How Boeing Lost Its Way

Summary

The video script details the decline of Boeing, an American icon, due to two fatal 737 Max crashes within six months. It discusses the company's shift from engineering excellence to prioritizing shareholder value, leading to a flawed MCAS system and a culture corrupted by profit motives. The script also covers Boeing's history, the 787 Dreamliner's issues, and the impact of stock buybacks and outsourcing on safety and innovation. It raises questions about the new CEO's ability to restore Boeing's safety culture and engineering heritage.

Takeaways

• 📰 Two fatal crashes involving Boeing 737 Max planes led to a global grounding and scrutiny of the company's safety practices.
• 🔍 The Maneuvering Characteristics Augmentation System (MCAS) was implicated in the crashes, with bad sensor data triggering the system to push the planes into a stall.
• 🚫 Boeing faced criticism for allegedly concealing the full details of MCAS from pilots and regulators to avoid costly retraining requirements.
• 💼 The company's focus shifted towards meeting Wall Street's expectations, potentially at the expense of safety and quality.
• 🏢 Cultural changes within Boeing, influenced by mergers and a drive for profit, led to a prioritization of financial goals over engineering integrity.
• 🛫 The 737 Max was rushed to market to compete with Airbus's A320 Neo, which may have contributed to oversights in safety features.
• 📉 The aftermath of the crashes resulted in Boeing's first annual loss since 1997 and significant financial and reputational damage.
• 🔧 Efforts to fix the 737 Max included software updates and internal company changes aimed at improving transparency and safety.
• 👨‍💼 Leadership changes at Boeing, including the departure of CEO Dennis Muilenburg, signaled a shift towards addressing the company's challenges.
• 🌟 The script raises questions about whether Boeing can regain its status as a revered manufacturer and restore trust in its aircraft's safety.

Q & A

What was the primary cause of the Lion Air Boeing 737 crash mentioned in the script?

The script suggests that bad data from sensors or computers indicating a potential stall triggered the MCAS (Maneuvering Characteristics Augmentation System), which automatically pushed the plane down, leading to the crash.

How did Boeing respond to the discovery of issues with the MCAS system after the first crash?

Boeing and the FAA issued a warning about the MCAS system's potential malfunction within 24 hours of discovering the issue and provided instructions on how to counteract it.

What was the reaction of other countries to the Boeing 737 Max after the Ethiopian Airlines crash?

China was the first to ground the Boeing 737 Max, which initiated a ripple effect leading to the grounding of the aircraft worldwide.

What internal issues at Boeing were highlighted by the leaked employee emails?

The leaked emails revealed that employees had concerns about the 737 Max's flight simulator and the plane's automatic trimming, indicating deeper safety and design issues within the company.

How did Boeing's focus shift after the merger with McDonnell Douglas?

The merger led to a shift in Boeing's focus towards financial discipline and cost control, which was more aligned with McDonnell Douglas's approach, rather than Boeing's traditional emphasis on engineering and innovation.

What was Boeing's strategy with the 787 Dreamliner that differed from their past practices?

Boeing attempted a new system for designing the 787 Dreamliner by outsourcing much of the plane's design and manufacturing to its biggest suppliers, rather than doing everything in-house.

What financial practices did Boeing adopt to boost its returns to shareholders?

Boeing engaged in stock buybacks, using its capital to buy back its own stock from the marketplace, which increased the stock price and provided a return on investment for shareholders.

What was the competitive pressure that led to the development of the Boeing 737 Max?

Boeing developed the 737 Max in response to Airbus's A320 Neo, which offered increased fuel efficiency and required no lengthy training for pilots, posing a significant competitive threat.

What were the consequences of Boeing's decisions regarding the 737 Max for its financial performance?

Boeing faced an estimated 18.6 billion in total costs for the grounded 737 Max and reported its first annual loss since 1997, leading to a significant financial downturn.

What steps did Dave Calhoun take upon becoming Boeing's CEO to address the company's issues?

Dave Calhoun aimed to increase transparency, quickly addressed any embarrassing overhangs from the previous year, and released more damning documents to clear the air and regain trust.

