Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Hey it's David Gerra,
Speaker 1: and today we're bringing you an episode from Salaiah Mosen
Speaker 1: and The Big Take DC podcast. As Boeing navigates a
Speaker 1: busy week with two hearings on Capitol Hill and an
Speaker 1: upcoming earnings report, Seleia takestock of its recent fall from
Speaker 1: grace and digs into what's next for a company the
Speaker 1: US government can't let fail.
Speaker 2: Yesterday, two different Senate committees convened to bring the country's
Speaker 2: biggest planemaker down to earth.
Speaker 3: Boeing.
Speaker 4: Is it a moment of reckoning. It's a moment many
Speaker 4: years in the making.
Speaker 2: That Senator Richard Blumenthal, who chairs one of those subcommittees Boeing,
Speaker 2: he reminded the public had promised to make big changes
Speaker 2: after a series of tragic accidents over five years ago.
Speaker 4: That led Boeing to promise.
Speaker 5: That it would overhaul its safety practices and culture, and
Speaker 5: promise proved empty.
Speaker 2: Whistleblowers and critics from inside Boeing are now saying that
Speaker 2: the company has ignored employees who have highlighted shortcuts in
Speaker 2: the manufacturing process. It's quite the fall from grace for
Speaker 2: a company that was long known as a trusted plane maker.
Speaker 6: People always felt this is the safest plane you know.
Speaker 6: There's that saying if it's not Boeing, I'm not going now,
Speaker 6: is sort of turn into well, if it's Boeing, then
Speaker 6: I'm not going.
Speaker 2: Benedict Camel overseas Bloomberg's global aviation coverage, and for the.
Speaker 6: Past three months it's turned into the everything Boeing beat because.
Speaker 2: Boeing has serious problems on its hands, from doors and
Speaker 2: tires falling off aircraft mid flight, to the US Secretary
Speaker 2: of State getting stranded overseas.
Speaker 5: It was scheduled to fly back from Zurich.
Speaker 4: There's a mechanical issue with his plane.
Speaker 6: These incidents happen all the time, in the way that
Speaker 6: a car can break down a plane can break down.
Speaker 6: The problem for Boeing is that it adds to that
Speaker 6: narrative that Boeing is producing planes that can no longer
Speaker 6: be trusted.
Speaker 2: And trouble at Boeing ripples through the entire airline industry.
Speaker 2: As Senator Ron Johnson pointed out at yesterday's hearing.
Speaker 5: In the end, I want the public to be confident
Speaker 5: in getting out of an airplane and experiencing your travel,
Speaker 5: but I have to admit this testimony is more than troubling.
Speaker 2: Today on the show, how did Bowing get here? And
Speaker 2: what can the company and the US government do to
Speaker 2: turn things around and make flying feel safe.
Speaker 6: There's one company that's too big to fail. It's Boeing.
Speaker 6: They make the presidential jet, that they are an integral
Speaker 6: part of the US economy, that the biggest exporter in
Speaker 6: the country. There's nobody suggesting that Boeing is going to
Speaker 6: go out of business.
Speaker 2: But the road ahead is sure to be turbulent. From
Speaker 2: Bloomberg's Washington bureau, this is the Big Take DC podcast.
Speaker 2: I'm Salaiah Mosen to understand just how remarkable this is.
Speaker 2: With Boeing's problems being dragged in front of Congress. You
Speaker 2: have to remember this is the company that, for more
Speaker 2: than a century had a reputation that centered on safety
Speaker 2: and reliability.
Speaker 4: The phrase that keeps coming to mind is the Great Unraveling.
Speaker 2: Bloomberg's lead Boeing reporter, Julie Johnson, has been watching that unraveling.
Speaker 2: It's a story that starts back around twenty ten.
Speaker 4: Just for context, Boeing was cranking out enormous amounts of cash.
Speaker 4: It was just really really riding high.
Speaker 2: It was the go to carrier for the US government
Speaker 2: from the Postal service to air Force one, and its
Speaker 2: seven thirty seven jets, which were first introduced in the sixties,
Speaker 2: were the aircraft of choice for commercial airlines.
