The phone in Room 511, in a Holiday Inn off the highway in Charleston, South Carolina, rang and rang with no response. John Barnett’s attorneys were calling after their client failed to show up for his third day of deposition against his former employer, Boeing. It was Saturday, March 9, and the lawyers, Rob Turkewitz and Brian Knowles, were looking forward to getting his story on the record. Barnett had worked in the company’s South Carolina plant building 787 airliners from 2011 to 2017, during which time he’d witnessed numerous safety violations. After he took his complaints public, Barnett alleged, Boeing had punished him by denying him promotions and forcing him to retire early. By suing, he sought not only to redress his own mistreatment but also to push Boeing to revamp its safety culture. The need was urgent: Boeing’s reputation had been in free fall since the start of the year, starting with the blowout of a door plug on a brand-new 737 Max-9 over Oregon and continuing with a series of well-publicized mishaps, including an incident just the day before when a wheel fell off a 777 leaving San Francisco.
When Barnett failed to answer the phone, Turkewitz and Knowles called the hotel and asked the staff to look for his orange Dodge Ram pickup. It was sitting in the parking lot with Barnett inside, dead. His finger was still on the trigger of a silver pistol. Conspiracy theories exploded, intensifying further after a relative claimed to a local TV station that Barnett had told her that “if anything happens, it’s not suicide.” There were two ways to interpret the story: Either Boeing’s communications strategy had been expanded to include assassination, or its reputation had become so toxic that the public found it possible to believe the worst.
Fantasies aside, Boeing really is in trouble. Its stock price has fallen by nearly a third this year. The booking site Kayak says that customers’ use of a tool to deselect 737 Max flights has risen 15-fold since the January blowout.Regulators and prosecutors are digging into the company’s inner workings. And across the aviation industry, the sense of crisis has grown so profound that even after last month’s purge of top Boeing leadership, a sense of unease remains. “Boeing has shown us repeatedly that it has not been able to improve its performance,” says Jonathan Root, senior vice-president at Moody’s Investors Service. “We are no longer giving them the benefit of the doubt for doing better.”
Thanks to a string of unforced errors and botched responses, Boeing, like other corporate giants from the 20th century, has devolved from the epitome of world-beating quality to a symbol of managerial fecklessness, focused on short-term profits at the expense of the company’s long-term sustainability. Boeing cut corners in production, pushed out experienced workers to save money, and poured money into boosting the stock price instead of investing in its products. “The Achilles heel of the company has been chasing short-term profits and stock prices,” says Justin Green, a partner at the law firm Kreindler & Kreindler LLP, which is representing 34 families of passengers who died in the Ethiopian 737 Max. “Long term, it’s killing the company.”
IT SEEMS hard to remember now, but until quite recently, Boeing had a sterling reputation. For the second half of the 20th century, the plane-maker leaped from strength to strength, propelled by a fierce commitment to the quality of its engineering. In the 1960s, it gambled big on planes like the 737 and 747, investments that could have bankrupted the company but instead created air travel as we know it and made Boeing the undisputed dominator of the industry. Europe’s sole hope of catching up was to form a conglomerate of smaller manufacturers called Airbus. Boeing only grew more powerful, eventually swallowing up its main domestic rival, McDonnell Douglas, in 1997. Between them, they sold two-thirds of the world’s commercial aircraft.
But that merger contained the seeds of Boeing’s current problems. McDonnell Douglas was run by a man named Harry Stonecipher, who was an acolyte of Jack Welch, the longtime head of General Electric who was viewed at the time as “the Manager of the Century.” He espoused the view that a corporation’s first and only duty was to maximize shareholder value — or, to put it in simpler terms, to make its own stock price go up in the short term. No other concerns — environmental degradation, employee well-being, or even its own long-term viability as a company — could even be entertained, let alone prioritized.
Though his was the company being acquired, Stonecipher wound up as the largest shareholder in the new Boeing and became its CEO. Under his direction, Boeing began developing a new wide-body, the 787. For the first time in its history, the company outsourced the design of components to subcontractors in order to save money. The process was a disaster and the project went wildly over budget. After Stonecipher was forced out following the discovery he’d had an extramarital affair with another executive, the company in 2005 replaced him with another Welch disciple from GE, James McNerney.
