I think Boeing has lost it

[Colon™]

Boeing set to lose $23bn UK dealBy Mark Odell and Peter Spiegel in London and Caroline Daniel in ChicaoPublished: January 22 2004 21:55 | Last Updated: January 22 2004 21:55

Boeing looks set to be hit by another blow with the loss of a $23bn contract for refuelling aircraft for the British government to a rival bidder.
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The UK is expected to award the contract on Monday to a consortium led by EADS, the Franco-German defence group.

The decision is a significant setback for Boeing, which has already seen Airbus, the European consortium, encroach into its commercial aviation market overtaking it for airplane deliveries for the first time. It now faces the prospect of losing market share in its critical defence operations.

Although the timing of the announcement could slip, industry executives say the team led by EADS, Airbus's parent, is scheduled to meet Ministry of Defence procurement officials on Monday to be told it has won.

The loss of the 27-year contract to replace Royal Air Force air tankers is the first big blow to Harry Stonecipher in his role as new chief executive of Boeing.

An order from the US Air Force to buy 100 767 tankers also remains on hold, pending further investigations of the links between Boeing and senior Pentagon officials.

The award represents a breakthrough for Airbus, which is 80 per cent owned by EADS and 20 per cent owned by BAE of the UK. Airbus will supply the aircraft to the AirTanker consortium, with engines and avionics provided by Rolls-Royce of the UK and Thales of France, respectively.

Cobham of the UK, the other consortium member, will carry out the refitting of the A330 passenger jets into military aircraft.

Despite its relatively small size - about 20 aircraft - the deal is crucial to the European manufacturer because Boeing has a near monopoly on tanker aircraft, large jets used to refuel military aircraft in mid-air.

Losing the contract would have effectively shut Airbus and EADS out of the market.

The British win is the first time that Airbus has beaten Boeing to a military aircraft contest outside France and Germany.

The US Air Force is planning to order an additional 200 air tankers and EADS' victory in the UK will give a strong boost in the competition for the larger US contract.

The decision to favour the AirTanker consortium came as the MoD warned BAE it could lose other contracts if it failed to improve project management of big weapons programmes.

The loss of the tanker contract follows a disastrous few months for BAE's TTSC consortium, which it leads jointly with Boeing and Serco of the UK.

Boeing is engulfed in a scandal over a similar, but much larger, tanker deal for the US Air Force, which led to the resignations of two of its most senior managers, including Phil Condit, its chief executive.

The MoD's warning to BAE came before today's publication of an annual review of the armed services' 30 largest weapons programmes, which showed the projects have slipped an additional £3.1bn ($5.2bn) over budget in the last year and were delayed an average of nine months, one of the worst performances in recent history. The study by the National Audit Office showed more than 87 per cent of the cost overruns and 79 per cent of the delays last year were attributable to four programmes, three run by BAE and the other by a missile house partly owned by BAE.

http://news.ft.com/servlet/ContentSe...=1012571727092

[monkspider]

Argh, this is bad news for my hometown (Wichita).

[Colon™]

Is there a Boeing plant in Wichita?

[Whoha]

yea, they make 4 tail deallys? there and 10 in China for the 7E7.

[Main_Brain]

Good News everyone!
For my Continent anyways.

[Spiffor]

It's good to see Airbus is finally in the process of becoming equals with Boeing

[Colon™]

I'm not interested in silly nationalism bites.

What fascinates me about Boeing is that this company made huge gambles in the past to build revolutionary new planes, the 707 (world's first commercial jet airplane) and the 747 are good examples. Only a couple of years ago it seemed they'd establish a monopoly by merging with McDonnel Douglas.
These days they've been too chickenshit to rise to the challenge of Airbus' superjumbo and they've lost their market leadership in large civilian aviation. Next to that they've been embroiled in a bribery scandal and now they're getting a big blow in a market that was previously almost solely theirs.

So as case of study in corporate management: what's ailing Boeing?

[Spiffor]

Originally posted by Colon
So as case of study in corporate management: what's ailing Boeing?

Maybe the quality/cost ratio of their planes isn't that great?

[Colon™]

On the defensive
Nov 25th 2003
From The Economist Global Agenda

Boeing has sacked its chief financial officer and a former US Air Force official for improper dealings over contracts for military aircraft. This comes as the aircraft-maker faces a probe into industrial espionage and trouble across its range of businesses

A DECADE ago Boeing ruled the skies, dominating the commercial airline business, in which Europe’s Airbus was a rude pretender. Then, in the late 1990s, the American giant decided to project this dominance into a range of other businesses: defence, space and aviation services. But, however wise this strategy, its execution has been a mess.