Speaker 3: Being a professional pilot, the absolutely most important part of
Speaker 3: it is the safe operation of the aircraft.
Speaker 2: Captain John Cox spent thirty years as a commercial in
Speaker 2: corporate pilot, for many of those years Boeing jets, including
Speaker 2: the seven thirty seven.
Speaker 3: And I really enjoyed the airplane. It's what pilots call
Speaker 3: an honest airplane. It does things the same way every time,
Speaker 3: very reliable, it's a workhorse. It was a good challenging
Speaker 3: weather airplane, meaning high cross winds, low visibility, so my
Speaker 3: time with the seven thirty seven was one of the
Speaker 3: high points.
Speaker 4: Of my career.
Speaker 2: In twenty ten, Boeing's main competitor, Airbus, upgraded a line
Speaker 2: of its planes with new engines that left the seven
Speaker 2: thirty seven looking dusty and outdated.
Speaker 4: Air Bus got a big jump on the market and
Speaker 4: Boeing decided they had to do something, and that's where
Speaker 4: the seven thirty seven Max was brought to live pretty quickly.
Speaker 2: The seven thirty seven Max, Boeing's next iteration of the
Speaker 2: beloved series, came out in twenty eleven, but it would
Speaker 2: end up spelling disaster.
Speaker 4: This is just like every fable you know you've ever
Speaker 4: heard over history. This company brought to its knees through
Speaker 4: a series of terrible tragedies.
Speaker 2: In October twenty eighteen, a Boeing seven thirty seven Max
Speaker 2: plane took off in Indonesia just thirteen minutes into the flight.
Speaker 1: The issue was.
Speaker 5: A system that forces the nose of the plane down.
Speaker 5: It's supposed to be a safety feature, but it resulted in, obviously,
Speaker 5: that tragic crash and airline pilots saying we weren't No.
Speaker 2: One on board survived. Boeing assured the public and its regulator,
Speaker 2: the Federal Aviation Administration, that the plane model wasn't at fault,
Speaker 2: But then just five months later, another seven thirty seven
Speaker 2: Max crashed, this one taking off from Ethiopia.
Speaker 4: The Ethiopia crash that killed one hundred and fifty seven
Speaker 4: people in.
Speaker 6: The first official words, and the fallout from that was
Speaker 6: swift and brutal for the company. Obviously, far more brutal
Speaker 6: for the people involved in these crashes, but on the
Speaker 6: corporate side, it was sort of a reckoning for Boeing
Speaker 6: and its products, which previously had a styllar record.
Speaker 4: The company's biggest source of revenue was grounded globally after
Speaker 4: the second crash, and that's when people started really questioning
Speaker 4: Boeing's processes and whether the company's priorities had drifted over.
Speaker 6: Time, the thinking and that this is a company that
Speaker 6: actually has not put safety first. It's a company that's
Speaker 6: put profit first. It's been caught up in the competition
Speaker 6: with our bus and all of these things led to
Speaker 6: a toxic cocktail that ultimately led to them producing planes
Speaker 6: that weren't properly built, certified, and had the errors that
Speaker 6: contributed to the crashes.
Speaker 2: All seven thirty seven Max planes were pulled from runways
Speaker 2: and Dennis Mullenberg, Boeing CEO at the time, was brought
Speaker 2: in front of Congress.
Speaker 4: He was really flogged by both parties publicly over a
Speaker 4: couple of days of hearings, and within a couple of
Speaker 4: months was forced out by the board.
Speaker 2: A new CEO, Dave Calhoun, came in with a fresh mandate.
Speaker 6: To clean the company up to put safety first. That
Speaker 6: was a thinking that indeed they had cut some corners,
Speaker 6: that they had been too quick with the way that
Speaker 6: they produced some of these planes, and that the company felt,
Speaker 6: we need to sort of rethink how we do things,
Speaker 6: slow things down.
Speaker 4: So Calhoun steps into the job in January twenty twenty,
Speaker 4: and then COVID happens.
Speaker 2: Suddenly nobody's really flying on any planes, not just Boeings, And.