To support its share price, the company under McNerney poured billions into stock buybacks instead of investing profits into the kind of research and development needed to stay competitive. McNerney decided not to spend billions of dollars building a new plane to replace the 737. Instead, Boeing tweaked and updated the existing model and called it the 737 Max, outfitting it with larger, more efficient engines for increased economy. Compensating for the resulting instability was a secretive automated system called MCAS that would adjust the plane’s pitch without input from the pilot.
McNerney also fought to deeply cut costs. On his watch, the company opened its first non-unionized aircraft production line and initiated a program called “Partnering for Success” that pushed suppliers to cut their prices by 15 percent or more. Many feared that squeezing suppliers would harm the quality of their components, but McNerney was determined to recoup the cost of the 787’s development; if the subcontractors complained, they could find their work taken away from them, as happened to landing-gear-maker United Technologies Aerospace Systems.
McNerney retired in 2015, handpicking his successor, president and COO Dennis Muilenburg. Over the next three years, Boeing’s stock price more than doubled as it sold new planes the world over. (As Bloomberg News reported, Muilenberg and McNerney “had personal reasons to emphasize productivity and cost-cutting” because their compensation was tied to share performance. Together they took $209 million in total pay over seven years.)
Then on October 28, 2018, a 737 Max operated by an Indonesian carrier suddenly crashed. Four months later, an Ethiopian Max did too. The cause in both cases was soon identified as a malfunction in the MCAS systemmeant to make the latest generation of 737s stable during flight. With 346 people dead, the Max fleet was grounded for nearly two years, costing Boeing billions. Even worse for the company, in 2019, Airbus overtook Boeing as the world’s largest plane-maker. That same year, the Boeing board fired Muilenburg and replaced him with David Calhoun, another McNerney acolyte. Muilenburg “was the hapless guy that was put in place for that purpose by McNerney,” says aviation analyst Richard Aboulafia of AeroDynamic Advisory. “This is all Game of Thrones shit.”
Then came COVID. With global air travel shut down, airlines suddenly didn’t want all those new planes anymore and cancellations soared. The downturn hit Boeing hard, and it shed much of its experienced workforce. It saved money in the short-term, but it drained the deep pool of experience and know-how that was the core of Boeing’s competitive advantage. “People were encouraged to retire who had 10, 15, 20 and more years of experience,” says Root. “You can’t replace that efficiency and know-how in two or three years.” When the pandemic ended and orders came flooding back in, Airbus was much better prepared to respond than Boeing. By the end of 2023, Airbus’ order book was 40 percent larger than Boeing’s, and the Americans were struggling to hang on to their dwindling market share.
All of the tribulations that whipsawed Boeing left it fragile and mistake-prone. “A group of jobs were not done properly and the procedures required for that job were not handled properly,” a Boeing engineer wrote me by email. “This is a reflection of the global supply-chain issues that Boeing has faced due to the pandemic. Parts are not coming in on time, many come in damaged, and deadlines are not being met.”
The door plug that blew out over Oregon was a prime example of how problems had proliferated. The plug was assembled into a fuselage section by a subcontractor, Spirit Aerosystems, at its factory in Kansas. But when the fuselage arrived by rail at Boeing’s assembly plant in Renton, Washington, workers there found that five rivets were damaged. In order to replace them, the workers had to partially remove the door plug, and when they put it back, they did so incorrectly. To make matters worse, documentation of the work was either destroyed or simply hadn’t been created in the first place. The Federal Aviation Administration temporarily grounded all 737 Max-9s operating in the United States.
CONTEMPORARY AIR travel is the safest mode of transport human beings have ever devised. That’s because when things go wrong, a robust procedure has been developed to learn from what happened and make changes to reduce the odds that they will happen again. Almost always, aviation accidents happen after a chain of mistakes, any one of which would have prevented the accident from occurring. The challenge for Boeing is to apply that analysis to its own slowly unfolding corporate disaster and find a way to fix its chain of management failures.
The most obvious person to blame is the CEO, who has operational responsibility for the company. In this case, that’s Dennis Calhoun, who had taken over from his predecessor, Dennis Muilenberg, after the latter disastrously botched the response to the two 737 Max crashes in 2018 and 2019. But Calhoun had done little to arrest the company’s slide. On the contrary: Rather than lay plans for long-term revitalization, he has eliminated the company’s strategic-planning department, “which is the equivalent of giving yourself a lobotomy because you don’t like what your brain is telling you to do,” says Aboulafia.
