Author Topic: Thoughts on Boeing  (Read 4468 times)

blue_green_sparks

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Thoughts on Boeing
« on: July 11, 2024, 09:32:32 AM »
Bargain buy right now or is Boeing doomed? Decades of pushing for deregulation didn't work out too well. 70% drop in sales. Had the FAA in their pocket like so many nickels and dimes. Yeah, oversight and regs are so wasteful while they are working. Till airplanes fall out of the sky.

franklin4

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Re: Thoughts on Boeing
« Reply #1 on: July 11, 2024, 09:41:25 AM »
Boeing isn't doomed - there is no way the gov't will allow it to fail and stop producing planes/rockets/etc for the military. Chances are it will improve its culture and reputation eventually and the stock will rise but that could take a long time!

LaineyAZ

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Re: Thoughts on Boeing
« Reply #2 on: July 11, 2024, 09:46:10 AM »
I'm less concerned about their stock prices and more concerned about the disastrous switch of leadership from engineers to MBA bean counters.  Frontline had a great documentary on exactly what happened and when.

If Boeing reverses course and allows engineers to again be in charge, then safety will again take priority over executive bonuses and shareholders.

Heckler

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Re: Thoughts on Boeing
« Reply #3 on: July 11, 2024, 10:45:14 AM »
I think Boeing is a part of VTI.  Other than that, the only thought is please don’t die every time I or someone I know flies.

J.P. MoreGains

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Re: Thoughts on Boeing
« Reply #4 on: July 12, 2024, 02:07:20 PM »
Opposite of Demming philosophy

https://deming.org/learn/about-dr-deming/

RobertFromTX

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Re: Thoughts on Boeing
« Reply #5 on: July 12, 2024, 03:23:23 PM »
I tried to talk a friend out of buying Boeing stock after the first Max crash.... 5 years ago. Oof.

ChpBstrd

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Re: Thoughts on Boeing
« Reply #6 on: July 22, 2024, 03:31:06 PM »
It makes me grateful not to be a stock picker. Who could have foreseen the disasters just based on annual reports, financials, and executive statements?

The Most Intriguing Investment thread has been a humbling experience since I started it. Just the evidence I needed to stick with index funds.

Telecaster

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Re: Thoughts on Boeing
« Reply #7 on: July 22, 2024, 03:48:47 PM »
Boeing's upper management including the last four CEOs have all been Jack Welch acolytes, either having worked for Welch directly at GE or were influenced by him.   That means reducing jobs, closing plants, spinning off companies, curtailing investment in new products, etc.    That's great for the stock price, but you can only follow that strategy for so long until you wind up like GE.   A shallow husk of the company that it used to be.   


ChpBstrd

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Re: Thoughts on Boeing
« Reply #8 on: July 22, 2024, 04:51:01 PM »
Boeing's upper management including the last four CEOs have all been Jack Welch acolytes, either having worked for Welch directly at GE or were influenced by him.   That means reducing jobs, closing plants, spinning off companies, curtailing investment in new products, etc.    That's great for the stock price, but you can only follow that strategy for so long until you wind up like GE.   A shallow husk of the company that it used to be.
Avoiding this management style should be an investing style.

Must_ache

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Re: Thoughts on Boeing
« Reply #9 on: July 22, 2024, 09:59:00 PM »
Why is it a bargain?  It took a tumble in 2020 and its stock price has been more or less flat for 4+ years. 
2020 58.2B Revenue, -11.9B Net Income
2021 62.3B Revenue, -4.2B Net Income
2022 66.7B Revenue, -4.9B Net Income
2023 77.8B Revenue, -2.2B Net Income
Obviously in order for the stock to be worth something, there are assumptions that the net income eventually goes positive. 
Are those assumptions going to hold?  How do I know?  But I wouldn't go looking to invest here.

marcus_aurelius

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Re: Thoughts on Boeing
« Reply #10 on: July 22, 2024, 10:09:59 PM »
If you don't need the money for 5+ years, it's a good idea to buy Boeing. I bought $5000 worth of stock when it hit $200. Why?
  • Increasing demand. Revenge travel is happening in a big way right now. Plus the world is getting richer and air travel is increasing long term. There are only 2 companies - Boeing and Airbus - to meet this increased demand.
  • In some time, Boeing's troubles will be behind it (new management, new processes, etc.) Revenues will increase as pent up orders come in.

