Guest columnist
A blueprint for Boeing

By Douglas Gantenbein
Special to The Times

ILLUSTRATION BY MARIAN WACHTER / THE SEATTLE TIMES

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It's a relief to see recent Boeing headlines that aren't only bad news. The 7E7 seems to be off to a promising start, and the Navy's decision last week to use Boeing's venerable 737 as a naval patrol craft promises employment for hundreds.

Maybe this is part of a long-term trend. Maybe not. Because clearly, Boeing has been in slow decline for years. Sure, people in Seattle have sensed that something was amiss, but elsewhere this phenomenon seems to have gone on largely unnoticed. Which is absurd, because few companies are as important to the country as Boeing.

People in many countries know the United States for three things: Big Macs, Coca-Cola... and 747s. Two speak to consumer and pop culture. But which says the most about America's technological prowess, ingenuity and will to lead? Moreover, at a time when the United States ran a record trade deficit of $489 billion in 2003, Boeing has been one of the country's most reliable export machines, accounting for close to $30 billion a year in overseas sales.

But Boeing has been in deep trouble with its finances, its ethics and its customers. Airbus — the progeny of sclerotic European governments — has been eating the company's lunch in the commercial aircraft realm. Airbus is well along toward the launch of its giant A380 jetliner, which easily outstrips the famous (and famously profitable) 747 for carrying capacity. The A380 is proving to be catnip to executives at airlines such as Singapore and Emirates who want the newest, biggest and best jet to carry their fleet colors.

Even before Sept. 11, 2001, which pancaked the company's commercial jet division, Boeing clearly had been drifting, hanging new chrome onto 30-year-old 737s and hoping to fall into money with Pentagon contacts acquired through the acquisition of McDonnell Douglas. The latter, meanwhile, landed Boeing in an ethical swamp.

First, the January 2003 disclosure that company executives had stolen a missile-launch rival's pricing proposals. Then came the news that Mike Sears, Boeing's chief financial officer, had been dangling a job in front of a Pentagon employee who at the time had influence over a Boeing bid to sell 100 767 jetliners to the military as refueling tankers.

	Douglas Gantenbein

That cost Sears his job, and contributed enormously to the departure of Phil Condit, the chief executive officer whose seven-year tenure had been marked by one boneheaded blunder after another, from botched production schedules to dismissing Airbus as a serious threat. Now, the deal to sell the 767 tankers probably is a dead duck.

Still, the momentum of increased military spending and a recovering domestic economy, along with growth in the Asian airline market, give Boeing a window of opportunity to get its house in order before new competitors come on line. The launch of the 7E7 — and early orders for the super-efficient "Dreamliner" — is a step in the right direction. Boeing should not squander the next few years, as it squandered the late 1990s while it grappled with delivery headaches and ignored the rise of Airbus.

Here are some possible ways Boeing can ensure a strong future for itself.

Hang onto knowledge

Outsourcing is inevitable, but could blow up on Boeing. Take the 7E7. As with all big commercial aircraft launches, the 7E7 represents a bet — in this case, that airlines want smaller jets so they can offer customers more point-to-point flights, rather than hub-and-spoke flight patterns dictated by bigger aircraft such as the 747 or Airbus A380 (which is Airbus' own bet).

But the 7E7 represents another bet — that Boeing can maintain its leadership role in commercial aviation without doing much hands-on work. In fact, once the 7E7 blueprints leave engineers' hands, Boeing will do next to nothing until major components of the jet arrive at the assembly plant in Everett. Then, a workforce of a few hundred will bolt the big bits together and send the jet on its way.

By pushing the manufacture of major fuselage and wing components onto subcontractors, Boeing spreads the financial risk of launching the $7 billion 7E7. But the approach poses hazards for the company. Company officials insist that Boeing's "magic" is in conceiving an aircraft such as the 7E7 and overseeing its design, not in making its wings and other parts. In the case of the 7E7, Boeing is allowing subcontractors such as Mitsubishi to make the most important parts of the jet — the complex carbon-fiber wings. As a result, Boeing risks losing touch with much of the knowledge that really gets its jets into the air. Outsourcing also risks the company's political capital when, as was shown with Washington state's effort to land the 7E7 plant, that counts for plenty.

