Inside the '90s merger that started Boeing's long decline
This story originally aired on Marketplace on Oct. 15.
The world's largest manufacturer of aircraft said Tuesday it will raise billions of dollars over the next three years by selling bonds and new shares of stock.
At the end of last week, Boeing announced it’s laying off 17,000 employees, which is 10% of its workforce. Meanwhile, the strike against the company by the International Association of Machinists and Aerospace Workers has just entered its second month.
Boeing’s spiral started before the strike, before the pandemic, and before faulty planes and fatal crashes. Marcel Zondag leads the supply chain management program at Western Michigan University. He said it began back in the 1990s.
"The downfall of Boeing was driven by the merger of McDonnell-Douglas," Zondag said.
That was when Boeing bought out its last big rival in the U.S. After that, Zondag said, Boeing started building "airframes made out of OK bits and pieces, and putting a number of mediocre things together doesn't create a great thing," Zondag said.
It’s a dangerous combination of complacency, worsening quality ,and now declining market share, said Tolga Tulgut, who teaches aeronautics at Florida Tech. He said those problems took a long time to hurt the company, thanks to its reputation.
"That momentum, it's like a strong wind coming from the past carries you forward, but that wind starts weakening over time," Tulgut said.
The multiple rounds of layoffs are part of an effort to fix the past five straight years of losses, Tulgut said. But job cuts alone won’t solve the problem.
"Now they're in a spiral," Tulgut said. "I think to get out of it, you first have to stop the bleeding, but you have to restore confidence simultaneously."
That includes the confidence of striking workers, as well as the airline customers that have been canceling orders.
But Ryan Ewing, founder of the industry site Airline Geeks, isn’t worried about Boeing folding. He said it’s too big to go under.
"I mean, one of the largest clients is the U.S. government, so I think it's pretty impossible for them to fail," Ewing said.
Nevertheless, Boeing is getting smaller. In 2019, after decades of making more planes than any other manufacturer, it ceded that No. 1 spot to its European rival, Airbus.
