyone and for all the deserved criticism that the American military-industrial complex gets, nobody else in the world actually does a better job of making fighter jets.
Interestingly, it is the senators who forced Boeing's hand, according to the ACQ podcast on Lockheed Martin. The senators were responsible to approve all kinds of government budgets for Boeing, and they wouldn't approve it unless Boeing also created jobs in their states.
American management style is to focus on marketing as the source of all revenue to be exalted. Engineering, design and manufacturing are expenses to be minimized and controlled.
Right now, Boeing management is looking hard to find reasonable manufacturing scapegoats and when they do, heads will roll. Clearly, management had no involvement.
Gives you that warm, fuzzy and safe feeling doesn't it?
Because they're the best planes available?
> or a Boeing branded Airbus with Boeing markup?
Because the Boeing markup is less than the US import tariff?
For the same reason people currently buy "American" autos (and planes) built from parts sourced around the world.
In American management culture, marketing is the knee jerk solution to any problem and the holy grail from which all revenue is gifted. They are true believers in the "magic" of being able to "game" people into making decisions based on something other than logic.
This same culture explains how/why the internet we have today is built around privacy invasion and (wait for it) ... marketing.
Bit like when the two planes fell out of the sky and the third world pilots were blamed / strongly hinted at as being inferior
Boeing did the correct thing outsourcing the actual building of planes, so they could focus on their core competency. Standard tech industry advice.
Furthermore, while those core competencies might sound correct to Boeing, they wouldn't sound like it to Boeing's customers. You're paying Boeing for a plane and support, not a trading company that can find five other companies who can outsource each task to a different firm that delegates responsibility to...
The problem is that there's a mismatch between the customers and management as to what the core focus of the business actually is. Every business wants to become a weirdly shaped futures trader that just arbitrages on other people's work - i.e. one that has no core competency whatsoever. Everything gets outsourced so that cost pressure can be used to obfuscate fraud.
If you can get 70 airframes for five years in a way that means that you just have to borrow a nubbin of cash and then make regular payments that's what you will do. All your actual money can go to the shareholders and exec compensation. If the business (airline) folds the airframes go back to Boeing and you go on to the next gig - who cares...
If Boeing will take the risk the banks are happy to fund, local airlines - well the banks will be nervous. Every other consideration is either imposed by regulation or of no interest at all.
https://www.documentcloud.org/documents/69746-hart-smith-on-...
Then State House Rep Reuven Carlyle was the point person for negotiating WA state's $11.4b (?) tax breaks for Boeing. With non-binding terms like agreeing to create jobs. Boeing's negotiators completely lost their shit when Carlyle tried to add good government amendments like transparency (to the public) about the actual monetary value of tax breaks.
Similar to the US Sen Al Franken's inside baseball version of wrestling with corporations over the mergers of telecoms & cables. The corps demanded all, conceded nothing, had no intention of honoring their promises, completely lost their minds when Franken tried to get future promises in writing.
The USA is a Corporatocracy. Partisanship, culture wars, moral panics, food fights, etc. all serve to obscure that central fact.
* https://www.businessinsider.com/alan-mulally-as-microsoft-ce...
After all these years, I'm still stunned that Microsoft got a new CEO who didn't run it into the ground. They used to make so many bone-headed decisions at the top levels.
They’d get visibly agitated. It was funny.
In the mean time airlines are stuck with Boeing planes (at least part of) the public thinks of as ticking time-bombs. Some (many? most?) are stuck with planes that they've sunk a fair bit of cash into. Or, more likely, the airlines' corporate parents own a company that owns planes that leases them back to the operating airline for tax reasons. And while that might seem to reduce pressure on the carriers, it's unlikely their corporate parents will want to walk away from that investment.
The last time we had a problem with the 737-900 MAX's, Alaska started flying Airbusses. This time my monthly SEA -> SJC flight is on an Embraer. This can't be good for anyone (except Airbus and Embraer.)
Maybe it's time for corporate America to get serious and only pay the c-suite bigbux if they don't destroy the company.
