An Inside Look At The Crisis At Boeing, with Bloomberg's Peter Robison

Bloomberg writer Peter Robison conducted more than a dozen interviews with former Boeing employees and FAA inspectors, and went through hundreds of pages of internal emails and records. In a piece entitled “Former Boeing Engineers Say Relentless Cost Cutting Sacrificed Safety” he writes this: “The crisis is best understood as part of a larger drama that’s played out as Boeing has reshaped its workforce in an all-consuming focus on shareholder value.” In that pressured environment, what gets sacrificed on the altar of more profits, now? It wasn't supposed to be this way... If this could happen to Boeing, what’s the lesson for other companies?

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Episode Transcript

Speaker 1 (00:00):
I'm Bethany McClane. This is making a killing in this show.
I cut through the hype and handwringing to reframe the
stories you thought you understood and uncover the ones you
didn't know were important. On October twenty ninth, twenty eighteen,
Lion Air flight six ten took off from Jakarta and

(00:21):
crashed into the Javacy, killing all one hundred and eighty
nine passengers and crew aboard. Less than five months later,
on March tenth, two, nineteen, Ethiopian Airlines flight three O
two crashed over the countryside, killing everyone on board. What
a grim opening for this episode. Put stick with me
as the world now knows. Both planes were Bowing seven

(00:43):
thirty seven Max jets, a new model that had become
the fastest selling plane ever in between the crashes. Bowing
said this, as our customers and their passengers continue to
fly the seven thirty seven Max to hundreds of destinations
around the world every day, they have our assurance that
the seven thirty seven Max is as safe as any

(01:04):
airplane that has ever flown the skies. But it would
turn out that Boeing allegedly knew there was a problem
with a key sensor back in twenty seventeen, long before
the crashes, and there's more to the story. With the
Max's grounding in March. Boeing has now had two airplanes
taken out of the sky by the Federal Aviation Administration

(01:25):
in six years, following battery fires on its Dreamliner in
twenty thirteen. The last model the FAA grounded was the
McDonald Douglas DC ten back in nineteen seventy nine. Now
Boeing is facing congressional scrutiny, lawsuits, and public fury in spades.
At the company's annual meeting in Chicago in April, family

(01:46):
members of crash victims stood outside in a driving rain,
holding up photos of loved ones and signs reading prosecute
bowing and exacts from manslaughter and Boeing's arrogance kills. How
could this happen to Boeing, which was supposed to represent
everything that was best about American manufacturing. Bloomberg writer Peter
Robeson conducted more than a dozen interviews with former employees

(02:09):
and FAA inspectors, and went through hundreds of pages of
internal emails and records, and a piece entitled former Boeing
Engineers Say relentless cost cutting sacrifice safety. He writes this
the crisis is best understood as part of a larger
drama that's played out as Boeing has reshaped its workforce
in an all consuming focus on shareholder value. It wasn't

(02:32):
supposed to be this way. Theoretically, the company that makes
the best, safest product wins competitions should engender a race
to the top, not a race to the bottom. Good
business practices and good profits should go hand in hand.
Helf forget the theory. We have actual proof that this
is the way it works. There are famous examples from
business history. Who can forget Paul O'Neill, who, as Alcoa's

(02:54):
newly minted CEO, gave a speech to the Wall Street
investment community in nineteen eighty seven in which he spoke
not about profits and cost cutting, but rather about worker safety.
He said his goal in the company was to reach
zero injuries. When an analyst asked him about company inventories,
O'Neill replied, I'm not certain you heard me. If you
want to understand how alco is doing, you need to

(03:14):
look at our workplace safety figures. By the time O'Neill
retired in two thousand, Alcoa's market cap had grown nine
hundred percent and worker injuries had dropped to a meniscular level.
Has something changed today? So many companies operate in an
environment of fear. Fear that they'll be taken over if
earning sag, or if they lose ground to a competitor,

(03:35):
Fear that an activist investor will oust management, thereby ending
their rich paychecks. In that pressured environment, what gets sacrificed
on the altar of more profits? Now, if this could
happen to Boeing, what's the lesson for other companies? I'm
thrilled to have Peter here with me from Seattle. After
starting on the Boeing beat in nineteen ninety eight and