Speaker 6: In some ways that was a chance for Boeing because
Speaker 6: this took a lot of the pressure off the business
Speaker 6: and the company, and it gave them the time to rethink,
Speaker 6: to reset, to revisit their aircraft from their operations.
Speaker 4: Boeing was still not making a profit, but was gradually
Speaker 4: starting to head in the right direction as they try
Speaker 4: to get their factories and their supply chain figured out
Speaker 4: post COVID and you know, win back trust of their
Speaker 4: customers and regulators, and the narrative seemed to be changing.
Speaker 6: There was this expectation that now would be the year
Speaker 6: where Boeing would truly come back. Everyone thought twenty twenty four,
Speaker 6: they've left all the baggage behind, They've left the previous
Speaker 6: crises behind. You know, orders were pumping. They were really
Speaker 6: winning amazing business all around the world. And then January
Speaker 6: fifth happened.
Speaker 2: January fifth, twenty twenty four.
Speaker 4: Uh seven thirty seven. Next you know, takes off out
Speaker 4: of Portland and a few minutes into flight, there's just
Speaker 4: this enormous bang and a panel flies out of the plane.
Speaker 6: This is a fortified door that is normally locked, so
Speaker 6: for that to sort of burst open gives you a
Speaker 6: sense of what could have gone horribly wrong.
Speaker 2: Turns out there was a mishap at the factory. Some
Speaker 2: Boeing employees had been fixing an error with a door panel, and.
Speaker 6: Then the panel was put back in. What didn't happen.
Speaker 6: The four bolts that should have kept it in place
Speaker 6: were just not put back in. Somebody clumsily left those
Speaker 6: bolts lying around somewhere on the factory floor that probably
Speaker 6: in a trash can at this point.
Speaker 2: Here's what Boeing said in a recent statement to Bloomberg News.
Speaker 2: Since twenty twenty, Boeing has taken important steps to foster
Speaker 2: a safety culture that empowers and encourages all employees to
Speaker 2: raise their voice. We know we have more work to do,
Speaker 2: and we are taking action across our company we continue
Speaker 2: to put safety and quality above all else and share
Speaker 2: information transparently with our regulator, customers, and other stakeholders. As
Speaker 2: for that January door incident, Boeing's CFO addressed it head
Speaker 2: on at the Bank of America Global Industrials Conference last month.
Speaker 7: First start by saying that we continue to be fully
Speaker 7: committed to transparency and accountability with our regulators. The FA
Speaker 7: is deeply involved and undertaking a tougher audit than anything
Speaker 7: we've ever been through before, and as they do their
Speaker 7: important work, we're undertaking comprehensive actions so that we can
Speaker 7: move forward to strengthen quality and build confidence.
Speaker 4: Fortunately, nobody was killed. I mean, it's just like unbelievably
Speaker 4: miraculous that nobody was sitting next to the section that failed,
Speaker 4: But that moment flashed around the globe and in videos
Speaker 4: that just went viral within a matter of minutes, and
Speaker 4: I was watching it happen. But the confidence that Boeing
Speaker 4: had been trying to reap bill just collapsed within minutes.
Speaker 2: Captain Cox, the pilot that we heard from earlier, has
Speaker 2: investigated crashes with the National Transportation Safety Board. He says
Speaker 2: that when he first heard about Boeing's tragic crashes in
Speaker 2: twenty eighteen and twenty nineteen, His sense of how they
Speaker 2: could have happened was blurry.
Speaker 3: I've been an accident investigator for thirty five years, and
Speaker 3: when you look at those accidents, there are some of
Speaker 3: the more complex ones I've ever seen.
Speaker 2: But as he's followed the news about Boeing seven thirty
Speaker 2: seven jets over the past few months and years, he
Speaker 2: says a different image has come into focus. He runs
Speaker 2: an aviation safety consultancy and says it's all left him
Speaker 2: more than surprised.
Speaker 3: I think shocked would be a better word. It was
Speaker 3: very disappointing to me as we began to understand the
Speaker 3: contributing factors for the Max accidents, of how the culture
Speaker 3: at Boeing had changed from when I was working very
Speaker 3: closely with them in the eighties and ninety The focus
Speaker 3: really shifted from building the highest quality airplane that they
Speaker 3: could to shareholder value.
