“Experts say that the root of Boeing’s present troubles is a longstanding culture issue. Over the years, the company’s top decision-makers went from detail-oriented engineers to slick suits with MBAs.
“You’ve got a management team that doesn’t seem terribly concerned with their core business in building aircraft,” says Aboulafia.
There’s one name that keeps popping up when people talk about Boeing’s cultural downslide: Jack Welch, the legendary — and infamous — executive who helmed the conglomerate General Electric from 1981 to 2001. Welch was known for ushering in a sea change of “lean” management that ruthlessly made cuts in both manufacturing processes and the workforce, all in the service of pumping up stock prices. His leadership style included firing the worst-performing 10 percent of GE staff every year; he reportedly laid off over 250,000 people during his tenure. He inspired an entire generation of business leaders, and this Welchian GE philosophy was eventually brought over to Boeing.
Historically, Boeing was renowned for its boundary-pushing innovations in aviation, which helped put commercial air travel on the map. But in 1997, Boeing bought a rival plane maker called McDonnell Douglas; instead of Boeing culture influencing McDonnell, however, the opposite happened. The engineer-focused company got a heavy dose of the cutthroat GE ethos as McDonnell’s CEO — a Welch disciple — became the president and chief operating officer, and later CEO, of the merged company. Other Boeing leaders, including James McNerney and current CEO David Calhoun, have also had stints at GE.
In Flying Blind: The 737 MAX Tragedy and the Fall of Boeing, journalist Peter Robison describes an environment where safety concerns were concealed or downplayed, in part to be faster and cheaper than Airbus, the former underdog that overtook Boeing as the biggest commercial aircraft manufacturer in the world in 2019.
The company began relying more on subcontractors; It had its own fuselage plant until 2005, when it sold it to a private equity firm — that entity became Spirit AeroSystems. Today, Boeing only completes the final assembly of a plane after it sources parts from thousands of suppliers. Outsourcing is cheaper — but using so many suppliers reduces the fine-tune control and oversight a company has over the parts that make up their product, according to aviation experts.
While lean management was the name of the game for Boeing’s rank-and-file, in the past decade the company’s executives spent over $43 billion buying back their own stocks and paying out nearly $22 billion in profits to shareholders. By buying back shares and removing them from the public market, the individual value of a share automatically rises even though nothing about the company’s operations has changed.
Those billions represent cash that could have been reinvested in developing the next line of Boeing planes or hiring more quality inspectors. Former Boeing CEO Dennis Muilenburg, who led the company during the deadly Max crashes, reportedly received an exit package of $62 million.
After the merger, there was also “an open labor war between the unions and the management,” says Hamilton.
In 2000, feeling demoralized and disrespected by the leadership shift, over 22,000 Boeing engineers went on strike. One of the chants heard during the strike: “No nerds, no birds.” As in, if Boeing doesn’t let engineers do their jobs properly, with adequate pay, there would be no airplanes. The engineers got the extra money they asked for, but not the ideological win. Boeing bled about $750 million due to the strike, according to Robison, and kept on with its cost-cutting drive while Boeing’s workers have kept sounding the alarm with every mass layoff.
In 2019, the company said it could cut as many as 900 inspectors — the people who make sure the plane is ready to fly. In 2020, it laid off about 16,000 people. Some were offered buyouts, a move that the company might have regretted when it had to go on a hiring spree after the pandemic, and after the 737 Max was cleared to fly again. “So you have a lot of inexperienced workers who now have their hands on the airplane rather than the mature, highly experienced workers who were laid off or took early retirement,” says Hamilton.
Despite the regular rounds of mass layoffs, last summer, Boeing’s CEO Dave Calhoun said he would love to ramp up the production of 737 planes from 50 to 60 per month, which would further elevate the pace of work for Boeing workers who already felt pressured to meet unrealistic quotas. A 2019 New York Times report interviewed over a dozen people about their experience working at Boeing, who said they saw many safety hazards during assembly — like debris left on planes — and claimed that they were fired for raising potential problems.
Boeing’s treatment of its 10,000-plus subcontractors has come under scrutiny, too, as the company has demanded ever-lower prices. “They treated their suppliers the way they treated their workers — as a disposable commodity,” says Aboulafia.
Boeing’s strategy to continually shrink costs doesn’t appear to have paid off. The company hasn’t turned an annual profit in the past five years. Airbus is selling more planes, and recent headlines about Boeing are putting a halo over Airbus’s comparative reputation. In January alone, Boeing lost $35 billion in market value as its stock price fell.”
https://www.vox.com/money/24052245/boeing-corporate-culture-737-airplane-safety-door-plug
“An avian flu outbreak devastated the poultry industry throughout 2022. By the end of the year, according to the U.S. Department of Agriculture (USDA), there were 43 million fewer egg-laying hens than in February 2022. Egg inventories fell 29 percent from January to December. When demand outstrips supply, prices go up.
A similar outbreak in late 2014 affected more than 50 million birds. According to Fed data, egg prices rose from $1.96 a dozen in May 2015 to $2.96 in September 2015 before falling for more than a year afterward.