(03:55):
then leaving that beat and then coming back to it,
what was your reaction to how the company had changed?
I suppose it was surprise, mostly because the background chatter
and grumbling that I've been hearing twenty years ago from
engineers about how Boeing was moving away from an engineering
focus and was only worried about Shecherholder return seemed to

(04:16):
be coming true. And usually that kind of grumbling remains
grumbling among employees, and it doesn't have what seems to
be such drastic effects, And according to engineers I talked
to for this story, it's the culmination of years of
cost cutting that was aimed at increasing Boeing's profitability. So

(04:37):
you started to hear this grumbling twenty years ago. Yeah,
Boeing had bought McDonald douglass, and at that time there
was a real diversion in the culture between the two companies.
McDonald Douglass I've heard described as sort of hunter killer
assassins of business, and the Boeing people at that time
were described as boy scouts. And Boeing had always been
a very engineer dominated company, many of its CEOs had

(04:59):
been engineer, but McDonald douglass under Harry stone Cipher was
very interested in shareholder return and part of the way
that they tried to do that was by outsourcing a
lot of the technology and expertise to other companies to
keep their own costs down. And that tension was just
starting to play out when I started covering Boeing back
in ninety eight. That's so interesting that the seeds of

(05:21):
this could have implanted so long ago. How was it
Do you think that the acquired company's culture ended up
becoming the dominant one. How does that happen? I think
part of the answer is in the style of Phil Condit,
who was the CEO at that time. He talked about
trying to merge the two companies. The story he told
at the time was that he drew two boxes on

(05:43):
a paper and put himself in one and Harry Stonecipher
in the other, and he said they would work as
a team. As it turned out, according to people I
talked to, what happened because McDonald douglas executives were more
aggressive and we're more used to the sort of corporate infighting,
is that the McDonald douglass style became ascendant and within

(06:04):
a few years Harry stone Cipher was running the company.
Do you think it also what played out at Boeing
tells a larger story of changes in the business world too.
In other words, that grumbling that started twenty years ago.
If our business world hadn't remained and become increasingly relentlessly
focused on shareholder value, maybe it would have played out differently.
Does it tell a larger story of how the business
climate overall has changed? I think it does because what

(06:27):
happened at Boeing is very similar to what happened at
other companies which are manufacturing base. They shifted production overseas
and did whatever they could to reduce costs. In Boeing's case,
that happened in some cases, but you didn't see the
effects for much longer because it takes so much longer
to develop planes. But you know, the people that I

(06:49):
talked to find it interesting that the all new planes
that have been or the new models that have come
out since Boeing bought McDonald Douglass are the seventy seven
Dreamliner and the seven thirty seven Max, both of which
have been grounded by the FAA, and that had not
happened to Boeing before. So let's back up to the
specifics of your story. You begin the story with this
anecdote about level D training. Why did you choose that?

(07:13):
And what larger picture does that tell? It sounds arcane
and technical, but it's important because Level D training signifies
a kind of training that the FAA requires. That means
any pilots flying this new model have to undergo simulator training.
Simulator training is expensive for airlines. It's also disruptive. They

(07:35):
have to run many hundreds or even thousands of pilots
through this training, so it disrupts their flight schedules, and
so Boeing at the time was trying to catch up
with Airbus, which had a competing model that was running
about a year ahead in the planning to Boeings. And so,
according to Rick Ludkey, who's been one of the more
outspoken former Boeing engineers managers from the start, said, you know,

(07:59):
whatever designs come up with, they cannot require Level D training,
which means no simulator training. So that's what they did,
and according to him, it may have led to some
shortcuts in the design and ultimately it led to pilots
getting about an hour of training on an iPad instead
of undergoing a full simulator training on this new model.
That's shocking. An hour of training on an iPad. Yeah,

(08:21):
it used to be that pilots would carry their flight
manuals around in those square suit cases that you would
see them rolling in airports. But they've shifted all their
training onto iPad. It's still an hour of training. And
it's really interesting the picture that paints your A story
begins with one of those perfect anecdotes that really does
sum up this much larger issue. So what role. Did
the fierce competition with Airbus play? I mean, theoretically you

(08:44):
think of competition as this thing that should make everybody
do better, right, But it appears to have been a
more destructive force in this case. Is that fair? It
may have been it just because Airbus had an advantage
in that It's A three twenty is about twenty five
years newer, and so the newer models of the Airbus
A three twenty had a more seamless similarity to the

