To De-risk or Not De-risk, That Is the Question at Boeing

And it’s not even clear at the moment what ‘maximizing de-risk’ is, except it sounds like corporate-speak for stopping the huge losses that threaten to burn down the barn at Boeing. Somewhere along the line, the plane maker lost interest in building its own planes and contracted out such messy work.

Is that a little harsh?

Probably not.

Boeing made a string of self-serving decisions over the past couple of decades that would have raised the eyebrows of a newbie accounting student. First they moved their headquarters from Seattle, where they were close to manufacturing, to Chicago, where they were close to nothing but management’s thirst for brighter lights and a lake instead of an ocean to overlook. Boeing’s strong suit has always been engineering and research, so Chicago broke that bond with executives losing their ability to walk the floor.

Not satisfied with that move, the gods that ran the company built a manufacturing facility in South Carolina to shed themselves of the unions in Everett, Washington. Then they picked up sticks to move the headquarters once again, this time to Arlington, Virginia to snuggle closer to their government contracts as their commercial reputation disappeared down the drain.

The 737 Max, the chicken that came home to roost

More than five years after the crashes of two 737 Max jets killed 346 people, families who lost loved ones are still pushing the U.S. Justice Department to hold Boeing accountable. Memo to Boeing’s CEO: ‘deaths are not the only cost of planes falling out of the sky.’ Best take the blame, pay the victims, ground the fleet and determine what the hell went wrong.

That might have happened in the old days when Boeing was engineering driven, but a revolving door of CEOs chose to pass the buck, place blame elsewhere and tough it out.

Gems from News Releases/Statements by Boeing

March 25^th CEO letter to employees: “As you all know, the Alaska Airlines Flight 1282 accident was a watershed moment for Boeing. We must continue to respond to this accident with humility and complete transparency. We also must inculcate a total commitment to safety and quality at every level of our company. The eyes of the world are on us, and I know we will come through this moment a better company, building on all the learnings we accumulated as we worked together to rebuild Boeing over the last number of years.”

Pardon me for thinking two 737 Max crashes was watershed enough and what was ‘learned in the last number of years’ was how to destroy an Icon.

Boeing Takes $222 Million Quarterly Loss on T-7, KC-46

That boosts their loss on these government contracts to a cumulative $8 billion (eight thousand million dollars, if ‘billion’ makes your head swim, as it does mine).

Which brings us to the metaphoric ‘de-risking.’ As near as I can tell, to de-risk is to stop the bleeding before the entire company, both government and commercial, disappears in a pool of blood on the corporate floor. But de-risking sounds better and Boeing is into sound-bites, having lost a taste for plain language.

In other current Boeing news as of today

Revenue from commercial airplanes - which has been hampered by aircraft groundings amid safety concerns - sank 30.6%, as deliveries dropped 36.2% to 83 planes, while 737 deliveries tanked 40.7 and 767 deliveries inched up to 3 from 1 and 787 deliveries rose to 13 from 11.

Quite a bit of de-risking required there it would seem.

"During the quarter, the 737 program slowed production below 38 per month to incorporate improvements to its quality management system and reduce traveled work within its factory and supply chain," the company said. "In addition, Commercial Airplanes is implementing a comprehensive action plan to address feedback from the FAA audit of 737 production."

The FAA is reportedly investigating whistleblower claims alleging flaws in Boeing's 787 Dreamliner.

Those opportunities to de-risk seem to be on an up rather than a downswing, but current CEO Dave Calhoun is set to retire at the end of the year and take home a giant going-away present: a $45 million mix of stock awards and options that vest over time.

The rich get rich and stockholders hold the bag.

One can only wonder when they decide to de-risk.