What is the broader issue that the script suggests needs to change within Boeing's culture and practices?

The script implies that Boeing needs to shift its priority away from pleasing Wall Street and return to its engineering roots, focusing on creating top-flight planes and restoring its safety culture.

Outlines

00:00

🛩️ Boeing's 737 Max Crisis

The script discusses the tragic crashes of Lion Air and Ethiopian Airlines flights involving Boeing 737 Max planes, which led to the grounding of the aircraft. It highlights the subtle warning signs and decisions that may have been overlooked, and the subsequent scrutiny on Boeing's safety culture. The script also touches on the company's response to the crises, the SEC investigation into Boeing's disclosures, and the internal company emails that revealed a troubling attitude towards safety and quality.

05:02

🔍 The Cultural Shift at Boeing

This section delves into the historical context and cultural changes within Boeing that may have contributed to the 737 Max disasters. It outlines the company's evolution from an engineering-focused manufacturer to one influenced by financial pressures and cost-cutting measures. The narrative includes the impact of the merger with McDonnell Douglas, the shift in management priorities towards profit over engineering excellence, and the effects of these changes on Boeing's product development and employee morale.

10:02

🌐 The 787 Dreamliner and Outsourcing Strategy

The script examines Boeing's decision to outsource significant portions of the 787 Dreamliner's design and manufacturing, a departure from its traditional in-house approach. It details the challenges and delays encountered due to this strategy, including supplier issues and cost overruns. The narrative also reflects on the financial engineering practices, such as stock buybacks, that were prioritized over long-term investments in innovation and safety, leading to a shift in company culture and values.

15:04

🚀 The Rush to Market with the 737 Max

This part of the script focuses on the competitive pressures that led to the rushed development of the 737 Max, as Boeing sought to match Airbus's A320 Neo. It discusses the internal and external pressures to deliver a fuel-efficient aircraft without requiring additional pilot training, which may have influenced critical engineering decisions. The section also covers the revelations from internal emails that suggest a culture of concealment and a disregard for safety in the pursuit of market competitiveness.

20:06

🔄 Post-Crisis Changes and the Path Forward

The final section discusses the aftermath of the 737 Max crashes, including the ousting of CEO Dennis Muilenburg and the appointment of Dave Calhoun as the new CEO. It outlines the steps taken towards transparency and the challenges of restoring trust in Boeing's safety culture. The script raises questions about the company's future direction, the need for a shift away from Wall Street pressures, and the importance of returning to an engineering-centric focus to rebuild the company's reputation.

Keywords

💡Boeing 737 Max

The Boeing 737 Max is a series of narrow-body aircraft that has been central to the video's narrative due to its involvement in two major crashes. Defined as Boeing's best-selling plane, the 737 Max became a subject of scrutiny after the accidents, which led to the grounding of the aircraft worldwide. The script discusses how the Max was designed to handle similarly to previous 737 models through the use of a flight control software called MCAS, which was implicated in the crashes.

💡MCAS (Maneuvering Characteristics Augmentation System)

MCAS is a flight control software system that was designed to ensure the Boeing 737 Max handled like earlier 737 models despite having larger, more fuel-efficient engines. The system's malfunctioning, due to bad sensor data, is suspected to have contributed to the crashes, as it automatically pushed the planes into a stall. The script highlights the controversy around MCAS, including its concealment from pilots and the public, and the subsequent investigations into its design and implementation.

💡Grounding

Grounding refers to the action taken by aviation authorities to suspend the operation of a particular aircraft model after safety concerns have been identified. In the context of the video, the Boeing 737 Max was grounded worldwide following the two fatal crashes, which had significant economic and reputational impacts on Boeing. The script mentions the unprecedented nature of grounding such an important aircraft model for an extended period.

💡Wall Street

Wall Street is used in the video as a metaphor for financial markets and the pressures they exert on companies to meet profit expectations. The script suggests that Boeing's focus shifted towards pleasing Wall Street, which may have influenced decisions that compromised safety and engineering integrity. This includes cost-cutting measures, stock buybacks, and pressure to deliver planes quickly, potentially at the expense of thorough safety testing.