(09:07):
previous models. And also they use electrical controls. The seven
thirty seven had originally been fled by wire, which means
hydraulically controlled. So it's an older plane that Boeing is
sort of jury rigging electrical control into try to make
it have modern handling, and according to people I talked to,
it ended up with this pury rigged system that was

(09:30):
confusing to pilots. Ultimately, And why did competition have this
negative impact instead of being a positive one. Is it
simply that in today's world, Boeing just couldn't risk losing
to Airbus for even a short period of time that
it would have taken to make a truly better plane. Yeah.
I think the thing that both of them try to
do with These models are very high volume, and they're

(09:52):
the highest source of income for the companies, and they
need to keep their assembly lines full. And if Boeing
had let air Bus get ahead of it with the
A three twenty, I think the thing, the thing that
surprising the most was that American Airlines had said that
it planned to order the A three twenty. American as
a bed rock customer of Boeings, and only twenty years

(10:15):
ago American had said that it would order only Boeing
planes for twenty years. Airbus saying that they wanted to
switch to the E three twenty was a critical moment
for Boeing, and at that point they launched the seven
thirty seven Max, which they hadn't been planning on doing
for several more years. I have this thing that business
stories are always stories about people. So let's let's start

(10:38):
with Dennis Mullenberg. Who is he? Dennis Mullenberg grew up
in Iowa on a farm. He tells a story frequently
about having gone to college at Iowa State and wanting
to grow up to become the world's best airplane designer.
And he had an internship at Boeing in Seattle and
the first time he'd been there for the summer. This

(10:59):
is in the mid eighties, and after he graduated, he
started at Boeing and he remained at Boeing. He's a lifer.
He's been there thirty plus years, so among the engineers
that there's a sense that he is one of them,
although at the same time there's been a lot of
disappointment in his public statements because he seems to huge

(11:19):
these legalistic formulations that seem partly designed to prevent liability
for Boeing, and he seems to struggle with connecting emotionally.
I had someone early on say it sounded like Boeing
statements were written by a lawyer and an engineer, which
is not surprising because they were so Muhlenberg. I also

(11:41):
find interesting because it seems like the kind of crisis
that might push out a CEO. But at this point,
the shares are are hanging pretty tough, and partly that's
because it is a duopoly, and ultimately airlines may not
have much choice, at least until new entrants in China
enter the market. I want to come back to that

(12:02):
because that's a truly frightening point. You also write about
Muhlenberg that he's somebody despite his engineering background, he's somebody
who also pushed for cost cutting, right he is. But
before this story in Business Week, we wrote another story
a year ago at a time when Boeing was writing
about as high as it ever had, at least in

(12:22):
the time that I've been covering it. It had seen
its shares triple in the space of a few years
and was really taking over the mantle from GE, as
you know, the America's industrial champion. And partly that was
because Muhlenberg had followed his predecessor, Jim McNerney, who was
a former GE executive, in pushing for cost cuts, pushing

(12:44):
suppliers to reduce their prices. They had a program called
Partnering for Success, which the suppliers grumbled was called pilfering
from suppliers. So that's part of the backdrop here, is
that Boeing an n Airbus had been pushing the system
for lower prices and cost cuts for years and years.
So is GE going all the way back to Jack Welch?

(13:04):
Is toe the source of all evil? I mean, I'm kidding,
But some of this relentless focus on earnings traces its
way back to Jack Welch right in the ge culture. Yeah,
it's definitely an element of it here. One issue is
that Boeing. Boeing's incentives have pushed it to reduce its
cost of capital. That top executives are compensated based on

(13:27):
a measure that penalizes them for the cost of capital,
so they have more incentive to outsource work. They have
more incentive to return cash to shareholders, which which they've done,
and shareholders have profited handsomely, as have the top executives.
We had a stat that Muhlenberg and McNerney his predecessor,
just since twenty twelve have taken in two hundred million

(13:48):
plus and bonuses and stock awards. And do you think
it's as simple as greed that makes people conform or
push such metrics or is there a fear component too,
and that if they don't deliver, shareholders will find somebody
else who will. I think it's more the fear components.
That there's a moment that I described in the story

(14:10):
where the top executives at Boeing were really fearful that
they would be taken over or pushed out in some
fashion at a meeting in ninety eight, Phil Condit called
his top managers together and said the stock price was
so depressed that Boeing could be taken over, which seems unthinkable,
But at the times its price was only thirty bucks