ChpBstrd

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Re: Thoughts on Boeing
« Reply #11 on: September 13, 2024, 08:51:53 AM »
BA is now down to about $160 and facing a strike. Problems in one area of a company (e.g. quality) may seem easy enough to solve, but they lead to other problems in seemingly unrelated areas. The quality issues have led to a mentality among workers that they'd better get a fat contract to extract as much value for themselves as possible before the layoffs come in a couple of years. The same layoffs of engineers, lean staffing on the assembly lines, and diffuse supply chains that led to the quality problems are now factors making it harder for BA to drop their worst planes and come out with a new product. Meanwhile, the company's reputational hit and future uncertainty will make it harder for them to attract the talent needed to turn things around. Eventually, the ratings agencies will downgrade BA, raising their cost of capital. Management will become distracted by activist threats and throw tens or hundreds of millions of dollars at that problem, further depleting the company's resources and making all the other problems worse.

Boeing's upper management including the last four CEOs have all been Jack Welch acolytes, either having worked for Welch directly at GE or were influenced by him.   That means reducing jobs, closing plants, spinning off companies, curtailing investment in new products, etc.    That's great for the stock price, but you can only follow that strategy for so long until you wind up like GE.   A shallow husk of the company that it used to be.
Avoiding this management style should be an investing style.
I keep returning to this idea - that identifying features of mismanaged companies could be a way to avoid losses or find short candidates. This article, in a corporate governance blog/magazine seem to identify a few key features that lead to a specific path to failure:
  • Company is in a technical field but management/CEO often have a degree in business administration or law.
  • Cost cutting or financial engineering is management's focus, rather than developing great products.
  • Management expresses a "shareholder capitalism" mindset that disregards the continual creation of value for customers in favor of financial efficiency.
  • The firm is thought of as a "grab bag" of unrelated parts that can be bought and sold, merged and divested, without much thought to how the pieces come together for customers or how the employees relate to the firm.
  • The firm is risk-averse to developing new products, lowering prices, or cannibalizing its own sales with new and improved products, but risk-seeking in term of mergers, spinoffs, reorganizations, leverage, or labor disputes.
Today we're joking about companies like Apple, Alphabet, Meta, Tesla, and several major pharmaceutical firms not creating a significantly new breakthrough product since their initial hits, and in fact laying off the talent that produced their blockbuster products.

Yet I wonder if we're still not seeing just how bad things have gotten, and are again taking companies' leadership positions and growth rates for granted. Perhaps these fish are currently rotting from the head down, informed by the same management culture and short-term executive incentives that ruined former technology leaders GE, Sony, Intel, IBM, and... Boeing.

What's scary is how these zombie companies have become such a large part of the indices. Investors have absolutely not gotten the memo about value-destructive management tactics that pump the numbers in the short term but cripple companies in the long term. Thus the incentives are still in place for management to destroy their companies, harvest their stock options with each quarterly beat, and ride their golden parachutes on the way out. It just keeps happening.

What's curious is how this managerial culture emerged during some of the lowest interest rate decades in history - the 2000's and 2010's, and it seems to continue now that stock valuations are very high. Low rates and high valuations mean investors are primarily assigning value to cash flows occurring in the distant future. So why are investors rewarding companies that are potentially sacrificing long-term stability for the sake of not disappointing analysts each quarter? You'd think a short-term mindset would emerge when rates are highest, not lowest!

My best guess is that corporate leaders are assuming technological change will eventually leave them in the dust, even if they run everything responsibly. However this attitude would have to not be shared by investors, who are buying at prices and interest rates that assume decades of future cash flows. Management is right because they can make their vision happen.

Michael in ABQ

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Re: Thoughts on Boeing
« Reply #12 on: September 13, 2024, 09:58:26 AM »
On the defense side I could see Boeing getting supplanted as a prime contractor. Anduril is coming up quickly and getting away from all the BS of Boeing and other defense contractors who try to spread their supply chains as far and wide as possible to get the most congressional support while making a relative handful of bespoke extremely expensive weapon systems and coasting on decades of maintenance with cost plus contracts and capture of the defense industry through a revolving door of senior military and civilian leaders.