The 2022 outbreak, by contrast, persisted into 2023. At the same time, general inflation was unusually high: 6.5 percent in 2022, compared to 0.7 percent in 2015. “Like consumers,” the American Feed Industry Association noted in January 2023, “feed manufacturers are feeling the effects of inflation on the economy and are paying increased rates for energy, shipping, labor and ingredients.” So even as the number of hens dropped, the cost of feeding them rose.
The good news is that egg prices began falling after January’s high. Average egg prices fell from $4.82 a dozen in January to $4.21 in February and $3.45 in March. The USDA predicted that, barring an avian flu resurgence, prices would continue to fall throughout the year.”
“Food companies say their price increases merely reflect how much their costs have gone up due to “inflationary pressures,” like higher labor costs, transportation delays, and capacity issues, or the higher price of grains and animal feed. Yet inflation in 2022 outpaced the rise in wages in most industries, and the prices of many agricultural commodities have come down.
The eyebrow-raising spikes at the grocery store can only partly be blamed on manufacturers’ higher costs. The inflation narrative offers the perfect jumping-off point for companies to raise prices, and major food manufacturers are taking advantage of the moment to boost their profits.
The proof? Look at just how rich companies have gotten since the start of the pandemic.”
…
““Corporate profits have hit their highest level ever, and corporate profit margins — how much they’re making on each unit that they’re selling — have hit the highest level in 70 years,” said Chris Becker, senior economist at the Groundwork Collaborative, a progressive economic advocacy organization.”
,,,
“Why are corporate profits so high at a time when regular people feel increasingly strapped? Because a small number of players have gobbled up most of the food chain. Cargill and just three other agribusiness companies control about 70 percent of the world’s agriculture market, according to Oxfam. Brands like PepsiCo, Nestle, Mondelez, and Conagra produce and market the vast majority of the offerings found in US grocery stores.
“We look at the supermarket shelf, and we might be buying tea, cereal, whatever it might be, and we think, ‘Oh, I’ve got a real offer of choice here on the product I want to buy,’” Ahmed, of Oxfam, told Vox. “Frankly, it’s an illusion of choice, because so many of those products are actually owned by the same company.”
Grocery retailers, too, have become increasingly consolidated.”
…
“Evan Wasner, a University of Massachusetts-Amherst economist who authored a recent paper on companies’ price-setting power with economist Isabella Weber, said that companies tend to raise prices when they think they won’t see a huge backlash — like when everyone else is hiking prices, too. “In a sense, economy-wide cost increases act as a kind of coordinating mechanism which allows firms competing with one another for market share to safely raise prices together,” said Wasner.”
…
“Market dominance makes the supply chain more brittle, too, because it means there are just a few vulnerable points for failure. Last year’s baby formula shortage is an example of how dangerous the results can be. Just two US companies control about 80 percent of the market, which meant that when one manufacturing plant shut down, the entire nation struggled to buy baby formula.
Becker blames the vulnerable state of supply chains in part on market deregulation over the last several decades, which has enabled companies to cut corners. In the 1980s, the growing popularity of “just-in-time” inventory systems, where companies order just the amount of inventory needed right now without a buffer, allowed companies to become more efficient. That has meant lower prices for consumers, usually, and higher profits for companies — until a crisis hits, and suddenly there are shortages and supply bottlenecks.”
…
“Transcripts of corporations’ recent earnings calls illuminate that they’re well aware of their power right now. Groundwork has been collecting highlights from corporate earnings calls on its website. “They’re saying a lot about cost increases and supply shocks, but they’re also saying it doesn’t matter,” said Becker. “We do have these higher costs that we’re paying, but we have so much pricing power, we’re so capable of passing all these prices on to consumers, that it doesn’t matter.””
…
“Becker echoed that the current economic orthodoxy on how to fix inflation — to rein in Americans’ ability to spend money by attempting to raise unemployment levels — should be questioned.
“I would say that we have this really toxic narrative out there that the only way we can get inflation under control is to throw a bunch of people out of work,” said Becker. “Larry Summers recently claimed that we would need 10 percent unemployment [for one year], which is about 11 million jobs lost, to get inflation under control.”
“We’re going to try to solve a cost-of-living crisis by making people poor or losing their jobs? I think that’s crazy,” he continued.
What will break the cycle of not just inflation, but of consumers having to pay ever-higher prices for essential goods while the world’s food producers become richer? Experts offered several potential solutions. One is stronger antitrust laws and improved enforcement of preventing and breaking up monopolies. Anti-price gouging laws are another tool in the arsenal. Oxfam, for one, has been a vocal advocate of a windfall profits tax on food corporations. “It’s a tax on those corporations which are raising prices substantially in excess of costs,” Ahmed explained. The fact that it would raise tax revenue is great. But “fundamentally, it reins in companies’ monopoly power and disincentives corporate greed.” Other countries already have similar measures in place. Spain expects to raise about $6.39 billion from its windfall tax on energy companies and banks.
“Corporations are really making profits on the backs of consumers and households,” said Becker. “Let’s tax those windfall profits — and let’s do something with that money.
“There’s nothing that really stops corporations right now from just doing whatever they want.””
https://www.politico.com/news/2023/02/22/newsoms-proposal-to-cap-oil-profits-in-california-meets-skepticism-in-first-public-hearing-00084101
https://www.vox.com/energy-and-environment/2023/2/8/23587955/exxon-chevron-bp-oil-profits-climate