The MCAS software debacle and penny pinching walk-back on the MCAS remediations shows that the rot has set in within Boeing.
> “I just can’t get the wing data to match the body data, and time is no longer on my side.” “Show us your wing data. Hey where did you get this stuff?” “From the body project.” “But they’ve given you old data; you’ve been trying to fit an old wing onto a new body.” (The best time to make a design change is before you’ve actually built the thing!) An hour later life was restored and the 727 became a single numerical entity.
One of the reasons that merger needed to happen though, was that Boeing didn't know how to be profitable in a non-government regulated market (post deregulation of the airlines).
It's easy to make well engineered planes when the government has a hand in guaranteeing you good profit margins and you don't have to worry too much about costs.
We're getting very close to the point where the combination of the competency crisis and the greed crisis are going to start causing more people to think twice about doing things that were once common, like flying commercial.
Personally, I cancelled my flight later this month and am going to start getting in the habit of doing long road trips again.
Just-as-if-not-more dangerous? Maybe, but at least I have a higher chance of my fate being in my own hands (swerving out of the way of an oncoming truck vs being sucked out from a fuselage plug failing).
More inconvenient? Yep, don't care.
More expensive? Maybe, don't care.
Anyway in reality, look at how post-merger, McDonnell Douglas’s professional managers hollowed out Boeing’s legendary engineering. And the stock market cheered that.
I don't get it. It seems like we all make riskier tradeoffs whenever we buy a used car instead of a newer, safer one, or when we buy a slightly less safe new car instead of the safest new car. By not spending more on a safer vehicle, we're saying that we're willing to trade a certain amount of savings for a certain amount of risk.
How much more are we willing to spend to make aviation safer, when it's already so much safer than driving?
One argument I've seen on HN is that most car accident deaths are preventable by a responsible driver, while passengers have no control.
Ok, even if 99% of car accident deaths were preventable, that leaves 1% that are unpreventable. 1% of the ~35,000 car accident deaths in the US each year = 350.
Compare that to ~zero commercial aviation deaths/year in the US over the last decade or so. Source: https://injuryfacts.nsc.org/home-and-community/safety-topics....
If we include Boeings 737 MAX overseas deaths, that adds ~350 deaths. https://en.wikipedia.org/wiki/List_of_accidents_and_incident...
Which doesn't seem to change the picture.
Because its easier to regulate 30,000 planes owned by a few dozen airlines made by a handful of manufacturers, than it is to regulate over a billion cars owned and maintainted by hundreds of millions of drivers and made by hudreds of manufacturers.
Down the street are 2 different KFCs.
One uses oil that sometimes, a very small percentage of the time, will instantly kill you. The other does not. They arrived at using the riskier oil because it saves them 5c a day and it makes the books look better.
Are you really asking why anyone would even bother differentiating these two because the drive to the KFC carries more risk?
Why would you as a consumer want to fly on something with an ever worsening safety record?
Why would you as an airline want the bad press, loss of revenue, and loss of reputation associated with a safety incident?
And to answer your second question, I would fly on the airplane with the worsening safety record if its other characteristics made up for it (price, timing, etc).
Why would an airline want the bad press, reputation effects, etc? That's a circular question to mine. My question was: why do people care so much about this minuscule increase in a minuscule risk? I agree that the game theory of such caring about caring (https://en.wikipedia.org/wiki/Keynesian_beauty_contest) makes sense, but I still wonder why HN readers care about it as individuals, not as Boeing execs.
A false argument that keeps getting pushed in the US despite being false.
You are right but the solution is not to say 'Boeing is fine' but rather, the way driving is treated is fucking batshit insane crazy.
When comparing safety within aviation, they talk about deaths per departure.
When comparing safety between aviation and cars, they suddenly change their metric and talk about deaths per mile, making aviation look much better.
I'm not saying aviation is worse than cars if you do a fair comparison; I haven't done the math. Maybe it's still better. But still they are fudging things in their own favor.
Comparing different operators within aviation, using a rate per departure makes sense I think.