Look at how SpaceX has pretty much destroyed their space launch business line. The Boeing Starliner is a financial failure - due in large part to all the issues of Boeing's culture and structure of spreading things out over hundreds of other subcontractors. Meanwhile SpaceX vertically integrated and was able to be far more efficient. Boeing can't handle a fixed price contract as their whole defense business model is based on cost plus and milking that for every dollar.


If I had to choose a company to invest in, the one that controls as much of the process in-house versus the one that outsources everything it can - it's a no-brainer. All that stuff sounds good on paper or in a financial model. But the real-world repercussions that all those MBAs are ignoring is the human element. Having your huge complex system built by 100 different companies and integrated at the end is way more prone to error and failure than doing almost all of that production and integration done in one place by one team who are all focused on the same goal.

TLDR: Boeing is a dumpster fire, definitely wouldn't invest in it.

ChpBstrd

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Re: Thoughts on Boeing
« Reply #13 on: September 13, 2024, 10:27:14 AM »
@Michael in ABQ I agree, and suspect we are heading toward an era when vertical integration and tight control over value chains is IN and the old financialized conglomerate model with a spider web of supply chains is OUT. Investors would have to figure it out first, though, and there are no signs of this occurring yet.

We should keep in mind that vertical integration can only be done if companies abandon their "flat hierarchy" organizational models and bring back middle managers to coordinate all the internal departments of the business. This comes with enormous reoccurring costs.

We should also keep in mind that the pools of experienced manufacturing workers, experienced middle managers, and engineers have dried up in the U.S. because of the earlier trend of outsourcing/offshoring and flat org models. A 4.2% unemployment rate doesn't help.

Companies like BA may eventually pivot, but the new way of vertically integrated business may have to be done in Asia, where the workers are.

GuitarStv

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Re: Thoughts on Boeing
« Reply #14 on: September 13, 2024, 12:14:40 PM »
Around 2000 or so Boeing merged with McDonnell-Douglas.  McDonnell-Douglas had a long history of damaging their company by taking shortcuts on safety to improve share price.  I used to work in aerospace as an engineer, and have friends at Boeing.  Everyone I know working at Boeing for a long time has mentioned that that merger was the beginning of a downward spiral that hasn't stopped.  Pay worsened, turnover kept increasing, good engineers packed up and left, projects have been disaster after disaster (the MAX, the 787 cost overruns, the 777 multi-year late delivery, etc.), huge reduction in quality control, weird communication issues because the execs are rarely physically in the same building as the engineers and tend to ignore issues that are raised to them.  As far as I'm aware, there has been no real attempt to seriously address any of the growing issues at the company.

There wasn't any surprise about the more recent public problems with the planes among people who work at Boeing.  They might not be doomed, but I wouldn't invest in the company right now myself.

GilesMM

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Re: Thoughts on Boeing
« Reply #15 on: September 13, 2024, 01:19:24 PM »
It will take years to decades to rebuild the company. I expect more air and space disasters in the meantime as the cost cutting chickens continue to roost.
« Last Edit: September 13, 2024, 08:05:43 PM by GilesMM »

blue_green_sparks

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Re: Thoughts on Boeing
« Reply #16 on: September 13, 2024, 08:01:41 PM »
Kinda bums me out if the US can no longer compete in the passenger airliner market. I am a retired avionics-engineer and sure, we felt the pressure to get product designed, tested, certified and ready for production, but never at the expense of safety. Out on the production floor everyone was encouraged stop the line (just by pressing a big red button) if they saw something that wasn't right. We tested our equipment beyond the required specifications (sometimes to physical destruction) to learn the actual performance and durability margins. Failure analysis for our systems started at the block diagram design phase and worked down to every single component used in the detailed design.

MustacheAndaHalf

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Re: Thoughts on Boeing
« Reply #17 on: September 13, 2024, 09:35:18 PM »
Anduril is coming up quickly ...

Look at how SpaceX ...