(14:31):
or so, and now it's three hundred and fifty or so,
and in today's era of activist investing and private equity,
it's actually not unthinkable, right exactly. And we think this
is interesting because there's a component of reality to that fear, right,
It's not just a desire for executives to put more
money in their pocket or focus on shareholder value. There's
a real element of self preservation at work too. Exactly exactly,

(14:56):
it's it's the entire construct which requires these companies to
produce higher earnings and returns for shareholders, no matter what
the circumstances are. So one of the really compelling quotes
there was. There were a lot of them, but in
your story, it was the CFO saying all the way
back in two thousand not to get overly focused on
the box. And what she meant is that the plane

(15:17):
itself was obviously important, but customers knew that, and so
it was time to focus on other things. Did that
strike you at the time or is it one of
those quotes that in retrospect you say, oh my god,
that was a moment. It struck me at the time.
I remember thinking that the customer focus should always be
emphasized as number one, and safety should always be emphasized

(15:39):
as number one in that type of business. And the
message that the CFO at the time was trying to
push was that it was a message to shareholders. It
was that Boeing understands the need for profitability, and so
that's where that quote was coming from. But at the
time I thought it could lead to problems pushed to
its farthest limits, and you were hearing that rumbling all

(16:00):
the way back then, which the quote is. The quote
is part of right. The engineers reacted strongly to that, exactly.
Part of the audience was also the engineers who were
pushing back on the shareholder focus. So this is there's
the Man thirty seven, and then there's the Dreamliner. There's
also this problem too. The New York Times wrote apiece,

(16:21):
and I guess it is the factory that makes the
Dreamliner that this plant was supposed to be trumpeted as
the state of the art manufacturing hub and that too
has been plagued by shoddy production. Is that a part
of this story is as well, that it isn't just
the Max. It isn't just the seven thirty seven Max.
The problems are much deeper. Yeah, and that I think
the way to understand the problems at the plant in

(16:43):
South Carolina that produces the Dreamliner is that that plant
was established because Boeing was trying to control its unions.
Boeing had felt that the unions had the upper hand
because the especially the Machinist Union, could always shut down
production if they struck, which meant that the plant and
evert which produced s wide bodies couldn't produce and so

(17:06):
Bowing had to capitulate. So Boing, as part of a
strategy to increase its leverage against the Machinist Union, opened
this new plant in South Carolina, which analysts at the
time were surprised by because they felt it would be
difficult to replicate the aerospace workforce, the supply base that

(17:27):
Boeing had in Washington. So, and that's exactly what's happened.
There have been numerous documented problems with faulty parts and
ending up on airplanes and quality inspections not catching. I
thought this quote in your story that McNerney jokes on
this conference call with journalists when he's getting ready to retire,
and he joked, the heart will still be beating, the

(17:47):
employees will still be cowering. Yeah, And that was a
striking quote at the time because it was in the
middle of all this conflict with unions and so, you know,
the engineers I spoke was said that at the time
they actually some people had signs on their desks showing
a kind of a cowering middle manager and it said
if I'm not here, I'm probably cowering. That's that's not encouraging,

(18:11):
is it. No, And that's just part of the back door.
I mean, the people that I talked to, you know,
described a really chilling, you know environment. It was the
kind of environment where layoffs were happening, at first voluntary
and then involuntary, and so people didn't feel that they
could speak up. And when I heard that from multiple people,
it began to make more sense how a problem like

(18:34):
the one on the MAX could have developed, which seems
to have been largely because of miscommunications and just sloppy mistakes,
such as an alert that might have alerted the pilots
to the fact that one of the angle of attack
sensors was not working, that was just not hooked up properly,
which which Boeing discovered a year before the first crash.
Explain what that was and how that how that played out,

(18:57):
how that's kind of miscommunication can become something that takes
people's lives. The real problem, at least as pilots describe it,
is that they did not even know that this automated
software system was on the airplane, that this maneuvering characteristics
augmentation system which automatically began pushing the nose of the

(19:18):
plane down when one sensor detected that the nose was
going up too high. Unfortunately, it turned out that this
sensor was faulty and the nose should not have been
pushed down, And when the pilots tried to countermand that order,
the software kept pushing the nose down, which was not
what the FAA had had certified and it was not

