Boeing’s Downfall - Before the McDonnell Douglas Merger

Boeing seems to be going from crisis to crisis nowaday with its reputation in tatris and the Press reacting to anything that happens to a boing aircraft if it warranted or not the plane just dropped a major shakeup this morning at Boeing there are serious allegations being made today against Boeing by one of its own Engineers but how did we actually get here now most of you would have heard that merger with McDonald Douglas had something to do with it but what well today I'm starting a series on Boeing's Fall From Grace and in this episode I will set the stage by taking a look at the history of Boeing and McDonald Douglas and also to show you how different these Giants were as they headed to a wedding that many of us now wish had never happened stay tuned when we're discussing boing a lot of people including me have been talking about the importance of having a good safety culture this is true for Airlines aircraft manufacturers and their suppliers in order to make sure that their work is transparent consistent and above all safe now in a recent video I mentioned the ntsp and their investigation into Alaska Airlines flight 1282 which lost a door plug shortly after the takeoff back in January and in that video I pointed out the frustration the ntsp investigators felt when they couldn't find out even who had been working on that door at Boeing now ultimately the NTSB chair Jennifer hundy said that Boeing wasn't providing enough information to the agency and her saying that publicly was what caused Bing to finally give the ntsp the names of 25 people who had been working on the door of course that's bad enough in itself but it was made worse by the implication that boing's people simply didn't feel confident enough to come forward a separate FAA invest instigation into Boeing which started a year before the blowout accident showed that Boeing's workers were worried about retaliation if they spoke up even for typical production problem so you can imagine how they felt after an event like that now to understand how boing got to where it is today we really need to talk about something broader which is boing's company culture as a whole meaning its General way of doing business plus and this is super important the relationship between Boeing's management its engineers and its workers because these attitudes and relationships used to be almost the polar opposite of what they now appear to be and to appreciate that change we have to dive a bit deeper into the history of both Boeing and McDonald Douglas now in my Classic series I have looked at the history of some iconic aircraft including the boing 707 but it is worth remembering here that before the 707 Boeing wasn't really thought of as primarily a civilian airliner manufacturer that reputation is actually something that Boeing built for itself after World War II partially thanks to the experience that they had gained by building great bombers like the B17 and the b29 but having that type of experience didn't mean that becoming a successful commercial aircraft maker was easy take for example the boing 377 strata Cruiser which was the company's first post-war attempt to making a large airliner now this aircraft was the commercial version of the c97 Strat of freure a military troop cargo and tanker aircraft which in turn had borrowed heavily from boing's wartime b29 bomber now you might be wondering why the Strat Cruiser isn't better known today and the answer is simple commercially it was a real flop this plane was designed and built to Eclipse competing designs like the loid constellation or the Douglas dc6 and on paper at least it also did have better both weight capacity and range but but sadly the Strat Cruiser just didn't work as well as an airliner for all of its big size and its massive radial engines it usually had seats for less than 100 passengers despite being a double decker like the 747 and the airb A380 now these relative low passenger numbers meant that the plane struggled to make a profit on a lot of routes which obviously didn't impress the airlines those big radial engines also had reliability issues which took years to fix so all in all only 55 Boeing Strat Cruisers ever entered service by comparison loid made over 850 cones and Douglas made over 700 DC 6s and more than 300 DC 7s but luckily for boing they did sell nearly 900 military stret of freighter to the US Air Force mainly the KC 97 tanker variant so while this commercial failure hurt them it wasn't a financial disaster now at at this point you might be asking Peter while all this is super interesting but what does it actually have to do with boing's company culture well what makes this story relevant is the way that boing reacted after they realized that the Strat Cruiser was flopping you see going by recent experiences you might think that they just maybe settled down switch to a more reserved or conservative design something that the economists would love with lower operating cost and Financial safer future but no absolutely not that was instead the time when boing started working on a jetliner now as I explained in my 707 video what makes the development of this aircraft even more amazing is the fact that nobody wanted it at the time Boeing had approached the airlines about it but they just weren't interested even before the structural problems of the DEH havalon Comet became known the airlines could clearly see that this Jets they would have really high operating cost especially compared to older piston engine airplanes and remember when this happened boing's Strat Cruiser had just failed exactly because it was such a huge gas Guster but Boeing's Engineers already had experience with building military jets like the b47 