Boeing’s space programme has cost it billions and Airbus has done so well in Boeing’s commercial-jet heartland that the Toulouse-based manufacturer will deliver more planes than Boeing this year. Defence had been the most promising part of the picture. But a long-running case of alleged industrial espionage by Boeing against Lockheed Martin led the Pentagon to remove $1 billion in orders from Boeing this summer. Now, Boeing is at the centre of another industrial-espionage row, over a $22 billion contract to supply America’s air force with 100 refuelling tanker-planes. On Monday November 24th, the row led to the sacking of Mike Sears, Boeing’s chief financial officer, and Darleen Druyun, who had been the air force official responsible for negotiating the Boeing tanker contract before joining the company. Mr Sears recently admitted to The Economist, in discussing Boeing’s dispute with Lockheed Martin: “We had an issue and it came back to bite us.” By firing him and Ms Druyun, Boeing is trying to defang this particular issue before it can do the company any more damage.

One of the reasons why the contracts are so sensitive is that the original deal for Boeing to lease tankers to the air force that Ms Druyun negotiated has been criticised as being terrible value for the government and has had to be rewritten. Senator John McCain, a former Republican presidential candidate, claimed that the deal, which extended demand for Boeing’s 767 mid-size airliner and enabled the firm to keep the 767 production line open, was little more than corporate welfare. Earlier this month, the Senate approved a compromise deal, under which 80 of the 100 planes would be bought rather than leased, saving up to $5 billion for the government.

The sacking of Mr Sears is particularly embarrassing for Boeing, since he had been seen by many as the company’s next chief executive. The charges against him are that he broke company rules by “communicating directly and indirectly with Druyun about future employment when she had not disqualified herself from acting in her official government capacity on matters involving Boeing”, and that the pair had attempted to conceal this infraction from company lawyers investigating the matter. It has also been alleged, during a Senate investigation earlier this year, that Ms Druyun broke the law by passing on to Boeing employees confidential information about how Airbus had priced its bid for the tanker contract. Ms Druyun’s role in negotiating this contract is also being investigated by the Pentagon's inspector-general. Eyebrows have also been raised at the fact that Ms Druyun’s daughter and son-in-law both work for Boeing.

Whatever the extent of Ms Druyun’s contacts with Boeing before she was hired, Boeing cannot afford to be anything other than squeaky clean in its dealings with the government. Phil Condit, Boeing’s chief executive, acknowledged this in his letter to staff about the sackings: “Even the appearance of impropriety can damage the reputation of the company,” he wrote. This is particularly true of defence, which is now arguably the most important part of Boeing’s business, given the mess the commercial airline industry is in.

Airlines have experienced their worst crisis ever in the past couple of years thanks to a combination of terrorism, the war in Iraq and the SARS virus. Not surprisingly, the main aircraft-makers have suffered along with their customers: Boeing will deliver around 275 aircraft this year, compared with 620 in 1999. Airbus has been hurt too, but not so badly, hence the expectation that it will overtake Boeing in deliveries this year. Thanks to Airbus’s new A380 super-jumbo, demand for Boeing’s flagship 747 jumbo has fallen. Boeing has also had to write off ambitious plans for its faster Sonic Cruiser after realising that in today’s super-competitive market for air travel, airlines value efficiency over speed. So the company is pinning its hopes on its new 7E7—the E is for efficient. This would replace its ageing 767 and compete with the A330-200.

Boeing’s space ambitions, which inspired the acquisition of Hughes Electronics' space and satellite business in 2000, have been an expensive flop. Demand for satellites has collapsed with the bust in the telecoms market. And Boeing was in such a rush to put up satellites that it failed to check its equipment properly. They are now afflicted by a series of problems that could reduce their life span by as much as two-thirds. The faults are so grave that some insurers are talking of suing Boeing directly, the first time insurers of satellites would have gone after a manufacturer rather than an owner. Boeing withdrew from the commercial-satellite market in July. Within weeks of the announcement, the firm’s military space ambitions were hammered when the air force withdrew $1 billion-worth of business from a bigger contract for rocket launchers because Boeing had misused confidential documents from Lockheed Martin when bidding.

Boeing’s ambitions took another hit earlier this autumn when it did an about-turn on its Boeing Capital portfolio. Soon after the financing business was acquired along with McDonnell Douglas in 1997, Boeing decided to use it to finance not only its own products but also those of other companies, such as ships. But this led to tension with the airline business during the aviation downturn: Boeing Capital was turning down financing deals for airline customers that it deemed too risky in favour of deals in completely unrelated industries. Boeing’s management recently decided that Boeing Capital should go back to focusing on helping airlines. Analysts now expect the division’s $12 billion portfolio to shrink.