If I had to choose a company to invest in, the one that controls as much of the process in-house versus the one that outsources everything it can - it's a no-brainer.
Privately held companies Anduril and SpaceX aren't available on public markets.  Rather than being a simple choice of where to allocate brokerage cash, these companies require pre-IPO access through funding rounds, hedge funds, or secondary markets.

MustacheAndaHalf

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Re: Thoughts on Boeing
« Reply #18 on: September 13, 2024, 09:54:37 PM »
I used to work in aerospace as an engineer, and have friends at Boeing.  Everyone I know working at Boeing for a long time has mentioned that that merger was the beginning of a downward spiral that hasn't stopped.

Kinda bums me out if the US can no longer compete in the passenger airliner market. I am a retired avionics-engineer and sure, we felt the pressure to get product designed, tested, certified and ready for production, but never at the expense of safety.

How much of commercial airliners are subcontracted by Boeing?

I'm only aware of engines being made elsewhere (GE, Rolls Royce), but I assume Boeing concentrates on the airframe rather than complex components.  The less Boeing does itself, the more room there is for a competitor.  But I would assume regulations and relationships give Boeing a huge advantage over a newcomer.

blue_green_sparks

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Re: Thoughts on Boeing
« Reply #19 on: September 14, 2024, 06:30:44 AM »
I used to work in aerospace as an engineer, and have friends at Boeing.  Everyone I know working at Boeing for a long time has mentioned that that merger was the beginning of a downward spiral that hasn't stopped.

Kinda bums me out if the US can no longer compete in the passenger airliner market. I am a retired avionics-engineer and sure, we felt the pressure to get product designed, tested, certified and ready for production, but never at the expense of safety.

How much of commercial airliners are subcontracted by Boeing?

I'm only aware of engines being made elsewhere (GE, Rolls Royce), but I assume Boeing concentrates on the airframe rather than complex components.  The less Boeing does itself, the more room there is for a competitor.  But I would assume regulations and relationships give Boeing a huge advantage over a newcomer.
Boeing and Airbus don't produce much more than the airframe itself. Up until the late 90s, much of the avionics equipment was defined by standards and multiple firms competed for spots in the equipment bay. This included communication radios, navigation radios, weather RADARs, flight controls, black (orange) boxes, etc. However, in move that puzzled me at the time, Boeing started contracting us to build non-standard, integrated avionics systems unique to a particular airframe. The functions provided by the equipment became more differentiated as well. For example, weather RADARs started predicting where weather would be by the time the plane got there. I am still not convinced that custom equipment was the smart move. Non-standard systems crept in, such as the infamous MCAS box.
« Last Edit: September 14, 2024, 06:35:30 AM by blue_green_sparks »

Boll weevil

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Re: Thoughts on Boeing
« Reply #20 on: September 17, 2024, 09:52:16 AM »
I used to work in aerospace as an engineer, and have friends at Boeing.  Everyone I know working at Boeing for a long time has mentioned that that merger was the beginning of a downward spiral that hasn't stopped.

Kinda bums me out if the US can no longer compete in the passenger airliner market. I am a retired avionics-engineer and sure, we felt the pressure to get product designed, tested, certified and ready for production, but never at the expense of safety.

How much of commercial airliners are subcontracted by Boeing?

I'm only aware of engines being made elsewhere (GE, Rolls Royce), but I assume Boeing concentrates on the airframe rather than complex components.  The less Boeing does itself, the more room there is for a competitor.  But I would assume regulations and relationships give Boeing a huge advantage over a newcomer.

A lot of it. Not sure of the breakdown between build-to-print and companies with engineering authority.

Boeing Wichita built 737 fuselages and nose section “kits”, engine struts, and nacelles for 747, 767, and 777 and was in the design process for 787 in 2005 when that division was sold off into what eventually became Spirit Aerosystems. Spirit kept all that after the divestment. But now Boeing is in the process of buying Spirit back with targeted close date sometime next year.