💡Stock Buybacks

Stock buybacks are a financial strategy where a company purchases its own shares from the market to increase the stock price and return value to shareholders. The video discusses how Boeing engaged in extensive stock buybacks, which were seen as a success in terms of increasing shareholder value but were criticized for diverting resources away from essential areas such as engineering and safety improvements.

💡Safety Culture

Safety culture refers to the values, attitudes, and practices that contribute to the safety of an organization's operations. The video script describes how Boeing's safety culture was allegedly corrupted, with a shift in focus from safety and engineering excellence to meeting financial targets and executive bonuses. This cultural change is suggested to have played a role in the development of the 737 Max and the subsequent crashes.

💡Regulators

Regulators in the context of the video are government agencies responsible for overseeing the aviation industry, such as the FAA (Federal Aviation Administration). The script discusses concerns about the relationship between Boeing and regulators, suggesting that Boeing may have misled or concealed information from them regarding the MCAS system, which raises questions about regulatory oversight and the certification process for new aircraft.

💡Engineering Innovation

Engineering innovation is the process of creating new solutions or improving existing ones through engineering and technological advancements. The video script contrasts Boeing's historical reputation for engineering innovation with the challenges it faced in recent years, particularly with the 737 Max. It suggests that the company's focus on financial performance may have overshadowed its commitment to engineering excellence.

💡Financial Performance

Financial performance refers to the economic results and health of a company, often measured by profits, revenue, and stock price. The video discusses Boeing's financial performance, particularly in relation to the 737 Max crisis, which led to significant costs, a tarnished reputation, and the first annual loss since 1997. It also touches on the company's past financial strategies, such as stock buybacks, which were criticized for potentially compromising safety and innovation.

💡Transparency

Transparency in the video is discussed as a key value that was lost and needs to be regained, particularly in terms of Boeing's communication with regulators, customers, and the public. The script mentions how transparency is crucial for rebuilding trust after the 737 Max crashes and the subsequent revelations about the company's practices and culture. The new CEO's commitment to being 'the most open book' is highlighted as a step towards restoring this trust.

💡Cultural Change

Cultural change refers to shifts in the values, beliefs, and behaviors within an organization. The video script describes a gradual cultural change at Boeing, from an engineering-focused company to one that prioritized financial performance and shareholder value. This change is suggested to have contributed to the decisions and practices that led to the 737 Max crashes, and the script discusses the challenges of reversing this cultural shift to restore the company's focus on safety and innovation.

Highlights

Lion Air Boeing 737 crashed into the sea with no expected survivors.

Ethiopian Airlines flight crashed shortly after takeoff, killing all 157 people on board.

Boeing's best-selling plane faces increased scrutiny after two deadly accidents.

Boeing commits to regaining trust and confidence from customers and the public.

Critics question if Boeing is straying from its original mission after two crashes in under six months.

The SEC investigates Boeing for proper disclosure of issues tied to the 737 Max grounding.

Internal messages reveal a culture where safety was compromised for meeting Wall Street expectations.

Boeing's 737 Max was grounded in March 2019 after two fatal crashes.

Investigation into the first crash revealed a software system MCAST that may have contributed to the accident.

Boeing and the FAA issued a warning about MCAST malfunctions and provided a countermeasure.

The second crash involved the same failure despite the supposed fix, raising further questions.

China's decision to ground the 737 Max initiated a global response, further grounding all planes.

Boeing's culture shift from engineering to financial performance is criticized.

Boeing's history as an American manufacturing icon and its contributions to aviation safety.

The 787 Dreamliner's development was plagued with delays and cost overruns due to outsourcing.

Boeing's financial engineering practices, including stock buybacks, are highlighted.

The 737 Max was developed in response to Airbus's A320 Neo to maintain market share.

Internal Boeing emails exposed concealment of MCAST system from regulators and the public.

Boeing's former CEO, Dennis Muilenburg, was forced out due to the 737 Max crisis.

New CEO Dave Calhoun aims for transparency and a cultural shift back to engineering excellence.