It's too late to suggest that Boeing keep more work. But company officials need to be aware of the danger in giving away too much critical work. One possible solution: Be more aggressive in launching new aircraft. Thirteen years passed between the launch of the 777 and the decision to build the 7E7. It's true the world doesn't need a new commercial jet every two or three years. It's also true that Boeing's refusal to build a new jet for more than a decade led to ennui at the company, while giving Airbus an open door. Today, Boeing engineers readily admit that the mere act of designing the 7E7 gave them insights into both engineering and customers that they otherwise might never have had.

Don't overdose

on government contracts

The acquisition of McDonnell Douglas injected the company with a streak of laziness born of the government procurement milieu. Certainly, that mindset is evident in the 767 caper, where a jet that couldn't find buyers in the commercial market was repositioned as a military craft and packaged in a wildly expensive lease deal that no stockholder-owned airline in its right mind would accept. Moreover, the ethics scandal surrounding the 767 now potentially taints any new effort to secure military contracts.

Another cautionary tale from the military world came in late February when the Army canceled the Comanche helicopter, a craft in which Boeing had an enormous stake and had hoped to share in at least $38 billion in sales. That deal also showed how the military world warps a company. It likely had been clear for years to Boeing engineers that the Comanche — designed to counter Warsaw Pact armies — offered few advantages over new-generation remote-controlled aircraft. But still the project ground on, eating up $8 billion and producing only two prototypes — in 20 years!

The moral: There certainly is good money to be made in military contracts — as with the new 737/Multi-Mission Maritime Aircraft program, worth an initial $3.9 billion — and Boeing has plenty of solid products to offer, such as the F/A-18 jet and the V-22 Osprey. But military spending is just as cyclical as commercial-airline purchases, and comes with the threat that the company becomes complacent due to what looks like easy money.

Keep your executives grounded

Three of what are commonly seen as the 10 most influential aircraft in aviation history all came from Boeing: The swept-wing B-47 bomber, which first flew in 1947 and remains the model for every commercial jetliner in the skies; the 707 jet, which proved that speed had value and erased more-efficient but slower prop-driven aircraft from the skies; and the 747, which before the Internet had helped knit together the planet.

That legacy is important, but it seems to have been forgotten. Why else did the company move its headquarters to Chicago in 2001? When a company makes tangible things, as Boeing does, what in the world is wrong with giving its executives the ability to walk out onto a production line to touch the reason for the company's existence?

A few Boeing executives seem to understand the power of the company's legacy. Walt Gillette, for instance — the long-time Boeing engineer who is spearheading development of the 7E7 — has lined the walls of his team's offices with huge photos of Boeing aircraft. He understands that it's inspiring to know you're part of a legacy. I'd suggest that the corporate office learn the same lesson. So ditch Chicago and move closer to a Boeing manufacturing facility — any Boeing manufacturing facility. Maybe even back to Seattle.

Inspire people

Boeing once was the dot-com/biotech/telecom industry all rolled into one. Now it's almost a backwater for the go-getters of today. Moreover, its risk-averse culture under Condit helped cost it market share. But designing and building aircraft are inherently perilous. If Boeing is to generate excitement among customers, employees and even stockholders, it needs to roll the dice on occasion.

One possibility: Within a few years, move ahead with plans for the Sonic Cruiser, a jet the company shelved in the wake of 9-11. It was sleek and sexy, and those in the flying public who saw a model loved it. If its design can pencil out with airlines' cost needs — and admittedly the math over the value of speed is complicated — it would combine with the 7E7 and still-fresh 777 to give Boeing a formidable trio of aircraft. Barring that, Boeing could move ahead with another design it recently toyed with: the "blended wing," a sort of modified flying wing that offers great efficiency and cargo capacity. Boeing looked hard at this concept four years ago, and it was much praised by both engineers and customers. But Boeing didn't move ahead with it. The design had drawbacks — few passengers would have windows, for instance — but it seems as if any hurdles could be overcome.

Moving ahead with either aircraft would show that Boeing is a company that's still interested in being a leader. Boeing's own focus groups have shown that the flying public loved the Sonic Cruiser because it simply looked like something that would fly, a response that seemed to surprise Boeing officials and that they since have scrambled to incorporate into the 7E7, through such goodies as over-sized windows and ethereal ceiling lighting that suggests the open sky.

The lesson: Ideas matter, and often lead to surprising results. One of which might be encouraging people to fly with more frequency than they have in the past few years, which would benefit everyone in the airline industry — and Boeing.

Douglas Gantenbein is the Seattle correspondent for The Economist. This essay is adapted from a longer article appearing in the May/June issue of Foreign Policy magazine.