For 787, Boeing got overly focused on return on investment and outsourced pretty much everything under the theory that integration was high margin while the actual design and build work was low margin, missing the fact that there’s a lot more design and build than integration and those low margins can still add up to serious money. The fuselage was going to be broken into four big pieces with work farmed out to Alenia (spelling?), Vought, and Kawasaki while Boeing kept the nose section. But after the Spirit sale, Spirit ended up with the nose section, and for a while Boeing’s only fuselage responsibility was assembling the parts like Legos. But later Boeing bought out Vought’s factory and that is now Boeing Charleston (South Carolina).

I believe wings for all products have significant sub-assembly work done in Japan and a lot of the flight control software is programmed by outside vendors (ie Rockwell Collins) with lots of Boeing oversight and input.

For detail parts and subassemblies there’s constant shuffling between being outsourced and insourced and transferring work between suppliers.

blue_green_sparks

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Re: Thoughts on Boeing
« Reply #21 on: September 17, 2024, 11:09:04 AM »
I recall back in the 90s a fire at a Japanese chip-resin factory was delaying the availability of memory chips and my company was scrambling to ship avionics units to Boeing. Contracts had daily penalties if a supplier caused Boeing to miss an airplane delivery date. Talk about overtime to find solutions, LOL.

I would not be surprised if Boeing has chains of suppliers that are ten or more dependencies deep. Boeing always wants to reduce their inventory of components and would prefer that deliveries that are made "Just-in-Time". So would their suppliers as well....so not much forgiveness if something goes awry anywhere in those long supply chain.

Redesigning for obsolete components is a big part of keeping an aircraft production line flowing, so all of Boeing's suppliers demand early notice from their suppliers if a chip or something is going out of production. Boeing's suppliers often try to make "lifetime buys" to mitigate the problem and hate ending up with lots of inventory and safe environmental storage issues.

Michael in ABQ

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Re: Thoughts on Boeing
« Reply #22 on: September 17, 2024, 11:31:45 AM »
I recall back in the 90s a fire at a Japanese chip-resin factory was delaying the availability of memory chips and my company was scrambling to ship avionics units to Boeing. Contracts had daily penalties if a supplier caused Boeing to miss an airplane delivery date. Talk about overtime to find solutions, LOL.

I would not be surprised if Boeing has chains of suppliers that are ten or more dependencies deep. Boeing always wants to reduce their inventory of components and would prefer that deliveries that are made "Just-in-Time". So would their suppliers as well....so not much forgiveness if something goes awry anywhere in those long supply chain.

Redesigning for obsolete components is a big part of keeping an aircraft production line flowing, so all of Boeing's suppliers demand early notice from their suppliers if a chip or something is going out of production. Boeing's suppliers often try to make "lifetime buys" to mitigate the problem and hate ending up with lots of inventory and safe environmental storage issues.

I think a lot of "just-in-time" inventory really meant that a supplier somewhere down the supply chain was holding that inventory. With complex supply chains and global logistics, the idea that you could perfectly forecast and guarantee delivery of hundreds of thousands (or even hundreds) of parts, components, assemblies, and sub-assemblies is impossible. Somewhere down the supply chain is a warehouse with more than a week's worth of parts for production - even if it's not sitting at Boeing, or Toyota, or some other manufacturer.

We carry thousands of products in our retail business that are manufactured in Europe, Asia, and the US. Things are constantly out of stock or delayed in shipment, etc. We're probably sourcing products from at least 50 different factories spread out all over the world and each of those are getting raw materials or other components from probably another 50-100 suppliers. I can't imagine the complexity of something like an aircraft where there could literally be a million individual parts once you start counting every chip, capacitor, strand of wire, nuts, etc.

ChpBstrd

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Re: Thoughts on Boeing
« Reply #23 on: September 17, 2024, 11:54:31 AM »
I recall back in the 90s a fire at a Japanese chip-resin factory was delaying the availability of memory chips and my company was scrambling to ship avionics units to Boeing. Contracts had daily penalties if a supplier caused Boeing to miss an airplane delivery date. Talk about overtime to find solutions, LOL.

I would not be surprised if Boeing has chains of suppliers that are ten or more dependencies deep. Boeing always wants to reduce their inventory of components and would prefer that deliveries that are made "Just-in-Time". So would their suppliers as well....so not much forgiveness if something goes awry anywhere in those long supply chain.