Speaker 4: The twenty nineteen tragedies, we knew, okay, there were a
Speaker 4: series of things that went wrong, but at the route
Speaker 4: was this flawed design. But when you don't have confidence
Speaker 4: in a company's ability to install literal nuts and bolts,
Speaker 4: in its aircraft. I think that's far more damaging.
Speaker 2: Coming up. Where does Boeing go from here and will
Speaker 2: the US government's intervention help move the needle. After Boeing's
Speaker 2: plane door incident in January, the FAA came down on
Speaker 2: the company hard.
Speaker 6: I think for the FAA, this is a moment of
Speaker 6: reckoning where they've understood we need to be much tougher
Speaker 6: on this company. We need to keep a much closer
Speaker 6: on what they do do we need to slow them down.
Speaker 2: The regulator can bened an expert panel to investigate safety
Speaker 2: practices at Boeing, and the results it published in February
Speaker 2: were pretty damning.
Speaker 6: They said there was a disconnect between sort of the
Speaker 6: message from the top about safety culture and what actually
Speaker 6: arrived down on the shop floors. There was a sense
Speaker 6: that profitability was taking precedent over process.
Speaker 2: I'm trying to think how we got here. Isn't it
Speaker 2: up to the US government or the Federal Aviation Authority
Speaker 2: to make sure that this doesn't happen in the first place.
Speaker 6: Part of the accusation leveled against the FAA after these
Speaker 6: two crashes was that they had too cozy a relationship
Speaker 6: with Boeing. That they let Boeing almost self regulate, and
Speaker 6: they put too much faith into a trust in Boeing,
Speaker 6: and we all know how that ended.
Speaker 2: It's worth noting that Boeing has over one hundred lobbyists
Speaker 2: on his payroll. It's been over fourteen million dollars on
Speaker 2: lobbying in twenty twenty three. Now the government is sending
Speaker 2: examiners into Boeing's factories. It's forcing them to slow things down,
Speaker 2: mandating that the company limit the number of planes it
Speaker 2: produces each month. It gave the company until late May
Speaker 2: to address the issues the FAA audit identified. At one
Speaker 2: of yesterday's hearings, Senator Tammy Duckworth put it this way.
Speaker 5: We need to judge Boing by what it does, not
Speaker 5: by what it says it's doing.
Speaker 2: Because Boeing's problems are the government's problems. Boeing isn't a
Speaker 2: company that can just be replaced. It's America's flagship aircraft maker,
Speaker 2: providing planes for everyday people to fly on and also
Speaker 2: supporting US defense and military operations. Plus there are only
Speaker 2: two major players in the airplane production industry. The government
Speaker 2: can't just ditch Boeing and replace its fleet with Airbus.
Speaker 2: Neither can commercial airlines.
Speaker 4: If you go to Airbus, you're joining the back of
Speaker 4: the queue, a queue that stretches into the twenty thirties.
Speaker 4: Airbus is basically sold out through twenty two twenty nine,
Speaker 4: and the airlines feed airplanes right now.
Speaker 2: Benedict told me he's spoken with Airbus executives about all
Speaker 2: of this, and they don't view Boeing's problems as a
Speaker 2: win for them.
Speaker 6: They say, look, we take no pleasure in the other
Speaker 6: side's misfortunes here because we know whatever happens to one
Speaker 6: side could as easily happen to the other side. And frankly,
Speaker 6: this is bad for the global aviation industry. People have
Speaker 6: second thoughts about flying. But it also means that if
Speaker 6: Boeing slows down, it sends a shiver through the entire industry.
Speaker 2: Benedict says, it's a problem of supply and demand. Fewer
Speaker 2: planes overall mean airlines have to limit their flights and
Speaker 2: the routes that they serve, and that would mean demand
Speaker 2: outpaces supply.
Speaker 6: So there are the fewer seats as it were, that
Speaker 6: means higher prices. So all these things are ripple effects
Speaker 6: that go from the factory floor at Boeing all the
Speaker 6: way back to the pockets of the consumer.
Speaker 2: If you ask Captain John Cox, we should keep things
Speaker 2: in perspective.