Calhoun wasn’t going to fire himself. The only entity with the power to do that is the board of directors, but it stuck with him. (Lesser executives are easier to sacrifice; in February, Boeing booted the head of the 737 Max program, Ed Clark.) With Boeing’s reputation sliding toward the wood chipper, and the board unwilling to act, frustration grew within the industry. Boeing’s largest union announced that it would seek a seat on the board, explaining that “we have to save this company from itself.”
The FAA was also running out of patience. For years, the agency had been a textbook example of regulatory capture: It even let Boeing self-certify much of the 737 Max. In the wake of the Max crashes, it became less docile, slowing Boeing’s push to certify two new Max variants, the 7 and 10. The Alaska Airlines door-plug incident further stiffened its spine, and in January, it refused to allow Boeing to increase production of existing models. In a recent safety audit, the FAA found that Boeing failed 33 of 98 production processes.
In February, the agency announced it was giving Boeing 90 days to come up with a quality-control plan — or else. “They need to make safe airplanes or they will be capped at a production level that’s not sustainable,” FAA administrator Michael Whitaker told NBC News. “So I’m confident that they’ll get there.”
The Department of Justice was circling, too. It had opened a criminal investigation into Boeing in the wake of the Max crashes, then settled in 2021, with Boeing agreeing to pay more than $2.5 billion in penalties. In the wake of the door-plug incident, the DOJ is reportedly investigating whether Boeing violated the terms of that agreement.
In the end, it was the airlines who forced the board to take action. According to reporting by the aviation website The Air Current, growing disquiet by some of Boeing’s largest customers prompted the board to finally push Calhoun out, along with two other top leaders: Board chairman Larry Kellner stepped down, and Stan Deal, the head of the commercial-planes division, retired. Calhoun will not leave immediately but will stay in his post until the end of the year.
A change of leadership is a positive step, but it’s only a start. Boeing had already had a change of leadership in 2019, when Calhoun replaced Muilenburg, and that didn’t get the company anywhere. “I think the new management should be like, ‘I’m taking a job that the last two CEOs left in ignominy,’” says Green. To succeed, the new leadership is going to not only set new priorities for the company, but to change its fundamental philosophy. “Now’s the hard part,” says Aboulafia: “Changing the culture.”
John Coffee, a professor of law and director of the Center on Corporate Governance at Columbia Law School, feels that vigorous prosecution, followed by the enforcement of stiffer penalties, could provide the shock that puts the company back on track. He thinks a $5 billion fine would be about right. “Boeing could raise it, but it would mean less stock buybacks, less executive compensation,” he says. He’d also like to put the company on probation for five years, during which time compensation to executives would be restricted: “Tell people they’re not going to get any executive compensation or stock buybacks for the next couple of years unless there is a turnaround in safety.”
TO SAVE ITSELF, Boeing could look to the past — returning to centering engineers, committing to training and retaining a skilled and experienced workforce, and investing in building new aircraft with the latest technology. And Boeing has, indeed, made some limited steps in that direction. In early March, the company announced it was exploring the reacquisition of Spirit Aerosystems, which assembled the faulty door plug and had been spun off in 2005 at the end of the Stonecipher era.
“Most of the problems have been associated with the fuselages. And now they’ve gone out back and are reacquiring that subsidiary at a high cost,” says Coffee. “I suspect they don’t believe they can repair their image or their safety without having control over the production and delivery of those fuselages.”
Even Aboulafia sees some grounds for hope for Boeing in the long term. “The good news is that with a clean sweep, they could still turn this thing around,” he says. “They still have some very good people, good technologies, and even good aircraft.”
I talked to a line mechanic at a major U.S. airline who has worked with the Max for several years and says that he agreed with that assessment. “Personally, I think the airplane is wonderful,” he told me. “I see this amazing new airplane that has so many features that are helpful for me. I don’t see a lot of these quality issues that are at the forefront in the news. It doesn’t ring true for me. I just think it’s great.”
But to unlock the value still inherent in its planes and its people, Boeing has to stop undermining itself. It needs to shed an ideology that worships short-term profit and relearn a devotion to long-term value. Only through such a radical realignment can it rebuild trust with the airlines, the regulators, and the public. “What gives Boeing a shot at redemption is that they don’t face a lot of competition, which gives them some breathing room to improve,” says David Primo, a professor of business administration at the University of Rochester.
Indeed, for all its troubles, the 737 Max order book is sold out for years to come. But that shouldn’t be grounds for complacency. “If at some point consumers lose faith in them to the point where airline bookings decline markedly,” Primo says, “then they are toast.”
This article originally ran on April 2, 2024 in New York magazine.