The need for Boeing to regain trust and focus on safety over shareholder returns is emphasized.

Transcripts

A Lion Air Boeing 737

crashed into the sea this morning.

Rescuers have located debris,

but they do not expect to find any survivors.

Some of the warning signs, in retrospect

were there all along.

Some of the decisions, or changes,

were so subtle that people might not even have realized

the importance, as they were taking place.

And Ethiopian Airlines flight

has crashed shortly after takeoff

from Addis Ababa, killing all 157 passengers and crew

thought to be on board.

Boeing's best-selling plane

is coming under increased scrutiny

after another deadly accident.

We'll do everything possible to earn and re-earn

that trust and confidence

from our customers and the flying public

in the weeks and months ahead.

Boeing is an American icon,

revered around the world for its engineering innovation.

But with two crashes in under six months,

critics have asked if Boeing is straying

from its original mission.

The SEC is investigating whether Boeing

properly disclosed issues tied to the grounding

of its 737 Max Airliners.

One message described the 737 Max

as a plane designed by clowns, overseen by monkeys.

The safety culture at Boeing was corrupted

under pressure from Wall Street,

and executives, and board members

who were lookin' more at their bonuses

than they were at the integrity of the organization.

Boeing was playing a game, to a certain extent.

It was a game of numbers.

They were meeting Wall Street's expectations,

but unfortunately, that came

at the expense of the end customer, and the flying public.

The failures that happened at Boeing

are really complicated, and involve subtle forces

and cultural changes that have been underway

for decades at the company.

This is a story of how

an American icon lost its way,

and whether or not it can find it again.

2019 was not the best year for Boeing.

Just five months apart, two Boeing 737 Max planes crashed,

and the planes have been grounded since March of 2019.

There's simply no precedent, in aviation,

for a plane this important to be grounded this long.

In the first crash, Lion air flight 610,

something was discovered with the technology on the plane.

Investigators believe the plane's sensors

or its computers, had bad data suggesting a potential stall.

There was this software system,

known as MCAST, that stands for

maneuvering characteristics augmentation system.

This obscure flight control software

was created so the Max handled the same way for pilots

as the previous generation of 737s.

Black box data indicated that

a bad sensor had triggered MCAST,

which automatically pushed the plane down.

Within probably 24 hours of them discovering this,

Boeing and the FAA put out a warning,

indicating that this could occur,

and then also telling them how to counteract it.

There is a fix, simply flipping a switch

should have turned the automatic system off.

The second crash, however, the same failure.

I've covered dozens and dozens of plane crashes,

and one of my mantras has always been

that crashes don't occur for the same cause.

China grounded the plane,

and it just set off a ripple effect.

Any plane currently in the air

will go to its destination, and thereafter be grounded.

Boeing is an incredible company,

and hopefully they'll very quickly come up with the answer.

What had been billed as

a relatively simple software fix proved not to be so simple.

Every time it seemed like Boeing was just around the corner,

then a new issue cropped up.

MCAST wasn't the only issue on this airplane,

you had issues where the computers

were getting overloaded with information,

now there's a new issue that

the computers don't start up properly,

when you want them to.

And then, the first batch of

really embarrassing employee emails leaked.

The FAA is demanding answers from Boeing

after they waited months to disclose to the agency

internal messages between test pilots

who were working in the 737 Max flight simulator.

"It's running rampant in the sim on me."

One pilot, referencing the flight simulator.

"The plane is trimming itself like crazy."

The emails came out two weeks before

Boeing's Chief Executive, Dennis Muilenburg,

was due to testify before Congress,

and it was a bipartisan shellacking.

346 people are dead

because what these chief pilots describe as egregious.

You're the CEO, the buck stops with you,

did you read this document,

and how did your team not put it in front of you,

run in with their hair on fire, sayin'

'We got a real problem here.'

Ultimately, we don't quite know

exactly what caused the MCAST design,

just like we don't know all the causes of the crash,

we don't quite know, but it's very clear

that the one big cultural change at Boeing

had been a disruption in the communication

between engineers and top management.

