What Really Wrecked Boeing

It wasn’t just missing bolts. It was the neoliberal philosophy that led to a commitment to crushing its unions.

By David Goldstein

Tagged BoeingEconomicsneoliberalism

When a faulty door plug explosively blew out the side of Alaska Airlines Flight 1282 three miles above Portland, Oregon, back in January, leading to the massive recent corporate shakeup at the company, it wasn’t just shoes, cell phones, seat cushions, and the gasping breath of terrified passengers that got violently sucked into the cold, thin air. Out through that gaping hole in a spanking new 737 MAX 9 flew the last tattered shreds of Boeing’s once lofty reputation. And whatever the proximate cause of the aircraft maker’s latest self-described “quality escape,” the root cause was clear:

It was neoliberalism.

Neoliberalism is an ideology that attempts to subject all of human activity to the invisible hand of the market, and since 1997, when Boeing acquired rival McDonnell Douglas (and more consequentially, its management), it has been neoliberalism that has guided the company on its decades-long flight from quality. It was neoliberalism that persuaded Boeing’s new management that its only fiduciary responsibility was to maximize value for shareholders. It was neoliberalism that caused management to fritter away the most skilled, experienced, and proud workforce in the industry. It was neoliberalism that literally unhinged Boeing from its glorious past.

Don’t take my word for it. Harry Stonecipher, the former McDonnell Douglas CEO who eventually assumed the reins at Boeing, was never shy about his management philosophy. “When people say I changed the culture of Boeing, that was the intent, so that it’s run like a business rather than a great engineering firm,” boasted Stonecipher—who was apparently blind to the irony that it was this “great engineering firm” that had acquired his struggling aircraft business, not the other way around. Sure, Boeing may not have been “run like a business” to Stonecipher’s neoliberal standards, but that hadn’t stopped it from thoroughly outcompeting McDonnell Douglas, Lockheed Martin, and every other rival on its way to becoming the largest commercial aircraft maker in the world.

But while the loss of its engineering culture surely contributed to Boeing’s recent string of near and actual midair disasters—including two MAX 8 crashes that tragically killed 346 people in 2018 and 2019—it wasn’t only its engineers who were the target of Stonecipher’s cultural revolution. It was also its machinist union, a fact made clear by the company’s internal debate over what it codenamed “Project Gemini.”

Obtained under subpoena by the National Labor Relations Board (NLRB) in 2011, the Project Gemini documents meticulously laid out for Boeing’s board of directors the pros and cons of moving a 787 assembly line from its unionized plant in Everett, Washington, to a new non-union facility in South Carolina. And though the board predictably chose the non-union option, throughout the documents the pros were consistently lopsided in favor of consolidating 787 assembly at the company’s legacy factory in Everett.

Boeing had determined that choosing the Everett line would result in lower start-up costs, faster ramp-up times, higher productivity, and a simplified supply chain, whereas a South Carolina line would introduce further production delays, rely on an “inexperienced workforce,” and result in a “negative impact to 787 program profitability.” Yet although the Project Gemini documents estimated that South Carolina would cost an additional $1.5 billion up front while reducing earnings on one-third of the 787 backlog, not even the usual neoliberal obsession with maximizing short-term profits could veer the directors from their ideological autopilot.

So why did Boeing choose South Carolina over Everett? The answer is repeated throughout the Project Gemini documents: “Creates a competitive labor choice and counterbalance to union leverage.” “Lowers labor costs and avoids current hostage situation.” “Leverage 787 final assembly placement decision by rebalancing an unbalanced and uncompetitive labor relationship.”

In other words, Boeing was determined to crush its unions.

The board fully understood the risks posed by Project Gemini, including “if poorly executed, additional loss of reputation,” but the decision to locate that 787 assembly line in South Carolina wasn’t really about the 787 at all. No, the “Strategy/Purpose” of Project Gemini was clearly stated at the top: “Solution for establishing long-term manufacturing capability outside of Puget Sound, starting with a second 787 final assembly line and progressing to the next new airplane program.”

That next new airplane program? You guessed it! It was the 737 MAX.

