Boeing Goes Global

by Mark Worth and Eric Nelson
The Free Press

Boeing, whose name is among the most recognizable of any corporate moniker on the planet, finally seems on the verge of becoming a global company in every sense of the word. And while this corporate awakening may spell good news for Boeing's stockholders, top brass and customers, as well as the capital- and job-starved nations of the Americas and Southeast Asia, the aftershocks will no doubt rattle the Northwest economy to the core.
Boeing, a company nearly as old as human flight itself, is eyeing a far-flung manifest destiny in the Age of Globalization. And it is garnering relatively rare praise - from industry pundits, at least - for keeping up with the rapidly advancing corporate curve. Boeing, rapped over the years for its clunky management style, is winning kudos for doing what major corporations in the 1990s are supposed to do: downsize, subcontract, pursue merger opportunities, slash employee benefits, and offer company executives seven-digit incentives.
Following this new philosophy, managers are tossing out the hundreds of performance indicators that helped make Boeing one of the most successful American companies of this century. Instead, managers will be looking at only four measurements: cost, speed, quality, and customer satisfaction.
Among the stunning results for the company: a more than 60 percent increase in Boeing's stock price over the past 21 months, $10.5 million in combined bonuses for CEO Frank Shrontz and President Phil Condit, a 40 percent speed-up in production since 1990, and a 40 percent drop in the company's tax burden since 1992. Pretty fancy footwork, indeed.
Getting dirt kicked in their faces, however, are tens of thousands of workers who are finding that job security is a thing of the past. With visions of jobs relocating to China or Mexico dancing in their heads, members of the International Association of Machinists and Aerospace Workers on Nov. 21 rejected a contract compromise reached by union and company negotiators.
Strikers, miffed by Boeing's wage and benefits offers, were even more unhappy - if not insulted - by the proposed contract's toothless job security language. Boeing made no promises whatsoever their jobs would be safe for any period of time, only that the union could bid on work proposed for subcontracting, that the company would brief the union on subcontracting plans, and that no on-site production or tooling work would be done by outside workers.
The strike, coming amidst reports that Boeing may merge with competitor McDonnell Douglas, raises the issue of job security to an all-time high level of importance. Certainly, such a colossal merger could trigger the laying off of thousands of workers from both companies. What's more, the corporate giant that would emerge would have the enhanced power and prestige to seek even more foreign production and subcontracting opportunities. Anyone doubting this is sadly mistaken. Long-time industry analyst Wolfgang Demisch of Manhattan's Bankers Trust Securities recently remarked to Aviation Week, "Boeing is quite unsentimental about contracting offshore."
Already, as part of a multibillion-dollar deal to sell jets to China, Boeing will buy 1,500 tail assemblies for the 777 from a Chinese subcontractor. Such "offsets" not only mean fewer jobs for Americans and more red ink to the U.S. trade deficit, but also the exportation of precious technology from one of the few industries in which the U.S. can still claim to be a world leader.
Such deals may yield gains in Boeing's earnings and stock prices, but the long-term costs could be devastating. In the next five years, for example, up to 250,000 U.S. jobs in the aerospace and related industries may be lost due to offsets and increased foreign competition, according to a study by the Economic Policy Institute, a respected Washington, D.C. think-tank.
Key Boeing competitor Airbus Industrie has exhibited more willpower against succumbing to buyers' demands for subcontracting work. With its global market share continuing to grow, the European consortium hasn't seemed to suffer as a result of sticking to its convictions.
Meanwhile, Boeing, and for that matter McDonnell Douglas, has not exhibited such restraint. "The process is like kids acting on dares - who'll go the furthest in granting offsets," Demisch told Aviation Week. "At the end of the day, U.S. companies are going further than they really wanted to."
There's more to Boeing's offset deal with China than meets the eye. In the short term, the company will save money by purchasing the less-expensive 777 tail assemblies. But down the road, the blossoming relationship could pay spectacular dividends for Boeing, while costing the United States jobs and economic vitality.
Here's why: For years, China has been building McDonnell Douglas jets under license from the company. And, in 1992, Douglas' commercial airline division merged with Taiwan Aerospace. Over the next decade, more commercial jets will be sold to Asian countries than any other region of the world. With Boeing already dealing with China and talking merger with McDonnell Douglas, Boeing could cash in to the tune of hundreds of billions of dollars in sales as a result of its expanding relationships with Asian economic and political leaders.
And, with relations improving between China and Taiwan, McDonnell Douglas' dealings with both countries would pay off in a big way if the Boeing/Douglas merger materializes.
IAM International President George Kourpias is scared. "By sending high-skill jobs and production all over the world," Kourpias told Aviation Week, "Boeing is punching holes in America's future." Researchers at the Economic Policy Institute warned likewise: "Technological transfer will hasten the development of a new generation of commercial and military competition."



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Contents on this page were published in the December/January, 1996 edition of the Washington Free Press.
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