But this kind of cultural change

for a company as old as Boeing happens slowly,

over the course of not years, but decades.

Boeing's history goes back over a century,

and while its early sea planes weren't iconic,

by World War Two, their military aircraft were.

When news of the successful raid

by the Flying Fortresses comes in,

these are the people who get the biggest thrill,

the thousands of Boeing workers who build them.

Boeing's an American manufacturing icon.

It was churning out bombers

that were critical to the allied defense effort,

and gave us Rosie the Riveter.

Sort of a symbol for American can-do culture.

Employers find that women can do

many jobs as well as men, some jobs better.

They were the great survivors of the post-World War Two

shakedown in aircraft design,

and the most successful new entrant

in the new jetliner market of the late 1950s.

The company gambled everything on a prototype

of what became its first jetliner, the Boeing 707.

Nearing completion

in the Boeing plant at Seattle,

America's first jet transport

is a unit of glistening beauty.

And that was followed by the 727,

and built this revolutionary behemoth, the 747,

you probably know it for the hump behind the nose,

and at the same time, they came up with what became

Boeing's greatest commercial success,

and that was the 737.

The 737 wasn't immediately successful.

It took several design and engineering iterations

to turn it into the plane that we see today.

It became a work horse for airlines like Southwest,

that fly primarily shorter routes,

and really brought travel to every day people.

And even as more and more

travelers flew on these aircraft,

the aviation safety record during this time

made flying one of the statistically safest ways to travel.

We've been the technology leader in aviation in the world.

Boeing was a magnificent company,

who made, in my opinion, the best airplanes in the world,

until some of these recent cultural changes,

which all came from pressure to Wall Street,

and bad management.

You know, over the years,

Boeing was this tremendously important

and innovative company,

but it wasn't necessarily a great stock.

In 1997, Boeing merged with McDonnell Douglas,

another aerospace and defense giant.

Boeing said

'let's do a merger, we'll continue with the innovation,

'and maybe McDonnell Douglas will help us

'in terms of our structure

'and telling our story to Wall Street.'

Almost immediately you began to hear

kind of a bitter joke coming out of Seattle,

that McDonnell Douglas had used

Boeing's money to buy Boeing,

and certainly, in terms of management structure,

it began to look that way.

Harry Stonecipher, a former GE executive

and McDonnell Douglas CEO,

becomes COO of the combined companies.

And more and more of the company's style and culture

began to be more of a McDonnell Douglas sort of picture.

He almost immediately signaled

there was a new sheriff in town,

and he was gonna bring financial disciple to Boeing.

Stonecipher would eventually become CEO,

and continued his emphasis on

controlling costs within the company.

A culture that engineers within the company

would begin to feel.

We had breakfast with the president of the--

This is Stan Sorscher,

he was a physicist at Boeing for over 20 years,

and felt these changes firsthand.

And he said he was so proud of cutting his

capital expenditure budgets by 60%.

Capital expenditures, for us,

were improvements in the factory, in our shop floor,

in processes and materials and things like that.

By 2000, there was a great deal of dissatisfaction

with the way our

problem solving culture was being displaced,

and we thought it was just much more difficult

for us to do our job.

And that's when a lot of people trace

this sort of fundamental shift in thinking

in terms of what you prioritize,

whether that be profits, or whether that be engineering.

Further evidence of

a move away from engineering prowess

and innovation, to profit, was Boeing's decision

to move company headquarters to Chicago,

when Boeing's jet manufacturing

and airplane designers were in Seattle.

Probably the biggest motivation was

to send a message to the Street

that this was a company that was not going to make

investment decisions on the basis of legacy,

or heritage, or anything like that,

but rather, purely make investment decisions

on the basis of returns,

and by moving to a place where there were no

legacy loyalties, no heritage production facilities,

they were sending that message.

And it also started to shape how

Boeing viewed its own internal investments

in things like airplane programs,

tremendously important as the company

started planning for what became the 787 Dreamliner.

Ladies and gentlemen,

your 787 Dreamliner.

For this event, it was held on July 8, 2007, so 787,

Tom Brokaw was there,

I was there just sitting in the audience,

just trying to soak it all in.