Redesigning for obsolete components is a big part of keeping an aircraft production line flowing, so all of Boeing's suppliers demand early notice from their suppliers if a chip or something is going out of production. Boeing's suppliers often try to make "lifetime buys" to mitigate the problem and hate ending up with lots of inventory and safe environmental storage issues.

I think a lot of "just-in-time" inventory really meant that a supplier somewhere down the supply chain was holding that inventory. With complex supply chains and global logistics, the idea that you could perfectly forecast and guarantee delivery of hundreds of thousands (or even hundreds) of parts, components, assemblies, and sub-assemblies is impossible. Somewhere down the supply chain is a warehouse with more than a week's worth of parts for production - even if it's not sitting at Boeing, or Toyota, or some other manufacturer.

We carry thousands of products in our retail business that are manufactured in Europe, Asia, and the US. Things are constantly out of stock or delayed in shipment, etc. We're probably sourcing products from at least 50 different factories spread out all over the world and each of those are getting raw materials or other components from probably another 50-100 suppliers. I can't imagine the complexity of something like an aircraft where there could literally be a million individual parts once you start counting every chip, capacitor, strand of wire, nuts, etc.
In popular business books of a certain vintage, JIT production practices and kanban were described as how Toyota built higher-quality cars for cheaper in the 70's through 90's and took over the market.

Some critical impulse fired off in my mind every time I encountered the idea, but I was too distracted to ask the question:

If suppliers must hold the inventory and pay the cost of capital for doing so, how is that any more efficient than if Toyota/Boeing held the inventory and paid the cost of capital themselves? Mustn't these costs come through the invoices?

Perhaps back then, antitrust enforcement was a bigger thing than it is now, in our New Gilded Age. Perhaps vertical integration was not possible at the time so JIT was the best way to be diffuse enough not to be accused of monopolistic behavior, and to build permissibly massive supply chains using multiple vendors and signals.

The more academically common explanation relied on the old fish and coconuts trade metaphor. If a different organization has a different leverage ratio, organizational culture, and natural talent more suited to produce a thing, then they will be the lower cost producer. Also there was this idea, which was not usually implemented in reality, that the main company could easily fire under-performing suppliers, and you can't do that if the supplier is yourself. So competition and natural advantage would automatically migrate demand to the most efficient suppliers.

Sounded great on paper, but in reality it was a shell game, where balance sheet inventory and debt (a weight on income / ROE) was magically offloaded to entrenched lower margin producers who were politically influential and had their customer by the nards.

Michael Porter had some things to say about bargaining power of suppliers, but it was somehow not seen as an idea in conflict with JIT.

Boll weevil

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Re: Thoughts on Boeing
« Reply #24 on: September 17, 2024, 01:47:02 PM »
I recall back in the 90s a fire at a Japanese chip-resin factory was delaying the availability of memory chips and my company was scrambling to ship avionics units to Boeing. Contracts had daily penalties if a supplier caused Boeing to miss an airplane delivery date. Talk about overtime to find solutions, LOL.

I would not be surprised if Boeing has chains of suppliers that are ten or more dependencies deep. Boeing always wants to reduce their inventory of components and would prefer that deliveries that are made "Just-in-Time". So would their suppliers as well....so not much forgiveness if something goes awry anywhere in those long supply chain.

Redesigning for obsolete components is a big part of keeping an aircraft production line flowing, so all of Boeing's suppliers demand early notice from their suppliers if a chip or something is going out of production. Boeing's suppliers often try to make "lifetime buys" to mitigate the problem and hate ending up with lots of inventory and safe environmental storage issues.

I think a lot of "just-in-time" inventory really meant that a supplier somewhere down the supply chain was holding that inventory. With complex supply chains and global logistics, the idea that you could perfectly forecast and guarantee delivery of hundreds of thousands (or even hundreds) of parts, components, assemblies, and sub-assemblies is impossible. Somewhere down the supply chain is a warehouse with more than a week's worth of parts for production - even if it's not sitting at Boeing, or Toyota, or some other manufacturer.

