29 September 2014
I don't want to make a documentary. I want to make a documentary about the making of a documentary. This meta concept seems appropriate after watching Al Jazeera's Broken Dreams. You can find it at www.aljazeera.com/investigations/boeing787. I make a few appearances, but that's why DVRs have fast-forward buttons. The documentary does not make a persuasive case against the 787 and is somewhat sensationalist. But it also tells us a lot about the state of things at Boeing. Boeing management's actions have produced a deeply angry work force. This documentary depicts some of the damage from that anger, and there's likely more blowback to come.
First of all, the tone of this documentary is way too dire. The individual interviews and allegations recounted in the program are presented with a rather conspiratorial tone, no matter how isolated or old they are. The allegations do not take into account multiple layers of quality control and regulatory oversight. Some of the criticism presented shouldn't be ignored, but I believe Boeing and the FAA have enough dedicated people and processes to ensure that the 787 is safe. I have flown on 787s, and I will continue to fly on 787s. (Boeing's response to the program is here: tinyurl.com/kdcc8px.)
But on the other hand, I understand how the documentarians came to think something bad was going on, which is the point of my meta-documentary. The one really new part of the show is a series of hidden camera interviews with workers who recount numerous manufacturing problems, and why they wouldn't fly on a 787. As a comment on BCA's workforce today, this is quite useful.
To recap the last ten months, in late 2013 and early 2014 Boeing used the threat of moving the 777X line to bully the machinists into accepting a contract that froze pensions and eliminated many benefits. As I wrote in my January 2014 letter, "It's quite clear that even though 51% of the machinists voted yes, many did so because they felt their jobs were at risk, not because they felt it was a good deal." I know this because I received many emails along the lines of, "I hate this contract. But they're threatening my job. Do you think they'd really move the 777 line?" In 26 years of tracking the aerospace industry, I've never seen anything like this.
After that morale-destroyer, in March Boeing eliminated pensions for 68,000 non-union workers. Even though BCA profits, jetliner demand, and market share have all been fantastic, getting rid of pensions was deemed a good idea by Chicago because...well, because they could get away with it.
Then in July, for good measure, CEO Jim McNerney told equity analysts that he won't retire after turning 65 in August, and that "the heart will still be beating, the employees will still be cowering." A day later McNerney apologized for "a joke gone bad." Of course like any bad joke there's more than a little truth embedded within, from the standpoint of how he thinks investors see things, and how workers see him. As an aside, most CEOs with twentysomething million dollar salaries are paid, in part, to not tell bad jokes.
Since then, Boeing workers have been buying "We Cower To No One" T-shirts. Several have been sent to me. Again, in 26 years of tracking the aerospace industry, I've never seen anything like this.
Into this toxic labor relations Superfund cleanup site comes the documentary film crew. They're not from aerospace, and they might not fully understand the situation. But they do notice that you can't swing a cat in a Boeing factory without hitting disgruntled workers. And they're interviewing people in Charleston, the factory where, in theory, a non-unionized newbie workforce would be grateful for a good job. It's a fair bet that 787 workers in Everett would be even angrier. And these workers aren't just alienated from management; they're alienated from their work, and from the product they make.
The Al Jazeera documentarians, like me, had probably never seen labor relations this awful, anywhere. They likely assumed they had found an endless supply of whistleblowers, when in reality they had simply found a very angry workforce. In short, by proceeding with exactly zero regard for worker morale, Boeing management had guaranteed blowback. This documentary illustrates that blowback. My documentary, about their documentary, would make the point that by focusing on safety, they missed the bigger issue ofworker morale and company culture.
This blowback is also important from a market analysis perspective. Consider the twin aisle competitive landscape. Airbus's twin aisle market position is greatly inferior to Boeing's. Being sandwiched between the 787 and 777X is a tough market position. The 787-10 will be a superb 300-seater, and 777-9X will be a great 400-seater. There's also the 777-8X, which will hang on to a big part of the 350-seat segment. Airbus has wisely killed the A350-800, leaving the A330neo to fight off the 787-8/9. In short, for large network carriers going with a combined 787/777X fleet would seem to be the right decision.
So, why are airlines buying the A350XWB in large numbers? Possibly, it's because they believe Airbus will execute well on this program, and because they look at Boeing and have doubts. For customers, a key part of the jetliner selection process involves confidence that the OEM will deliver on time. After the 787 development debacle, Boeing is kind of on probation in the minds of customers. By contrast, in Toulouse, labor relations aren't a major concern. And in possibly related news, Airbus looks set to deliver its first A350XWB later this year, after a remarkably trouble-free gestation period.
After the documentary appeared, I did an investor client call about the program. I wasn't asked about the 787's safety. Rather, I was asked whether the adversarial labor/management situation at Boeing would affect new product development. I told them that Boeing management needs to start listening, and needs to be as conciliatory as possible. After that, the company will hopefully heal. Otherwise, the answer is yes, there's the greater risk of development delays on the 737MAX, 787-10, and 777X. A workforce this angry just won't go the extra mile in times of trouble, the way it did during the 787 disaster.
In short, the one clear message from the Al Jazeera program is that a terrible labor relationship produces blowback in many different forms. The documentary depicted the consequences of Boeing nickel and diming its workforce; there are more consequences to come.