I think they raised the factory door,

and there was the plane.

But at the time, it was just, it was an empty shell.

We didn't know it, but it was all for appearances.

For the 787, Boeing attempted

a new system for designing the aircraft.

Instead of doing everything in house,

it would outsource much of the plane's

design and manufacturing to its biggest suppliers.

It was gonna be about outsourcing,

outsourcing to the places where

we could produce things more cheaply,

as opposed to the finest, best,

safest airplanes in the world,

which is what Boeing made for decades.

This works for running shoes, ladies garments,

cell phones, hard drives, integrated circuits,

it works for everybody, it'll work for you, and I thought

'No, it won't.'

Boeing had never done a plane using the system before,

this was very different from

Boeing controlling the processes itself,

and it did not go well.

We launched the 787, the worst I could think of

was that we'd be three months late,

which is a shooting offense at Boeing.

It wasn't three months late, it was three years late,

it wasn't 5 billion dollars over budget,

it was 30 or 40 or 50 billion dollars over budget.

Grounded the fleet for three months.

The suppliers were just in over their heads,

most of them, we had years of issues,

there was an engine explosion at one point,

there was an electrical fire on flight test aircraft.

And I thought

'Okay, this experiment is done.'

This didn't work.

And the executive said

'The business model is fine, we just didn't execute it.'

Every new airplane has growing pains,

especially those that kind of

push the edge of the envelope in technology.

Eventually, Boeing would fix

many of the 787's issues,

and the Dreamliner slowly started to bring in big returns,

and with a profitable plane,

Boeing looked at other measures

to boost its returns to shareholders.

There's different ways of getting your profit up,

so one is just that you make the best product imaginable,

and everybody wants to buy it,

and so your sales go up,

and you make more money on that plane.

The other is that you do financial engineering.

One common technique

for companies to boost their stock price

is a practice known as stock buybacks,

where a company uses its capital

to buy back its own stock from the marketplace.

And the math is really simple to understand,

if you have fewer shares trading, absent all else,

the price goes up, the shares worth more,

they get a nice return on their investment.

Boeing's stock was on the rise,

and by 2015, new CEO Dennis Muilenburg

would ramp the program up even more.

From 2014 to 2019, Boeing would re-purchase

about 38 billion of its own shares.

They went from a relatively normal percentage,

something like 30%, to over 90%

of cash being returned to investors.

And the contrast to pensions being cut

was really shocking,

and sort of a bitter moment for some people.

Buying back shares, and paying huge dividends,

while you're laying off senior engineers

to hire cheap labor in India, that's a sickness.

But while long time employees at Boeing

may have been frustrated, at the time,

this was viewed as a huge success.

In less than a decade, the company's stock price tripled.

Wall Street just loved this company, its stock shot up.

I see a new Boeing, I just see just straight line growth.

And Muilenburg was getting the rockstar treatment.

You're obviously a very accomplished executive,

you've done a great job for Boeing and its shareholders,

I wish I had bought the stock when you took over.

It's still a good deal. Still a good deal.

Around the same time all of this was happening,

Boeing was selling record numbers of its newest plane,

the 737 Max.

The 737 Max was born out of a competition with Airbus.

The aviation industry is

a duopoly between Boeing and Airbus,

with the two giants controlling

almost all of the jetliner market.

For both companies, it's beating commercial heart

is an enormously profitable family of single-aisle jets,

the Boeing 737, and Airbus A320.

While Boeing had planned to build an all-new jet

to replace the 737,

it was sidetracked by the Dreamliner debacle.

Airbus shocked everyone by announcing a simple upgrade

to its A320 family of planes,

in what became known as the A320 Neo.

Since the new planes had engines

that increased fuel efficiency

and required no lengthy training for pilots to fly,

it became a huge cost saver for airlines,

and a big hit for Airbus.

So Boeing had to do the same thing,

if Boeing didn't act, or waited too long,

they could lose significant market share.

American Airlines called Boeing and said

'We're gonna buy 400 planes,

'and they will all be Airbus

'unless you can match their fuel economy,

'and the fact that no pilot training is required,

'it's identical to their other Airbus models.'

