Comment by Tagbert
5 years ago
Yes, but Boeing (aka McDonald-Douglas) really wants to get rid of the unions in the Seattle area plants.
Prior to the 1997 purchase of MD by Boeing, Boeing’s culture was very engineering focused. When MD came on, a large chunk of MD management were retained and soon after Boeing moved it’s official headquarters from Seattle to Chicago (where the MD headquarters were). Since then, a lot of the business decisions seem to have been more driven by management than engineering.
Pre-merger, MDD HQ was St. Louis, Missouri. The public theory behind the move was that the overall org needed a more central HQ (BCAG was primarily in Seattle, but there was still a significant presence in Texas and Wichita plus the legacy Rockwell sites).
The cynical explanations are/were that Boeing had to call Washington states’s bluff for negotiating leverage (The MDD commercial stuff in California was a dead end). My pet theory is that more states == more Congressional representation.
When I was working at Boeing, my boss who was around during those times gave this anecdote.
Apparently in return for being allowed to build the 777, the city of Everett (maybe it was Renton or the state of Washington) demanded large amounts of public works/benefits. Boeing was not pleased with this but in order to make the 777 happen they did all the stuff required. However, they vowed to never have to deal with such nonsense again. To make that happen, they moved their HQ (it was eventually decided to be Chicago) and began to consider relocating their plants to another state. Eventually, that became South Carolina. Or so the anecdote goes.
I don't think my boss was very high up back then, so I can't speak to how factual it is, but it sounds plausible.
>"...Boeing (aka McDonald-Douglas)..."
Boeing subsumed McDonnell Douglas, not a McDonald's franchise, and did so under pressure from members of the Clinton administration.
From the [archived] contemporaneous articles I've read it was Boeing's CEO and Chairman, Condit, who pushed heavily for the merger. Condit engineered the exit of Boeing's CFO, a skeptic, as part of an unfolding strategy to replace much of Boeing's original executive staff with those from McDonnell Douglas.[1] And he had the board's support as the Boeing board was enamored of McDonnell Douglas executives' financial engineering strategies.
So while it may have nominally been McDonnell Douglas' culture that ruined Boeing, it was also very much an inside job. Boeing's leadership had already been fatally infected years prior and invited McDonnell Douglas in with the intention and purpose of adopting their culture.[2] The demise of Boeing culture was a fait accompli before the merger.
This notion that Boeing was a victim is revisionist. To the extent it was a victim, it was a victim of the wider business and finance culture. There's no need to spin conspiracy theories about how it happened; it happened in the normal course of things, unfortunately. While Condit was clearly the immediate driver, the choice of Condit as CEO years earlier wasn't accidental.
[1] "The exit by Givan, 62, who has held the post of Boeing finance chief and senior vice president since 1990, stems in part from disagreements with other executives over the conservative accounting methods used by Givan, say people close to the matter. For example, some officials believe he was too stringent in assessing how Boeing would accumulate charges for problems incurred in the course of its commercial-airplane order boom." https://archive.seattletimes.com/archive/?date=19980715&slug...
[2] "'When people say I [Condit] changed the culture of Boeing, that was the intent, so that it's run like a business rather than a great engineering firm.'" https://www.theatlantic.com/ideas/archive/2019/11/how-boeing...
Is that true or did the Clinton administration just look the other way? Regardless, it should have been blocked on anti-trust grounds, and subject to approval from Congress. At least, Ralph Nader thought so:
https://nader.org/1997/01/02/boeing-mcdonnell-douglas-merger...
Nader is a lawyer and activist, and has no experience running any sort of organization or company, and has no engineering training.
His opinion is of little to no value here.
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I think the mistake qualifies as an insult of McDonald's.
McDonnell Aircraft was a company with a proud history, responsible for remarkable engineering, including the F-4 Phantom II and Gemini spacecraft. Douglas also has a stellar history including the World Cruisers, DC-3, and A-4 Skyhawk. I see it as tragic that they merged and slowly failed.
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Story as I recall had SecDef William Perry call both CEOs to Washington and tell them their companies "needed" to merge.
According to a 1997 Washington Post article it happened in 1993, he didn't speak with just those two CEOs but executives from across the industry, and no company was singled out, rather he suggested for the industry generally to pursue mergers to survive large cuts to defense spending:
> The frenzy of defense industry mergers can be traced to 1993, when then-Deputy Defense Secretary William Perry invited executives to dinner. At an event now referred to as "the last supper," Perry urged them to combine into a few, larger companies because Pentagon budget cuts would endanger at least half the combat jet firms, missile makers, satellite builders and other contractors represented at the dinner that night.
> Perry's warnings helped set off one of the fastest transformations of any modern U.S. industry, as about a dozen leading American military contractors folded into only four. And soon it's likely only three will remain, with Lockheed Martin Corp.'s announcement yesterday that it plans to buy Northrop Grumman Corp. for $11.6 billion.
Source: https://www.washingtonpost.com/archive/business/1997/07/04/h...
In context I don't see anything untoward here. 1993 was also the fourth round of closures under the Base Realignment and Closure (BRAC) process: https://en.wikipedia.org/wiki/Base_Realignment_and_Closure BRAC was the systematic demilitarization of the U.S. after the Cold War, and apparently Perry was giving the industry fair warning that the process was finally and irreversibly going to bear down on their long-term sales prospects. I think it's fair to say that the Defense Department had a legitimate interest in the orderly realignment of the defense industry. It doesn't seem like he told them anything that wasn't already publicly known; rather more letting them know that there weren't going to be any 11th hour miracles.
If there's an issue here it's acting on the belief that defense contractors can only survive with enormous economies of scale given the long-term capital expenditures. But everybody believed that; and most still do. Most people still think Elon Musk and SpaceX are aberrations, and maybe they are. And nobody could have guessed 9/11 and subsequent wars, which inflated defense expenditures to well beyond Reagan's highs. (For that matter, nobody could have predicted the huge amount of assets and incredible liquidity of the modern investment world that make SpaceX possible.) If spending had remained at Clinton-era levels the reduced number of competitors may have worked out perfectly well, notwithstanding the demise of Boeing culture.
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From that simplified model, it sounds like the focus on functions than value, and constant negotiation with unions, helped Boeing survive.
I wonder what makes it possible for said management to continue union busting if literally the opposite is proven to work...
Investors speak financials. Not nuts n' bolts. As it turns out, there are many ways to make a company with a culture going down in flames look fantastic on the books apparently.
The move to Chicago was more about Condit escaping his wife.