We carry thousands of products in our retail business that are manufactured in Europe, Asia, and the US. Things are constantly out of stock or delayed in shipment, etc. We're probably sourcing products from at least 50 different factories spread out all over the world and each of those are getting raw materials or other components from probably another 50-100 suppliers. I can't imagine the complexity of something like an aircraft where there could literally be a million individual parts once you start counting every chip, capacitor, strand of wire, nuts, etc.
In popular business books of a certain vintage, JIT production practices and kanban were described as how Toyota built higher-quality cars for cheaper in the 70's through 90's and took over the market.

Some critical impulse fired off in my mind every time I encountered the idea, but I was too distracted to ask the question:

If suppliers must hold the inventory and pay the cost of capital for doing so, how is that any more efficient than if Toyota/Boeing held the inventory and paid the cost of capital themselves? Mustn't these costs come through the invoices?

Perhaps back then, antitrust enforcement was a bigger thing than it is now, in our New Gilded Age. Perhaps vertical integration was not possible at the time so JIT was the best way to be diffuse enough not to be accused of monopolistic behavior, and to build permissibly massive supply chains using multiple vendors and signals.

The more academically common explanation relied on the old fish and coconuts trade metaphor. If a different organization has a different leverage ratio, organizational culture, and natural talent more suited to produce a thing, then they will be the lower cost producer. Also there was this idea, which was not usually implemented in reality, that the main company could easily fire under-performing suppliers, and you can't do that if the supplier is yourself. So competition and natural advantage would automatically migrate demand to the most efficient suppliers.

Sounded great on paper, but in reality it was a shell game, where balance sheet inventory and debt (a weight on income / ROE) was magically offloaded to entrenched lower margin producers who were politically influential and had their customer by the nards.

Michael Porter had some things to say about bargaining power of suppliers, but it was somehow not seen as an idea in conflict with JIT.

Most American companies who go to (Toyota Production System / just-in-time / lean manufacturing) don’t fully understand or embrace it as an operating philosophy, only as a series of exercises meant to improve some aspect of their operations.

The purpose of the system is to eliminate waste, which is defined as anything not contributing directly to the final product. Batches of thousands of parts sitting on shelves for weeks or months is seen as waste. Better to run assembly processes with a few days or couple weeks of work-in-process than to hold several months worth. Toyota  spent a lot of time and money to figure out how to reduce tooling changes on presses from several hours to a couple of minutes to support that.

Ideally the suppliers are also running some form of lean manufacturing too.

TPS / JIT / lean doesn’t work for all things and sudden shocks to the system (jumps in demand, catastrophe in the supply chain) can be difficult to navigate.
« Last Edit: September 17, 2024, 01:52:30 PM by Boll weevil »

Boll weevil

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Re: Thoughts on Boeing
« Reply #25 on: September 17, 2024, 02:12:28 PM »
A couple other random thoughts:

- Warren Buffett recommends buying companies with large moats. Turns out that designing commercial airliners is a GIANT moat. Mitsubishi started and gave up on the Mitsubishi Regional Jet. Bombardier developed the CSeries, sold the design off to Airbus, and is for now out of the commercial market. From that aspect, Boeing should be a fairly safe bet.

- The aviation industry in general is what I like to joke as excellent at making small fortunes (How do you make a small fortune in ____? Start with a large one.) New products aren’t introduced that frequently and every one of them is basically a bet the company moment. Boeing read the market better regarding 787 vs A380. They have severely botched the 737 MAX in trying to compete with the A320 NEOs.

Order books for both Airbus and Boeing are sold out for several years and industry has a history of supporting the worse part of a duopoly, if nothing else to keep the better company honest.

Long term I’m optimistic. But for the near term, it’s going to be a wild ride.

markbike528CBX

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Re: Thoughts on Boeing
« Reply #26 on: September 17, 2024, 03:19:50 PM »
........There are only 2 companies - Boeing and Airbus - to meet this increased demand.