(19:40):
the intention of the software engineers at Bowing, and Bowing
has since announced a fix which would take information from
both sensors and would reduce the ability of the software
to continue pushing the nose down, even when the pilots
try to countermand it. And it's really unusual after an
accident to have such clear evidence of what happened. In

(20:04):
many cases, accident investigations don't reach a firm conclusion for years.
But in this case, we had two accidents within five
months where investigators very quickly determined a critical error in
the software. It was crystal clear what the cause was.
But how does that happen. I'm still unclear as to
how that could happen. How somebody couldn't have said we've

(20:27):
got a problem here, especially since they knew it before
the crash has happened. You're hitting on what investigators are
still trying to determine who knew what when, and so
far it seems that the errors were there were honest
mistakes made, or at least that's what people have talked
to assume, you know, barring other evidence. But it may

(20:48):
come back to the fact that this was a compartmentalized
design system where one hand didn't know what the other
was doing. In other words, a mistake of this magnitude
could happen through sheer sloppiness, not through deliberate wrongdoing or
deliberate obfuscation exactly. There's this lawsuit that was recently filed,
and there's an exchange in the lawsuit where a pilot

(21:09):
is heard saying, in this conversation, we flat out deserve
to know what is on our airplanes, and this unidentified
Boeing official answers, I don't disagree, and then a pilot says,
these guys didn't even know the damn system was on
the airplane, referring to the Lion air pilots in their crash,
nor did anybody else, And the Boeing official says, I
don't know that understanding this system would have changed the
outcome of this. In a million miles, you're going to

(21:31):
maybe fly this airplane and maybe once you're going to
see this. Ever, so I wondered if from that there
was this sense that, well, this was just a minor
issue and something we could afford to overlook, rather than
something that was going to blow up into this reputation
destroying thing. Yeah. I think that quote was given to
the American Airlines pilots in November after the first crash

(21:53):
of the Lion airplane, and he was saying, you won't
see this again in a million miles. Well, it happened
within one hundred thousand flights of the plan within five months,
so that conclusion seems wrong. Yeah, it's a really interesting
story about odds, right, that you can try to calculate
the odds of something going wrong and say they're minimal,

(22:14):
but that can actually be an incredibly misleading way to
think about things right. One of the heroes of the
Boeing engineering workforce is a manager named at Well Al
Molalley went on to run Forward. He designed the Triple
seven and had a quote that he would often use,
which is that the problem with communication is the illusion

(22:36):
that it happened. So he would try to manage his
meetings and airplanes with really overcommunicating and trying to make
sure that all sides understood what was happening. And it
seems that Boeing went away from that, and that's another
reason I led the story with that first anecdote, which
shows that Boeing was trying to limit what people knew

(22:58):
and according to when the engineer involved, this was just
to save money that it would have been costly for
airlines and if they had been given all the information
and if there was a new software system that was
introduced on the plane, and that that may have triggered
this additional training, and that's just that better communication would
just be more costly, so therefore keep everything siloed. Exactly

(23:19):
after all these years of covering business, does your gut
tell you that this is a case of sloppiness and
miscommunication rather than something I don't even even know if
it's arguably darker, because sometimes sometimes incompetence is actually more
frightening than malevolence, right, yeah. One of my editors described
this early on as Boeing's Challenger moment, and that's you know,

(23:41):
the famous case where it ended up being this one
faulty o'erring seal that brought down the Challenger and it
shouldn't have flown, and engineers were warning the day before
that the seal couldn't stand up to the cold on
the day that the shuttle flew, and you know, some
of those engineers who tried to stop the Challenger from flying,

(24:02):
you know, we're tormented by it for years. You know,
would talk thirty years later about how they wish they
could have changed their manager's minds about that. And that's
why I'm really interested to see what the investigators turn up,
because that will turn up who said what when you
know there may be a challenger moment that we don't

(24:23):
know about. Did you hear some of that? And you're
reporting some feeling of maybe if I had been louder,
I could I could have done this, even from people
who weren't necessarily central to that issue, but from the
people who were warning that something was going wrong with
the culture for years. I didn't hear that exact tone
of contrition. It was more just how could this happen?
You know, to you know Boeing, you know, this vaunted

(24:45):
engineering company, renowned for meticulous engineering. How could it happen?
And it was it was more just wanting to know
the answers. And there was another scene that we described
for the end of the story where Dennis Muhlenberg came
to meet with the engineers in Seattle, and it was
an emotional meeting. It was introduced by the head of
the commercial airplanes business, and at least one person was weeping.