and this meant that they knew that they could give a jetliner enough passenger capacity to make it financially viable even if the high fuel burn of those early jet engines were there so even though no one wanted it it had zero orders and they had just burned in another venture Boeing management still went ahead and approved the development of the 367-80 better known as the -80 back in April of 1952 and just to put that date into perspective the first ever Douglas dc7 which was a piston engine design would fly a full year after the launch of this- 80 and loid didn't stop building late versions of the constellation until 1958 this meant that Boeing's decision to build the -80 was an incredible Financial gamble a true leap of fate and it would cost them $16 million now that might not sound very impressive today but according to the author Martin Bowman those 16 million was 2/3 of all of boing's net profit since the end of the war luckily though this turned out to be a very successful gamble the -80 is the aircraft that would become the prototype for both the military KC 135 and the legendary boing 707 the aircraft which would end up literally shaping commercial Aviation for the rest of the 20th century but what is really important for the topic of this episode is how and why Boeing's management took that super risky decision and also what kind of person was running Boeing back down was it a business school graduate or maybe an engineer well as it turns out it was actually neither of those despite what you might have heard Boeing's Heyday as an aerospace engineering giant came with the company's run by a lawyer and I'll tell you more about that after this boing has been hit by one problem after another lately especially after the revelations brought on by an internal whistleblower in a recent Senate hearing now when it comes to keeping up with the flood of Boeing news I always initially rely on the sponsor of today's episode ground news ground news gives me access to over 50,000 sources from all over the world covering basically every topic that you can think about and that of course includes Aviation so let me show you how they work because it's quite ingenious and if you want to follow through then just go to ground. news/ Mentor here we can see that ground news has got over 90 different sources covering this story and that really gives you a clear picture of what's going on as we can see here 60% of these sources comes from scented leaning Outlets meaning that the coverage is likely balanced and free of substantial political spin perfect for objective research but it is also cool to see all of the different viewpoints in one site because that really gives you a taste of what people on both sides thinks as we can see here for example this right leaning article emphasizes personal responsibility and skepticism of government oversite while this left leaning one instead focuses on criticism of boing's response and the need for corporate responsibility so one story two completely different viewpoints which really helps finding a balanced assessment so to try out ground news for yourself and become more informed about the world around you go to ground. news/ Mentor this will give you a 40% discount on the subscription or let you try it for less than $1 this month thank you ground news now back to the video when William mcferson Allen better known as Bill Allen was first offered the position of president at Boeing back in 1944 he fled out refused it he just didn't think that he was the right guy for the job since this was clearly an engineering company and he wasn't an engineer Alan joined Boeing in 1925 and became a member of its board from 1930 and onwards because he worked for a law firm that represented the company the previous boing president was Philip Gustaf Johnson who incidentally was an engineer but sadly had died suddenly in 1944 so the company needed a new Pres ENT someone who would transition it from a wartime military aircraft maker to a post-war Military and Commercial aircraft Powerhouse and selecting Bill Allen as the next boing president was the idea of the then boing chairman Claremont eget now eget himself was an engineer but he had been with the Boeing Company long enough to remember how they had struggled to switch gears after the first world war under the leadership of another engineer boing's founder William boing eget believed that other senior boing Engineers just weren't business-minded enough to guide the company through the same tricky process now in the 1940s and he thought that bill Allen had demonstrated great management skills when he was working as a corporate Council on the Boeing board when the Boeing group had faced some legal and Regulatory challenges eventually egget convinced Allan that he would be the right man for the job when the time came and as it turned out this was an incredibly accurate Assessment bill Allan became boy president in 1945 and while preparing for his first day on the job he wrote down the following few notes to himself be considerate of my associates views don't talk too much let others talk instead make a sincere effort to understand Labor's Viewpoint and develop a post-war future for Boeing he may not have been an engineer but Allan turned out to be a good listener a great manager of talent which meant that he also earned the trust of his subordinates Allan wasn't just a guy who authorized the build of the 367-80 Prototype alongside that he also oversaw projects including the b47 and the B-52 bombers and he was still running the company when they developed the 727 the 737 and even the boing 747 this was the period when the company earned its reputation as an engineer's paradig Bill Allen himself handled the Strategic side of things while he