Boeing’s woes in the commercial-aviation, space and financing businesses, coupled with the growth in American military spending, explain why the company’s defence business is so vital. As it unveiled its third-quarter results last month, Boeing marginally raised its annual revenue target, acknowledging that it continued to benefit from American government spending on missile defence, homeland security and networks. (Boeing aims to be the lead systems integrator for the American military.) But government contracts are subject to much more scrutiny than commercial work, especially since the round of industry consolidation in the 1990s has left just two big American military plane-makers.

For all the criticism of Ms Druyun, few people (even, it is said, within Airbus) ever saw the French aircraft-maker as a serious supplier to the American government. However, Boeing’s recent troubles have prompted Noel Forgeard, Airbus’s boss, to muse about building military planes in America. The US Air Force flying French planes? That might sound fanciful now, especially in light of France’s hostility to America’s invasion of Iraq. But Boeing, given the seriousness of its strategic problems and the latest embarrassment, would do well not to treat it as a French farce.

[CharlesBHoff]

Originally posted by Colon
I'm not interested in silly nationalism bites.

What fascinates me about Boeing is that this company made huge gambles in the past to build revolutionary new planes, the 707 (world's first commercial jet airplane) and the 747 are good examples. Only a couple of years ago it seemed they'd establish a monopoly by merging with McDonnel Douglas.
These days they've been too chickenshit to rise to the challenge of Airbus' superjumbo and they've lost their market leadership in large civilian aviation. Next to that they've been embroiled in a bribery scandal and now they're getting a big blow in a market that was previously almost solely theirs.

So as case of study in corporate management: what's ailing Boeing?

They lost some airlines bussien in the middleeast as they are seem as than arrogorent america corporation. Kuwait Airline is buying airbus planes to replace the ageing Boering airplane they have. The decision was base upton the growing anti-america mood in the middleeast.

[TCO]

Originally posted by Colon
I'm not interested in silly nationalism bites.

What fascinates me about Boeing is that this company made huge gambles in the past to build revolutionary new planes, the 707 (world's first commercial jet airplane) and the 747 are good examples. Only a couple of years ago it seemed they'd establish a monopoly by merging with McDonnel Douglas.
These days they've been too chickenshit to rise to the challenge of Airbus' superjumbo and they've lost their market leadership in large civilian aviation. Next to that they've been embroiled in a bribery scandal and now they're getting a big blow in a market that was previously almost solely theirs.

So as case of study in corporate management: what's ailing Boeing?

They were smart not to do the superjumbo. I don't care what happens to Boeing. Even if the company went completely broke, someone would pick up the assets, perhaps multiple companies. The US is a big enough market for that. Companies come, go. Who cares.

[DeathByTheSword]

well it is great news for the EU aerospace and my job oppertunities...but boeing is working not on a superjumbo but on a megajumbo...(to carry over 2000 people IIRC)

[The Viceroy]

Just another sad example of a market leader, who forgot how it became so, and didn't react quick enough to emerging competition, business is littered with examples of this.

I don't think its the end of boeing at all, they need a decade in 2nd place to get a handle on what the customers want, and to once again challenge Airbus.

I think they will return with products airlines can afford and want.

When it comes to aircraft, I don't think many companies are in a position to let politics get in the way, they want cheap, flexible and safe aircraft, which allows them to make money and expand their business, who gives a damn if they are american and arrogant if the aircraft are ideal for the job

[Patroklos]

Because when companies merge like that you can expect a serious loss in jobs, and Boeing has ALOT of emploees. And god only knows where those jobs will go.

[DeathByTheSword]

well a nice story about politics in the aircraft business:

when suadi-arabia wanted to change its aging fleet of boeings they looks at airbus and boeing deals. they picked the airbus one...then the president of boeing called the president of the US with something like: 'we are losing that contract that means people without jobs and that is bad for you'. then the US president called the boss in suadi and told him something like: 'you buy american or you wont get military support'. after that call they bought boeing planes although the airbuss ones were more fit for that particulair job.

the major problem with the aerospace business is that it is so polarized. so that you get the 'us' and 'them' feeling

[Patroklos]

Boeing has alot of military contracts for all sorts of equipment and services worlwide too. They are famous for their commercial airliners but that is hardly the only think the company dabbles in, though admittedly commerical airlines is their biggest piggybank. Lossing the lead in the market and going bankrupt are far from similar.

[Cruddy]

To be honest, I doubt Boeing really had a chance.

The RAF just doesn't use Boeing aircraft - apart from the highly excellent E3 Sentry - and even there GEC Marconi spent an absolute fortune trying to develop an alternative.

That contract only went to Boeing went it became clear the Brit alternative would be more expensive and under spec.

Add in the nasty habit of BaE Systems under bidding for contracts (and then going over budget) and you can see why Boeing just didn't have a realistic chance.

http://news.bbc.co.uk/1/hi/business/3422239.stm

I can't say I'm upset about it though - although I do have a sneaking suspicion that BaE are a bit like Nortel. No matter how much money they lose, they'll always be propped up as a vested interest.