(25:08):
And then Muhlenberg got up and answered five questions or
so with these artfully vague responses that people have gotten
used to. And this engineer told someone it was a
nothing burger. So they I think that people even within
Boeing want to know how it happens. So there's this
Forbes headline that asks, really bluntly, can Bowing be safe

(25:31):
and profitable? And it was a consultant who used software
to search through Boeing's reports and Airbuses reports to see
how many times each one used the words safe. And
it turns out Boeing only had seventeen words related to safe,
and it's one hundred and fifty four page annual report,
and Airbuses three hundred and twenty four page annual report.
It has one hundred and fifty five words related to safe,

(25:54):
which would ratio wise suggest airs is thinking a little
bit more about safety and Bowing used two profit words
for every safety word, while Airbus's ratios one profit word
for every safety word. Do you think language matters? And
do you think safety and profitability are diametrically opposed or
should they go together? I don't see how safety and

(26:15):
profitability are diametrically opposed, because if you produce the safest
airplane ever, that's the one people are going to want
to fly on, you would hope. So, right back to
something you'd said earlier, why do you think it is
that Boeing stock is holding up as well as it has.
I mean, it's it's way off its peak, but yet
it still is up this year despite these two horrific

(26:36):
accidents in the first two groundings of planes by the
FA since nineteen seventy nine. How does that square It's
because it's ultimately a duopoly and the only option that
customers have is to go to Airbus, which has completely
full assembly lines for several years. So unless further evidence emerges,

(26:57):
or unless there's another crashs are sticking with Boeing, sensing
that it's going to find a way to tough this out.
And do you think that's true? Do you think Boeing
will find a way to tough it out. I think
it's a hundred year old plus company that has incredible
brands and engineering knowledge still behind it. So it may,

(27:21):
but there may be more surprises and bruises along the way.
The duopoly structure is really interesting in the protection that
that affords a company, even as in as precariously seeming
a place as Boeing. Is right, and is it just
that there's literally nobody else other than Boeing and Airbus,
and this business is so complicated and so has so

(27:42):
much history to it that you can't have a new
competitor step up and take one of their places. Yeah,
that is That is the case, and that's probably the
case for ten years or more. You know. Most of
the analysts I talked to are just very skeptical about
new competitors, including China, which has developed a plane of
roughly similar size to the seven thirty seven eight through twenty,

(28:06):
but it's not considered a viable contender at least for
a decade. But the interesting thing for Boeing is whether
customers in Asia stick with it, because Asia is so
much of the market now and Lion Air and Indonesia
is so upset at Boeing for its handling of the
crash and really in blaming the airline's maintenance at first.

(28:27):
So oh did they do that? They blame the maintenance
at first. They pointed very pointedly at several cases where
maintenance steps weren't followed, and Lion Air had not had
a spotless maintenance record. So after the first crash, there
wasn't the scrutiny you saw after the second one, because

(28:47):
this narrative that maintenance may have been partly to blame,
or even more to blame. What's holding Wow, interesting act
of corporate ducking of responsibility? Right to put it kindly,
you could put it. So, why are people skeptical about
the Chinese plane and about the market share that might garner,
Because you know, as you were saying, it is such

(29:08):
a complex product. It's it's millions of parts, it's the
most rigorous safety standards of any product in the world,
and it's a product that involves hundreds of suppliers. They've
everything's got to come together exactly right. And in addition
to that, you know, even if you do make this
plane perfectly, people are going to be reluctant to fly

(29:30):
a brand new plane before there's a track record, and
Boeing and Airbus have track records stretching back decades. And
for all of Boeing's problems, China doesn't exactly have a
great reputation for manufacturing precision either, right, No, no, exactly.
You also write about Boeing's relationship with its regulator, the
Federal Aviation Administration. I've long been fascinated by companies and

(29:54):
their regulators, and there's some maybe not unique things about
about that dynamic. But what surprise, do you the most?
And looking into Boeing's relationship with the FA. This all
happened after I was covering Bowing directly as a beat
and so I was surprised to see how much the
regulatory system had had changed. And it's a system called

(30:15):
organization designation authorization. In this system, it used to be
that the FAA would would have sort of direct managerial
authority over the engineering workforce at Boeing that are responsible
for the safety sign offs. But back in two thousand
and nine, under initiative that started in the George W.
Bush administration, the FAA began shifting that authority to the manufacturer.

