Only time will tell if the actions announced by Boeing’s chief executive Kelly Ortberg on 11 October prove effective.
The sweeping job cuts – a literal decimation of the company’s workforce – and programme changes are part of a plan to “return Boeing to its former legacy”.
There will also be a refocusing on its core competencies; an effort to stop spreading itself too thinly.
As Ortberg sees it, the airframer’s problems are three-fold: it has too much debt; trust in the company has eroded; and serious performance lapses have left customers disappointed.
Cultural change, better programme execution, and achieving financial stability are three immediate priorities.
The latter is arguably the most pressing. In unveiling another set of eye-watering write-downs – driving Boeing to a $6 billion loss in the third quarter, or a $7.7 billion deficit across the first nine months – the manufacturer is clearly hopeful that it can get all of its bad news out of the way now.
Stop us though if you have heard that before. The KC-46 Pegasus tanker in particular has seen so many charges and write-downs it is hard to keep track – but having topped $7 billion in losses last year, the latest $700 million penalty means the programme is now cruising towards the $8 billion mark.
For what was meant to be a relatively straightforward adaptation of an in-production commercial platform, losses of that magnitude are hard to fathom, or excuse.
Ortberg is correct in his analysis that “execution discipline” has been lacking across the business – both in terms of aircraft development, and the bidding process.
In essence, the defence unit continues to be hamstrung by its previous fixed-price bidding strategy; while it has won work as a result, the nature of the contracts leaves no room to manoeuvre in the case of cost or development overruns.
With that in mind, it is entirely possible that fresh future write-downs will be necessary on other programmes – notably the T-7A Red Hawk trainer, which incurred a $900 million charge this quarter, to accompany a $94 million penalty earlier in the year.
In Ortberg’s favour, though, is a total backlog of $0.5 trillion and a solid industry outlook, particularly on the commercial side.
Airlines want new aircraft and they cannot all be supplied by the company’s rival in Toulouse.
Sure, postponing the 777-9’s introduction to 2026 – a jet that was supposed to have arrived in 2020 – does not immediately satisfy that demand, but getting the 737 Max back on track will.
That means resolving the persistent quality issues that have dogged the narrowbody, and persuading the US Federal Aviation Administration to lift the current 38-per-month rate cap.
None of this will be easy. As Ortberg acknowledges, Boeing is a “big ship that will take some time to turn”, but if he can successfully wrestle it in the right direction then there is hope.
Of course, even with the most experienced hand on the tiller, not every vessel responds.