[CerberusIV]

The long term future of military aircraft is pilotless after the generation of fighters now entering service. Boeing are well placed in that field.

They clearly took their eye off the ball in the civil airliner field. Not necessarily the end but they have to go away and think very hard about the way forward.

[Patroklos]

You have a good 100 years untill you have true pilotless aircraft. The ones we have now are recon platforms or novelties. Can't compete with a human pilot in fighter/strike role by any stretch of the imagination. But yes, Boeing is much more diversified as far as spreading assets between military/civilian interests than Airbus.

[CerberusIV]

It is already technically possible to build a fighter that can manouver at higher G than a human being can withstand. All they need is to sort out a remote control system. The F22, Eurofighter, etc. will give them 20 to 30 years to do so.

I would not be surprised to see civil airliners flown by computer and without pilots within 20 years.

[Menlas]

Go Airbus !!! The evil imperalist yankee firm bites the dust !!!


More seriously, even if Airbus is almost sure to lead the market until the end of the decade, Boeing will certainly not sink. Indeed the companies have no interest in it : an unique firm with a monopoly could raise his prices without problem, while a solid competitor will lower them. See the processors prices since AMD challenges Intel for example

[Arrian]

I think the larger a company gets, the more conservative it tends to get. Why gamble big when you're in the lead? Nah, minimize risk and hang on. But ah, there's the catch. That doesn't always work.

-Arrian

[yavoon]

Originally posted by Spiffor

Maybe the quality/cost ratio of their planes isn't that great?

whats ailing boeing is that airbus is subsidized entirely by the gov't.

its like competing against france germany and britain.

its nice to know that another GOVERNMENT CONSORTIUM has overtaken boeing for a contract.

[Bereta_Eder]

Originally posted by Spiffor
It's good to see Airbus is finally in the process of becoming equals with Boeing

Equal? Airbus has surpasses Boeing in sales ages ago.

[yavoon]

Originally posted by Colon
I'm not interested in silly nationalism bites.

What fascinates me about Boeing is that this company made huge gambles in the past to build revolutionary new planes, the 707 (world's first commercial jet airplane) and the 747 are good examples. Only a couple of years ago it seemed they'd establish a monopoly by merging with McDonnel Douglas.
These days they've been too chickenshit to rise to the challenge of Airbus' superjumbo and they've lost their market leadership in large civilian aviation. Next to that they've been embroiled in a bribery scandal and now they're getting a big blow in a market that was previously almost solely theirs.

So as case of study in corporate management: what's ailing Boeing?

boeing was probably correct in that there is no way THEY could have built a double decker and made money. a large % of the cost of the jumbo is being subsidized by european taxpayers.

[Bereta_Eder]

Meanwhile Airbus went ahead with A3XX the largest plane to be built in world history. It is a gamble but the initial pre - orders are encouraging. We'll see.

[yavoon]

Originally posted by DeathByTheSword
well a nice story about politics in the aircraft business:

when suadi-arabia wanted to change its aging fleet of boeings they looks at airbus and boeing deals. they picked the airbus one...then the president of boeing called the president of the US with something like: 'we are losing that contract that means people without jobs and that is bad for you'. then the US president called the boss in suadi and told him something like: 'you buy american or you wont get military support'. after that call they bought boeing planes although the airbuss ones were more fit for that particulair job.

the major problem with the aerospace business is that it is so polarized. so that you get the 'us' and 'them' feeling

I agree it is very polarized. I assure u americans dont like losing jobs to uber subsidized french industry(I've talked to them).

this is pretty common tho. france protects its car industry viciously. it bails out its crappy engineers. and it throws money at airbus. viacomm goes around buying everyone(which was a dumb idea). then we all learn its a dumb idea. but thats ok, cuz they're french. so here comes the french gov't.

french companies are awful. they're a drag on competition and a bore to efficiency.

[Spiffor]

Originally posted by yavoon
whats ailing boeing is that airbus is subsidized entirely by the gov't.

"entirely". Probably
I guess they make no money whatsoever because they simply give away the planes, but Boeing ones are so superior some still pay big bucks to buy them

In your opinion, how much of the 19.4 bil. € of this year's turnover are subsidies from the State? I'm very curious...

[yavoon]

Originally posted by paiktis22
Meanwhile Airbus went ahead with A3XX the largest plane to be built in world history. It is a gamble but the initial pre - orders are encouraging. We'll see.

it wasn't a gamble at all. airbus' future was never once in jeopardy.

it could have failed, but it wasn't a gamble.

[Patroklos]

Imagine fighting the Civ AI in air to air combat, I will give the edge to the human.

Of course abolish war and settle disputes with a good game of chess, well them maybe I'd trust a computer for that.