Speaker 3: If you look at him, twenty twenty three, worldwide, we
Speaker 3: flew about thirty five million flights without a single accident
Speaker 3: or a single fatality. It's one of the safest years
Speaker 3: in aviation's history.
Speaker 2: That's encouraging to him, even though clearly doors should not
Speaker 2: be falling off planes midflight.
Speaker 3: I think day by day will begin to rebuild the
Speaker 3: confidence in the quality of the airplanes coming off the
Speaker 3: Boeing assembly line. I'm comfortable with them today I fly
Speaker 3: on a Max without a second thought.
Speaker 2: But right now Boeing is still managing a bumpy landing.
Speaker 2: On Wednesday, the company will report it's earnings from the
Speaker 2: first quarter of twenty twenty four, and things are not
Speaker 2: looking good.
Speaker 4: They've burned through just an enormous amount of cash. I mean,
Speaker 4: they've had to pay hundreds of millions of dollars to
Speaker 4: the airlines whose planes were grounded, slowing your factories, taking
Speaker 4: days off to encourage employees to speak up about you
Speaker 4: know what, They've seen all of that. So it's going
Speaker 4: to be a big cash outflow.
Speaker 2: Investors are expecting the company to report burning through four
Speaker 2: to four and a half billion dollars in cash for
Speaker 2: the first quarter.
Speaker 4: So at some point they need to start ramping up
Speaker 4: their production again, but they can't do that until the
Speaker 4: FAA is convinced that their processes of change.
Speaker 2: If Boeing wants to rebuild trust, it's going to need
Speaker 2: a new plane. Consumers do not trust the seven thirty
Speaker 2: seven Max anymore.
Speaker 4: Boeing planes right now are like just one giant bad meme.
Speaker 2: But new planes cost money, money that Boeing does not have.
Speaker 2: All this leaves Boeing in a spot not unlike the
Speaker 2: one it found itself in in twenty nineteen crisis management mode.
Speaker 2: A few days after that plane door flew off. This
Speaker 2: past January, Dave Calhoun, the CEO who took over during
Speaker 2: the last crisis, addressed the company's employees and told them
Speaker 2: we're taking responsibility for this. Something needs to change.
Speaker 6: Dave Calhoun held an almost tearful speech to employees, saying, look,
Speaker 6: I get this, we need to get this right.
Speaker 5: I got kids, I got grandkids, and so do you.
Speaker 3: This stuff matters.
Speaker 6: This is a watershed moment for the company. Safety is
Speaker 6: our guiding principle, always has been. But if anyone didn't
Speaker 6: get the message, this is our north star.
Speaker 2: The last thing I wanted to ask you about, adict
Speaker 2: is where does Boeing go from here?
Speaker 6: Well, Boeing, wherever they go, they're going to go with
Speaker 6: a new CEO. So a couple of weeks ago they
Speaker 6: announced a leadership change that was fairly comprehensive. The chairman
Speaker 6: stepped down at the head of the aircraft manufacturing business
Speaker 6: step down, and Dave Calhoun, who had taken the role
Speaker 6: in the wake of these twin crashes, also said that
Speaker 6: he would leave. And a lot of people are saying
Speaker 6: Boeing needs an engineering mind again, you know, forget the
Speaker 6: person with a financially minded sort of perspective. We've had
Speaker 6: those before and that didn't get us any.
Speaker 2: Thanks for listening to The Big Take DC podcast from
Speaker 2: Bloomberg News. I'm Salaia Mosen. This episode was produced by
Speaker 2: Julia Press. It was mixed by Ben O'Brien. It was
Speaker 2: fact checked by Audrianna Tapia. It was edited by Aaron
Speaker 2: Edwards and Benedicte Cammel. Naomi Shaven is our senior producer.
Speaker 2: Michael Shephard, Wendy Benjaminson, and Elizabeth Ponso provide editorial direction.
Speaker 2: Nicole Beemster Bower is our executive producer, and Sage Bowman
Speaker 2: is Bloomberg's head of podcasts. Please subscribe and review The
Speaker 2: Big Take DC wherever you listen to podcasts. It helps
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