put engineers in charge of each program so that they could design the very best aircraft they were capable of boing also had a great reputation as an employer for mechanics and all of the rest of their employees at the time but of course there were some occasional problems with some disputes and Strikes that were dating back to before World War II and also keeping the company a float immediately after the war when all of the military contracts were cancelled did involve some really painful redundancy so it was far from all roses here but on the other hand Boeing's Management in the years that followed seemed to inspire a sense of loyalty in its workers which was quite rare at the time you see during the war there had been stories of Engineers and other workers in many companies sleeping in cots at the factory floors but at Boeing there were similar stories even in peace time for example when Boeing launched the 747 it had to build an entirely new Factory for doing that from scratch and that factory by the way is today the biggest building in the world by volume to save time Bo's engineers and mechanics had to start working on the aircraft before the factory was even finished which meant that the place didn't even have a roof when the engineering mockup of the 747 was built and of course it was raining during those months the first actual production 747 was also put together while most of the factory was still open to the elements and the workers who managed to build that plane under these conditions in 16 months became known as The Incredibles and had t-shirts hats and other clothes made up with a special Incredibles Lumberjack logo on them now stories like that are signs of a great company culture with a really engaged and motivated Workforce and even much later in the 1990s there were stories of Engineers mechanics and manag all under the same roof working as a team high-fiving and hugging each other when they had solved serious problems and for me that sounds exactly the like the type of company culture where I would like to work myself now I should point out that at least in the 1950s and 60s there were some specific conditions in the industry that probably helped make boing you know take those kind of bold strategy decisions that they did because you see back then aircraft and engine technologist evolved so quickly that new aircraft sometimes became obsolete even before they entered service so Boeing had to be bowled but also careful at the same time also these were the days before the airline deregulation meaning that airlines in the United States were assigned specific separate routs and ticket prices could therefore be kept quite high now this was a strategic decision by the US government since most if not all manufacturers had both civil and Military contracts and the government therefore needed them to be all profitable and healthy this and the really low fuel prices of that era meant that Airlines had money to spend and they had every reason to compete for the fastest and most comfortable jet the industry could come up with but that didn't mean that becoming a success as a commercial aircraft manufacturer was particularly easy and to understand what I mean by that we have to have a look at McDonald dog and how they did back then compared to Boeing now I want to start here by making clear that at this point in time we're talking about two companies here the McDonald aircraft Corporation and the Douglas Aircraft Company McDonald was a company based in St Louis Missouri and from its Inception in 1938 it was a military contractor who concentrated exclusively on the design and production of aircraft and missiles for the US Military and NASA on the other hand we had Douglas who were based in Long Beach Beach California and was a bit more like boing they made aircraft for the military especially early on in their history but later transition to the commercial market with the legendary dc2 and then DC3 now at this point I should mention that these two activities making military planes or airliners have some really big differences between them scale is one of them where commercial aircraft generally sell in bigger numbers although that wasn't necessarily as true back in the 1950s 60s but more importantly these two markets usually differ when it comes to who pays for the development of a new aircraft design with civilian airliners the aircraft manufacturer usually foots the bill maybe with some help from its key suppliers but by contrast When developing a military aircraft the manufacturer usually charges a price to its laun customer which includes all of the development costs of the aircraft now that often goes really badly wrong when for example a country's Air Force initially orders that say 300 Jet and then later cuts that order to just 150 to save some tax dollars that's when they normally quickly find out that the total cost then doesn't go down by half since the development cost still stays the same now I am obviously oversimplifying things a little bit here and there are definitely exceptions on both sides there are military planes that a company developed as a private vent Venture and airliners whose development was paid for by a launch customer but the point is that military contracts are generally safer or at least give a much quicker return on investment for the manufacturer on the other hand the military Market also tends to be a little bit less stable so for example when a military contract ends and a manufacturer fails to get the next one they could be in for a really long downturn and obviously something like the end of World War II would hit a military own aircraft manufacturer really really hard and as for makers of Civilian airliners as I explained in a recent video they generally