Boeing's Managerial "Revolution" illustrates the conflict between industry and business...

From Ian Welsh's blog

Crash Course: How Boeing’s Managerial Revolution Created the 737 Max Disaster 

[New Republic, via The Big Picture 9-21-19]

There are many things I like about this article. It illustrates that problems arise not from evil, malicious people, but the ideologies in which they have been trained to think. It gives details of how Republican leaders in Congress at the very least bent the truth if not outright lied to prevent inquiry into what actually went wrong. It shows that labor unions were the only actors in this whole story that acted from a sense of promoting the public good — which is an implicit repudiation of conservatives’ and neoliberals’ demonizing of organized labor. It explicitly contrasts engineers with financially mindede managers. It explicitly attacks Jack Welch, the former CEO of General Electric, and shows why the public acclaim he has been given is entirely misplaced. Most of all, it is a perfect example of Thorstein Veblen’s analysis of the conflict between industry and business.

….Nearly two decades before Boeing’s MCAS system crashed two of the plane-maker’s brand-new 737 MAX jets, Stan Sorscher knew his company’s increasingly toxic mode of operating would create a disaster of some kind. A long and proud “safety culture” was rapidly being replaced, he argued, with “a culture of financial bullshit, a culture of groupthink.”

Sorscher, a physicist who’d worked at Boeing more than two decades and had led negotiations there for the engineers’ union, had become obsessed with management culture. He said he didn’t previously imagine Boeing’s brave new managerial caste creating a problem as dumb and glaringly obvious as MCAS (or the Maneuvering Characteristics Augmentation System, as a handful of software wizards had dubbed it). Mostly he worried about shriveling market share driving sales and head count into the ground, the things that keep post-industrial American labor leaders up at night. On some level, though, he saw it all coming; he even demonstrated how the costs of a grounded plane would dwarf the short-term savings achieved from the latest outsourcing binge in one of his reports that no one read back in 2002.*

Sorscher had spent the early aughts campaigning to preserve the company’s estimable engineering legacy. He had mountains of evidence to support his position, mostly acquired via Boeing’s 1997 acquisition of McDonnell Douglas, a dysfunctional firm with a dilapidated aircraft plant in Long Beach and a CEO who liked to use what he called the “Hollywood model” for dealing with engineers: Hire them for a few months when project deadlines are nigh, fire them when you need to make numbers. In 2000, Boeing’s engineers staged a 40-day strike over the McDonnell deal’s fallout; while they won major material concessions from management, they lost the culture war. They also inherited a notoriously dysfunctional product line from the corner-cutting market gurus at McDonnell.

…. much of the software on the MAX had been engineered by recent grads of Indian software-coding academies making as little as $9 an hour, part of Boeing management’s endless war on the unions that once represented more than half its employees. Down in South Carolina, a nonunion Boeing assembly line that opened in 2011 had for years churned out scores of whistle-blower complaints and wrongful termination lawsuits packed with scenes wherein quality-control documents were regularly forged, employees who enforced standards were sabotaged, and planes were routinely delivered to airlines with loose screws, scratched windows, and random debris everywhere. The MCAS crash was just the latest installment in a broader pattern so thoroughly ingrained in the business news cycle that the muckraking finance blog Naked Capitalism titled its first post about MCAS “Boeing, Crapification and the Lion Air Crash.”

Here, a generation after Boeing’s initial lurch into financialization, was the entirely predictable outcome of the byzantine process by which investment capital becomes completely abstracted from basic protocols of production and oversight: a flight-correction system that was essentially jerry-built to crash a plane. “If you’re looking for an example of late stage capitalism or whatever you want to call it,” said longtime aerospace consultant Richard Aboulafia, “it’s a pretty good one.”
….
There was one unmistakable harbinger of what was to come at Boeing in the saga of the GE90—an all-new, ultra-efficient engine inspired by a NASA project that General Electric’s pioneering chief of aviation Brian Rowe developed exclusively for the new plane. Market watchers referred to the development of jet engines, which make up 20 percent of an airplane’s purchase price, as GE’s “crown jewel,” because the margins were high once the company had eaten the ten-figure cost of developing and testing one. But in 1993, GE’s notorious downsizing CEO Jack Welch—by then well on his way to becoming the most grotesquely lionized character in American business—abruptly fired Rowe, along with several thousand other aviation engineers. The results were predictable: The engines failed their tests, often in spectacular fashion, replete with smoke and flames, over and over and over again. Things deteriorated to the point that the FAA sent Boeing a “letter of discontinuance” directing the company to cease flight tests until GE got its act together. A shrunken staff of engineers, working overtime to implement decisions by colleagues who had long since been laid off, finally got the engines approved more than a year past their scheduled delivery dates, and malfunctions continued to plague the engines for years thereafter.

Less than two years later, a layoff-happy Welch protégé named Harry Stonecipher, McDonnell Douglas’s former CEO, grabbed the reins at Boeing, and the same dysfunction took hold in Seattle.
…

The McDonnell Douglas engineers had seen it all before: In the name of RONA, Stonecipher’s team had driven the last nail in the coffin of McDonnell’s flailing commercial jet business by trying to outsource everything but design, final assembly, and flight testing and sales of the MD-11. In 2001, one McDonnell engineer wrote a scathing critique of the metric and its inevitable result, “Out-sourced Profits,” that went viral on Boeing’s intranet server. But Wall Street analysts dismissed the paper as a “rant,” and so the whole process was fated to begin anew under Stonecipher’s watch at Boeing.
…
The McDonnell Douglas engineers had seen it all before: In the name of RONA, Stonecipher’s team had driven the last nail in the coffin of McDonnell’s flailing commercial jet business by trying to outsource everything but design, final assembly, and flight testing and sales of the MD-11. In 2001, one McDonnell engineer wrote a scathing critique of the metric and its inevitable result, “Out-sourced Profits,” that went viral on Boeing’s intranet server. But Wall Street analysts dismissed the paper as a “rant,” and so the whole process was fated to begin anew under Stonecipher’s watch at Boeing.

Boeing might represent the greatest indictment of 21st-century capitalism
A link from the article above
Packed in the 737 fiasco are all the economic problems we face: crony capitalism, regulatory capture, offshoring…

And it's not just Boeing... See At $28 billion so far, the farm rescue is more than twice as expensive as the 2009 bailout of Detroit’s Big Three Two automakers, which cost taxpayers $12 billion.