The 737 family is the best-selling commercial aircraft in aviation history. With over 11,600 planes delivered and 18,000 ordered since it was first introduced back in 1965, it has long been Boeing’s cash cow. So, while the 787 “Dreamliner” may well have been a technological showcase of widebody innovation, it was the far more in-demand fourth generation 737—and its thousands of preorders—that the board was counting on to really put the “MAX” into shareholder value maximization. The “run like a business” logic was clear: Any 737 concessions Boeing could squeeze out of its unions would surely pay dividends for decades to come, and if that meant sacrificing a little profitability on its much less lucrative 787 program, that was a small price to pay.

And by neoliberal business standards, the strategy worked. Spooked by the loss of thousands of 787 jobs to non-union South Carolina, Boeing’s machinist union agreed to humiliating concessions in exchange for keeping 737 MAX final assembly (and a couple years later, the 777x) in the Seattle area, including higher health care costs, the elimination of traditional pensions, a morale-busting two-tier wage system that protected incumbent workers at the expense of newcomers, and a long-term contract that ultimately delivered a mere 4 percent wage increase over an eight-year span. The machinists also dropped the unfair labor practices complaint that had exposed Project Gemini before the NLRB investigation could reveal additional embarrassing (or incriminating) documents, and perhaps more importantly, all but abandoned its fight against Boeing’s aggressive move toward outsourcing major aircraft components—including the MAX’s largest component, the fuselage, to Spirit AeroSystems in Wichita, Kansas, the facility at which that faulty Alaska Airlines door plug was initially installed.

According to an anonymous whistleblower whose detailed allegations were authenticated by Seattle Times Pulitzer Prize-winning aerospace journalist Dominic Gates, the door plug arrived at Boeing’s Renton, Washington 737 assembly facility with “damaged and improperly installed rivets” and at some point a “damaged pressure seal,” setting off a cascading series of procedural errors by Boeing and Spirit workers that ultimately led to the plug being removed but never properly reinstalled and inspected. The whistleblower alleges that Boeing’s own records show that the four bolts that secure the door plug to the frame “were not installed when Boeing delivered the airplane” to Alaska Airlines, a claim later confirmed by a National Transportation Safety Board investigation.


Whether the door plug was initially damaged at the Spirit facility in Malaysia where it was manufactured or in Wichita where it was installed or in transit from Malaysia to Wichita to Renton, we may never know. But regardless, this wasn’t just some one-off event. The whistleblower claims that Boeing recorded “392 nonconforming findings on 737 mid fuselage door installations” alone over the previous year. That’s just on one component out of thousands, “a hideously high and very alarming number.” In an unrelated revelation, Spirit recently announced that it had discovered “improperly drilled holes” that would force Boeing to rework the fuselages on about 50 unfinished 737s. “[G]iven the enormous volume of defects they were already finding and fixing,” the whistleblower lamented, “it was inevitable something would slip through.”

If there is chaos and dysfunction at the Renton facility (“a rambling, shambling, disaster waiting to happen,” says the whistleblower) it should come as no surprise. Reports from workers of fear and loathing on the factory floor—of “pressure,” “intimidation,” “retaliation,” “fatigue,” and “low morale,” for example—have been rampant for years and so numerous that you could literally write a book about it. And after two decades of layoffs and threatened layoffs and early retirements, Boeing is now struggling to hire enough qualified workers. No wonder. What was once a great-paying job is now just a job. The Seattle area is a pricey place to live, but according to the machinist union, wages for entry-level hires start at just $23 an hour, while a quick search of Boeing’s website found jobs listed as low as $18. By comparison, Renton voters recently approved a $20.27-an-hour minimum wage scheduled to go into effect on July 1. Sure, the opportunities for career advancement are probably better on Renton’s 737 MAX line than at the Five Guys down the street, but with Boeing constantly threatening to move jobs elsewhere, who would be foolish enough to count on that? And given that Boeing spent an incredible 121 percent of profits on stock buybacks and dividends between 1998 and 2018 (money that could have been spent on, say, quality control or on wages), there’s little reason for prospective workers to expect the company to invest much in them.