take seven or even more years to develop and then often need another seven years to pay for themselves and even longer than that so before the merger with McDonald Douglas found themselves in some real financial trouble a big reason for that seemed to have been that the company just wasn't as bold as boring were with launching new aircraft designs the dc2 and the DC3 had been amazing aircraft but the evolution from these to the four engine DC4 dc6 and dc7 was fairly conservative after the war both Boeing and Douglas were getting military contracts which they used to boost their commercial developments but when for example Boeing developed swept wings and podded engines for their large military jets like the b47 and the B-52 which they could then use in the Boeing 707 Douglas simply evolved its Warf time DC4 with bigger radial engines and pressurization in order to make the dc6 and the dc7 now the Douglas dc8 jetliner eventually sold reasonably well but it only got a fraction of the sales of the Boeing 707 the dc9 also sold well even to a point where it actually worried boing a little bit but Douglas was then behind on deliveries and could really use someone to buy them up someone with some money to spend at the same time McDonald wanted a way into the airliner world so they ended up buying the cash strap Douglas which led to the formation of McDonald Douglas on the 28th of April 1967 so actually that's exactly 57 years before this video was released but in terms of new passenger jet designs the McDonald Douglas partnership didn't really bear much fruit at all technically the dc10 was launched after merger although Douglas had been studying it for quite a while before that and the md11 was really just a derivate of the dc10 while the MD80 family was a similarly updated and enlarged dc9 maybe you start to see a pattern here now McDonald Douglas did work on a number of other projects including a twin engine version of the dc10 with a shorter fuselage and a greater wingspan and they also studied variations of smaller fuselage diameters too but ultimately none of those projects went ahead so why was that then well the answer seems to be because the McDonald Douglas chairman James McDonald or Mr Mac basically just said no despite Airline interest into those projects Mr Mac just wouldn't greenl light the funds needed to launch them now in his excellent book air wars Scott Hamilton explains that the McDonald Management in St Louis never never really understood how the commercial aircraft Market really worked and crucially even after the merge of Douglas the two companies continued operating somewhat independently except that McDonald held the money and therefore also called all the shots so while the merger likely saved Douglas from bankruptcy it also meant that the company now couldn't make its own contracts with suppliers or deal with customers anymore now even a potential deal to collaborate with Airbus in 1976 was shot down from St Louis can you imagine how the history would have looked if Airbus was the one who ended up merging or at least working together with McDonald Douglas and not boing but to be fair here the Douglas management who was still based in Long Beach was routinely making overly optimistic and unrealistic presentations and projections and that led the McDonald Management in St Louis to conclude that they Douglas just couldn't or shouldn't be left to their own devices and take any decisions the ultimate result of this was that the merge McDonald Douglas never really designed an original airliner to the very end they only made derivates of existing designs with whatever improvements they could add retroactively mainly in engines and avionics with the only new large they ever made being the military c17 by contrast in less than 19 years between 1964 and 1983 Boeing introduced five different aircraft types the 7 27 737 747 757 and 767 and that was despite going through the painful boing BST in the late 1960s which I will look further into in another video in the 1990s boing then had to abandon the promising 7 j7 replacement for the 737 and they instead launched the 737 NG but they also launched the Triple 7 which was an incredible Engineers aircraft and it was also a design that showed how successful a potential TW wi dc10 might have actually been if McDonald Douglas would have had the balls to actually do it now McDonald Douglas actually did look at launching a big jet in the 1990s which was going to be a four engine double decker very similar to the Airbus A380 which they dubbed the md12 but it too went nowhere which was probably a good thing given what happened later on to the airb a 380 but what happened when boing and McDonald Douglas eventually merged and why did they even want to merge in the first place well that is what I will talk about in the next episode in this series which will come next week let me know in the comments below if you have any questions about this one or you can also join my Patron crew and discuss this directly with me in our next hangout I would love to hear from you stay tuned for next week and have an absolutely fantastic day bye-bye

Channel: Mentour Now!

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Keywords: airbus, boeing, aviation news, news explainers, aviation trends, aviation industry, airbus vs boeing, US aviation, mentour pilot, mentour now, air travel, spirit airlines, low fare carriers, united airlines, airports, Aviation revolution, New Tech, Fascinating Tech, Things you didnt know, Aviation history, mentour pilot now, door plug, alaska airlines, 737 MAX 9, boeing 737, Boeing, Spirit Aerosystems, boeing news, things you didnt know you needed, hydrogen

Id: ym41Iz68j4s

Length: 24min 24sec (1464 seconds)

Published: Sun Apr 28 2024