(30:40):
And people I talked with said that they noticed the
change that that once Boeing had more authority over the
regulatory process, they started putting more junior engineers, you know,
people that may have been more easily controllable, into these positions.
Self regulation is something that happens in many industries. It's
relatively new in aerospace, at least in terms of this system.

(31:04):
I should say that self regulation has happened since the
FAA was born in nineteen sixty. The engineers have always
had authority to certify the products but there was much
closer supervision before this new system came into ploy. What
brought about this new system, this shift in two thousand
and nine. Is that a story of cost as well? Yeah,
that's a story of lobbying, and that's lobbying by the

(31:26):
aerospace industry but which felt that this system was slow.
They wanted to have the control to keep projects moving
along as quickly as they felt was warranted, and it
took longer when the FAA was involved in directly nominating
an approving individual engineers in the process. I thought there

(31:48):
was a stunning statistic in your story that the fa
says it would need ten thousand more employees and an
additional one point eight billion of taxpayer money each year
to bring certification entirely in house. Those are stunning numbers,
don't you think. Yeah, yeah, it's something that Congress has
gone along with because government is expensive. From where we
sit today, where would you say Boeing is going to

(32:10):
be in five years? Is this going to leave lasting
scars or given this duopoly position, are they going to
be able to effect waltz away from this? They may
be a more clear number two to Airbus in five years,
because even if they are getting some orders for the

(32:31):
seven thirty seven Max. Three twenty seems to have an
advantage in the narrow body planes that are a majority
of the market. And I think the surveys are showing
that a solid number up to half of flyers are
saying they don't want to fly on the Max for
a year. So there may be a sales overhang that

(32:54):
Boeing finds hard to overcome. They may find it harder
to make the profits they've been banking. Would you get
on a seven thirty seven Max. I would after the
FAA certifies it and once international regulators certified, So you
need both, not just the fa You want international regulators
to look at it too. And do you hear anything

(33:16):
from inside Boeing that the engineers think, well, maybe now
we'll start being listened to. Do you think it will
result in a cultural shift of any of any type
inside Boeing? It really depends on how reflective the company is.
I hear from some people who think there may be
a shift. One encouraging thing is that before these crashes,

(33:38):
Dennis Muhlenberg was looking to bring more work in house,
so the avionics sort of cockpit electronics work would have
come back in house, and maybe if we were in house,
you wouldn't have these problems. That that was partly profit
driven as well, because Boeing has been a little resentful
of what it feels are higher profits that some of
the suppliers are getting. But it's a someone encouraging sign

(34:01):
that Muhlenberg is an engineer, So you hope that he would,
even if he's not saying it publicly, would have some
grasp of what the issues are. So I'm going to
be uncharacteristically happy and say that just maybe maybe there'll
be a silver lining to all of this terrible tragedy.
I hope so. On that note, I hope so too,
And thank you so much for taking the time to

(34:21):
chat with me. Thank you it was a pleasure. Before
talking to Peter, I saw the Boeing story as a
terrible tragedy for the passengers and crew who were killed
and for their families. Now I see it also as
a tragic tale of a company that lost its way
and lost its soul and as a result, had what
Peter calls a challenger moment. Was it, like the Challenger

(34:45):
a result of sloppiness, bad communication, and in this case
too much focus on reducing costs or will it turn
out to be something darker and more deliberate? Stay tuned.
What we know for sure is the truth of that
famous Warren Buffett quote it takes twenty years to build
a reputation and five minutes to ruin it. If you
think about that, you'll do things differently. I bet Boeing

(35:08):
wishes it could have done things differently. Making a Killing
is the co production of Pushkin Industries and Chalk and Blade.
It's produced by Ruth Barnes and Rosie Stoffer. My executive
producers are Alison mcclein. No relation in Making Casey. The
executive producer at Pushkin is Mia Loebell. Engineering by Jason

(35:30):
Gambrell and Jason Rostkowski. Our music is by Jed Flood.
Special thanks to Jacob Weisberg at Pushkin and everyone on
the show. I'm Bethany mcclin. Thank you so much for listening.
You can find me on Twitter at Bethany mac twelve
and let me know which episodes you've most enjoyed.