And the Boeing CEO said

'No no no no, we'll match that,

'we want half that order.'

With the Max, Boeing was also trying to shake

the image of incompetence that had followed

the 787 debacle,

so there was a lot of pressure there,

to show that the,

'Hey, look, we can design planes,

'and we can meet deadlines with the Max.'

And to their credit, with the Max, they did.

Unfortunately for Boeing,

some of the critical engineering decisions that were made

came back to haunt them.

In late 2015,

Boeing's first 737 Max takes shape, right on schedule.

Flight testing begins in early 2016,

and in 2017, the Max enters the commercial market,

months early, and it is, in fact,

that fastest selling aircraft in company history.

You saw huge orders coming for both companies,

airlines seemed generally pleased with it,

and to be honest, they still are.

Even after the crisis, some of the biggest customers say

'You know what, this is a good airplane.'

But internal emails,

made public from investigators,

revealed that Boeing had gone to extraordinary measures

to get the Max into the air,

including some employees lying to the FAA.

The Chief Technical Pilot on the plane

described how he used Jedi mind tricks on regulators.

In one exchange, a Boeing employee says

"I still haven't been forgiven by God

"for the covering up I did last year."

The most disturbing thing we've found is,

there was a 2013 meeting,

and they conspired to conceal the system.

MCAST was created

so that the larger, more fuel-efficient engines on the Max

wouldn't make the plane handle any differently

than the previous generation of 737s.

At that meeting, they said

'Well wait a minute, wait a minute,

'if we tell anybody about this system,

'then they might require that

'pilots have additional training,

'and our bosses, from the top, in Boeing,

'and our contracts with the airlines say

'no additional training required,

'so we have to conceal this,

'no one outside Boeing can know

'that this safety-critical system exists.'

Another week, another shakeup at Boeing.

The company's former CEO, Dennis Muilenburg,

forced out after 35 years with the company,

and four years as CEO.

After firing Muilenburg,

Boeing would close their books

on one of the worst financial performances in history,

estimating 18.6 billion in total costs

for the grounded 737 Max,

and it would report its first annual loss since 1997.

Dave Calhoun, a member of Boeing's board,

was tapped as the next CEO,

and immediately starts to make

sweeping changes within the company.

The first couple of weeks on the job,

he moved very quickly to get any embarrassing overhang

from the last year, just clean out the cobwebs,

get all the bad news out there right now.

Trying to be more transparent,

Calhoun dumped even more damning documents,

and holds a conference call with reporters.

When boards reach a conclusion to change a CEO,

they expect change.

And they recognize the arguments

that have been presented from the outside world as legit,

and they're gonna experience

a different style of leadership,

a different way of doin' things.

But it's unclear whether or not Calhoun

will shift Boeing's priority away from pleasing Wall Street,

and return the company to its engineering roots

and heritage of creating top flight planes.

We believe this airplane's safer

than the safest airplane flying today.

Every next airplane has to be that way,

it has to be that way for Boeing,

it has to be that way for our competitors.

He's been on the board since mid-2009,

and also one of the, well,

almost all of the board members

that do not have an engineering degrees,

from a purely accounting background,

private equity, hedge funds, that kind of thing.

This is a bit strange, because on one level

a company really needs to change.

On the other hand, other than a shareholder emergency,

I'm not really sure

what would be the instigator of that change.

We are gonna have the most open book

the world's ever seen, on this subject.

Transparency is what we lost for a moment,

and it's something we have to regain,

because it speaks to the trust that the world has in us.

I am very hopeful that he can restore

the safety culture there,

so that they can focus on making safe airplanes.

The old days of simply harvesting cash

from legacy programs,

and returning it to shareholders, needs to stop,

and the idea of engineers being some sort of a commodity

that you can rely upon to come through for you,

that needs to stop, too.

The bigger issue of setting the tone,

changing culture, which, these things happen gradually,

bit by bit, he's saying all the right things right now,

about correcting course,

but we won't know for awhile as to whether

Boeing's on the right course.