Boeing facing the music

[Just Jeepin']

Under the terms of the DPA, Boeing will pay a total criminal monetary amount of over $2.5 billion, composed of a criminal monetary penalty of $243.6 million, compensation payments to Boeing’s 737 MAX airline customers of $1.77 billion, and the establishment of a $500 million crash-victim beneficiaries fund to compensate the heirs, relatives, and legal beneficiaries of the 346 passengers who died in the Boeing 737 MAX crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302.

https://www.justice.gov/opa/pr/boeing-charged-737-max-fraud-conspiracy-and-agrees-pay-over-25-billion

[6MT_FTW]

@just-jeepin With all of these fine and penalties you have to wonder what would have happened if they took that same amount of money and used it to develop a new narrowbody instead of building the Max.

I'm sure that this amount is cheaper than developing a new airplane, but when you try to figure in the intangibles such as loss of stock value and damage to reputation you have to wonder...

[ranwhenparked]

@6mt_ftw As of 2011, Boeing estimated the cost of an all-new 737 replacement at $10-12 billion and about 8 years.

Not including today's announcement, the 737 Max has cost about $26 billion (about $6 billion in initial development, nearly twice the original estimates, +$20 billion in fallout from the grounding) and almost 7 years (original development, plus recertification after grounding).

[Just Jeepin']

@ranwhenparked Whoops!

[facw]

@ranwhenparked My understanding is that they were less concerned about the development costs, and more concerned about losing customers if airlines had to recertify for a new type. I assume that sort of cost is not represented in your numbers. A 737 costs somewhere around $100M, so it doesn't take many lost sales to add up to big money (of course they've lost sales anyways by screwing up the development).

[chan]

@just-jeepin I still don’t feel comfortable with the MAX.

[LooseonExit]

@Just-Jeepin Serves them right and not enough of a fine IMO. The have serious cultural issues and there's no proof that's changed. They've just been lucky until their negligence bit them in the ass with the Max. It should be the safest plane now, but I'm not looking forward to flying on them when I get back to doing that. Because it's tainted and they're tainted and I'd rather ride Airbus or RJ's until they unfuck themselves.

[MisterButtercup]

@chan Agreed. Glad I don't usually fly, and will be checking what airplane I'll be on the next time I do...

[ranwhenparked]

@facw That was held out as a selling point with the Max, but I believe the A320neo was the most immediate cause - they were surprised by Airbus' re-engining announcement, and didn't want to have to keep selling the now-outclassed 737 Next Generation for the length of time it would take to get a new plane into production. The Max was supposed to be a quick stopgap to maintain market share against Airbus, getting into service in roughly half the time.

[nowhere]

By 2019 in the six previous years Boeing had spent a total of $43,400,000,000 on share buybacks. That shows pretty clearly what management considered their top priority.

[ranwhenparked]

@looseonexit I wonder if part of the problem with Boeing is similar to what happened with the US shipbuilding industry - they got fat and happy on government contracts with nearly endless development schedules that constantly slip and bottomless, taxpayer funded budgets, all from a customer who can't really go anywhere else - and lost their edge when it comes to competing in the private sector.

Its like they've completely forgotten how to develop new commercial planes and bring them to market in a timely and cost effective manner. They used to do it all the time in the 1950s and '60s, but they've only managed 2 new models in the past 30 years, and the latter one, the Dreamliner, went years behind schedule and significantly over budget, and still had that embarrassing lithium ion battery pack problem after getting into service. It seems like each new program becomes a bigger clusterfuck then the one that went before.

[gmporschenut also a fan of hondas]

@facw That and the time to bring to market

[6MT_FTW]

@nowhere I just wonder if, when all of the former McDonnell Douglas management is finally squeezed out, Boeing will ever go back to be being a company driven by engineering or if they are forever tainted. That merger seemed like a good idea, but 20+ years later the extreme cost-cutting mentality it brought seems to be taking the company down from within.

[іди на хуй Влад - formerly known as Distraxi]

@just-jeepin

deceived the FAA regarding the Maneuvering Characteristics Augmentation System (MCAS) meant to stabilize planes at a high angle of attack.

accountable for its employees’ criminal misconduct

a criminal monetary penalty of $243.6 million

(all quotes from @Miss-Mercedes jellypink article)

Is it just me, or have Boeing and its management got off pretty darn lightly here compared with (e.g.) the drubbing VAG got for dieselgate, which didn’t directly kill 300+ people.

[facw]

@distraxi Not directly, but VW's excess emissions are responsible for many more deaths than that.

And there is the critical difference that even as Boeing was dishonest with the FAA, they didn't think they were shipping an unsafe airliner, while VW knew that their emissions were really much higher. For the most part you were looking at incompetence rather than malice (though incompetence that might have been noticed by the FAA had Boeing been forthright in their declarations).

But yeah, also no surprise the government went harder after a foreign company than a US one. Presumably Boeing gave the same sort of misleading statements, half-truths, and omissions to the EASA for their certification process, and it will be interesting to see if they come down harder.

[nowhere]

@6mt_ftw Unfortunately none of the people responsible for taking it down that way will suffer at all. On the contrary, they'll be richly rewarded.

[RacinBob]

There are three narratives here.

The first is Boeing's legitimate interest to serve their customer's desire to not have to be retrained for flying the 737 max. I think its hard to underestimate how nice it is for Southwest to be able to to have any one of their pilots to be able to jump onto a 737 max without needing training and qualification first. The flight augmentation system was intended to make a Max fly like any other 737. Its too bad that they did it in such a hamfisted way.

The second is there is a huge base of 737 users and ecosystem that the 737 max assumedly plugs into . An all new Boeing aircraft won't plug into it and upsets the applecart. Abandon the 737 platform and customers will ask do I want the new platform or do I want Airbus.....

The real fault in this is that Boeing leadership subcontracted the avionics software development without adequate supervision and testing. Remember there were at least two major issues. The augmented flight control, and also that the digital control design had fault modes and poor redundancy that FAA discovered when they really dug into it. I believe most of the downtime was due to the need to redesign and re-qualify the entire control system so that it conformed to FAA standards, not just fix the FCAS.

Now, having FCAS and keeping the legacy 737 platform were well considered decisions. This was not mismanagement. But the craptastic way that Boeing outsourced the software development, rushed its production. and minimized their management is something that clearly falls at leadership's feet. Unfortunately, leaders sometimes forget that they are playing with lives and betting the company. And also unfortunately companies tend to promote and reward the managers who promise the most and forget this the best.

[ranwhenparked]

@racinbob And the first people to lose their jobs when the company starts feeling the financial fallout tend to be ones who had nothing to do with the problem, about 20,000 layoffs at Boeing so far, and that's probably not the end of it

[Adabofoppo- Has Gone Plaid]

There is no way that fine was double the amount of profit they have seen from sales of that plane.

If we want corporations to stop fucking us over and considering fines as simply an expense of doing business, we need to start making them pay any and all profits (I would argue for doubling those amounts to make it especially painful) and jailing the C-suite suits involved.

[flatisflat]

@ranwhenparked This reminds me of that Fight Club scene where Edward Norton's character talks about the auto manufacturer's accounting for if/if not to submit a recall. Sounds like Boeing calculated "correctly". Which is gross.