And it’s not just Boeing’s unions, customers, and Row 26-adjacent passengers who are paying the price of Boeing’s war on workers. Ironically, Boeing’s shareholders are too. While the Project Gemini documents had anticipated risks from “additional supply chain complexity” and “labor morale/disruptions on existing programs,” they had in fact grossly underestimated the ultimate cost. “Run like a business” Boeing delivered the first 787 three years late and $25 billion over budget. More than a decade later the program has yet to turn a net profit. The two 737 MAX 8 crashes and subsequent 20-month grounding cost Boeing $20 billion in fines, compensation, and legal fees, plus an estimated $60 billion in losses from about 1,200 cancelled orders. And while the dollar cost of the recent MAX 9 blowout is currently unknown, the reputational cost, as always, will be severe. Boeing is no longer the largest commercial aircraft maker in the world. That honor now goes to Airbus, whose A320 family (some of which are competitively assembled by French workers famously guaranteed six weeks of annual paid vacation) will soon pass the 737 family as the best-selling aircraft in commercial aviation history.

In March, Boeing announced that CEO Dave Calhoun and board chairman Larry Kellner would step down, along with Stan Deal, the head of its commercial aviation division. But it may be too late for a management shakeup to pull the company out of its reputational nosedive. Boeing’s stock has lost about a quarter of its value since January. MAX 8 and MAX 9 deliveries slowed substantially after federal regulators stepped up scrutiny, while Boeing’s ongoing failure to obtain certification for its new MAX 7 and MAX 10 models has forced customers to eliminate flights, furlough pilots, and cancel orders. The Justice Department has opened a criminal investigation into the MAX 9 blowout. Three years ago, Boeing had avoided criminal charges over the two deadly MAX 8 crashes after entering into an agreement with federal prosecutors that, among other conditions, required the company to strengthen its quality control. In an extraordinary stroke of bad timing, that agreement expired in January, and prosecutors are now considering whether to move forward with charges,

Calhoun will depart with a golden parachute worth tens of millions, but if there’s anyone at Boeing worth that sort of money, it’s the company’s beleaguered PR department.

Boeing’s dominance didn’t have to end this way. When I moved to Seattle in 1991, “Jet City” was no longer the company town it once was, but I was still taken aback by the amount of genuine pride locals held for Boeing and the planes it produced. Seattleites cheered for new Boeing orders the way other cities cheered on their sports teams: “If it’s not Boeing, I’m not going!” That’s why when Seattle was awarded an NBA franchise in 1967, it was proudly named the SuperSonics, and when the city was briefly home to an MLB team in 1969, they were called the Pilots. It seemed like everybody had somebody—a friend or relative, a parent or grandparent—who worked for Boeing or a Boeing supplier, or whose home or health care or education or livelihood had at least in some way been touched by Boeing. Boeing had helped build Seattle. But the pride I saw was rooted in the shared belief that the people of the region had helped build Boeing.

This is something that Boeing’s carpetbagging neoliberal usurpers never understood or appreciated: that you can’t put a price on the passion and loyalty of your workers, and that you can’t model the enormous costs of undermining the reciprocity norms on which your long-term prosperity relies.

There are few products as complex as a modern jetliner, and the greater the complexity embedded in the aircraft, the more complex the networks of highly cooperative specialists required to create it—from the machinists to the inspectors to the engineers and yes, even to the corporate bean counters in the corner office. It’s a complexity that Boeing further exacerbated through the intricately complex supply chains it constructed in pursuit of disempowering workers and cutting costs. But increased complexity requires increased cooperation, and importantly, cooperation is always grounded in trust. So, when a trove of internal messages obtained by congressional investigators in the wake of the two MAX 8 tragedies revealed a 737 MAX worker complaining, “I honestly don’t trust many people at Boeing,” the writing was on the wall. It had taken 80 years to nurture and build the complex networks of knowledge, knowhow, cooperation, and trust from which Boeing had so spectacularly prospered, but only a decade or so to blow it out a door plug at 16,000 feet.

Boeing was always more than just a great engineering firm. It was a great manufacturing firm, and great manufacturing firms are built by great workers—something Boeing didn’t so much lose sight of as intentionally misplace: “When the headquarters is located in proximity to a principal business—as ours was in Seattle,” then-CEO Phil Condit explained in 2001 about why Boeing was moving its headquarters to Chicago, “the corporate center is inevitably drawn into day-to-day business operations.” As if that’s a bad thing.

Unbolted from the factory floor, Boeing’s neoliberal regime was always doomed to fail.

Read more about BoeingEconomicsneoliberalism

David Goldstein is a senior fellow at Civic Ventures and the co-host of the podcast "Pitchfork Economics with Nick Hanauer."

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