There was Bombardier CRJ (the commercial line now owned by Mitsubishi). Nice, smaller jets for regional airports. 
For a long time, CRJ's and Embraer's were the only jets I flew on cross-country but multiple stop trips.  Rarely, if ever, flew on big jets.
Wide body planes need smaller feeder jets to fill them.
https://en.wikipedia.org/wiki/Bombardier_Aviation

There still is Embraer, some of them are starting to get close to the smaller versions  of the 737 line in size.
https://en.wikipedia.org/wiki/Embraer

Oh if you need more rants about Boeing and Starliner, have at it.  https://forum.nasaspaceflight.com/index.php?board=75.0
TL;DR. Starliner 2.4 Billion + 287 million, 7 years late, still not certified   Dragon 2.6 Billion 3 years late,  successfully got 50 people to ISS so far.


https://en.wikipedia.org/wiki/Commercial_Crew_Program. ---
https://www.scientificamerican.com/article/nasa-picks-spacex-and-boeing-to-fly-u-s-astronauts-on-private-spaceships/?redirect=1.     2017 original fly date
https://www.firstpost.com/tech/science/nasa-hands-boeing-extra-usd-287-million-to-avoid-18-month-wait-time-for-the-human-spaceflights-7654891.html

markbike528CBX

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Re: Thoughts on Boeing
« Reply #27 on: September 17, 2024, 03:40:15 PM »
Regarding Boeing's "moat", a cautionary tale is that of Marquardt Corporation

Quote
These large engineering and development costs taxed Marquardt's profits, and although the company remained profitable throughout this period, by 1964 the board of directors hired a new president to change the focus toward more profitability. Unfortunately, this meant Marquardt would have to move forward with only the existing product offerings then being manufactured, with little hope of new breakthroughs and future growth. In 1966, the new president announced that in his first year (1965) he had increased profits in part by the "... elimination of research and development efforts that weren't directly related to the company's current activities".

Quote
In 1968 Marquardt merged with CCI Inc. in .......... and the effort intensified to spin-off or sell the balance of Marquardt it had acquired in 1968

Just 4 years* and the death spiral was in play.

https://en.wikipedia.org/wiki/Marquardt_Corporation

* Just over 4 years after the Beatles sang "I want to hold your hand", Iggy Pop and the Stooges were singing "I want to be your dog".
Well 29 November 1963 to July 1969, so more like 5.5 years, but my point is still there.

Telecaster

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Re: Thoughts on Boeing
« Reply #28 on: September 17, 2024, 04:03:29 PM »
The purpose of the system is to eliminate waste, which is defined as anything not contributing directly to the final product. Batches of thousands of parts sitting on shelves for weeks or months is seen as waste. Better to run assembly processes with a few days or couple weeks of work-in-process than to hold several months worth. Toyota  spent a lot of time and money to figure out how to reduce tooling changes on presses from several hours to a couple of minutes to support that.

In addition the purpose of JIT is not only to reduce inventory, it is to expose problems with the manufacturing process.   For example, if Widget A is difficult to manufacture consistently, the problems can be hidden/mitigated by always having lots of Widget A in inventory.   But if you don't have lots of Widget A in inventory, then you are forced to fix the underlying manufacturing problem.   

reeshau

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Re: Thoughts on Boeing
« Reply #29 on: September 17, 2024, 06:02:03 PM »
The purpose of the system is to eliminate waste, which is defined as anything not contributing directly to the final product. Batches of thousands of parts sitting on shelves for weeks or months is seen as waste. Better to run assembly processes with a few days or couple weeks of work-in-process than to hold several months worth. Toyota  spent a lot of time and money to figure out how to reduce tooling changes on presses from several hours to a couple of minutes to support that.

In addition the purpose of JIT is not only to reduce inventory, it is to expose problems with the manufacturing process.   For example, if Widget A is difficult to manufacture consistently, the problems can be hidden/mitigated by always having lots of Widget A in inventory.   But if you don't have lots of Widget A in inventory, then you are forced to fix the underlying manufacturing problem.

Overproduction; the worst form of waste, because it magnifies all the others.

blue_green_sparks

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Re: Thoughts on Boeing
« Reply #30 on: October 12, 2024, 08:41:53 AM »
The downward spiral continues. Boeing to cut 10% of workforce, stops 767 production line amid ongoing strike. Stock down 40% year over year (around $151 today) and over 60% from highs back in 2019 and it hasn't made an annual profit since 2018. I am guessing some folks will probably make big money if the company survives all this.
The company is working on implementing the "smart factory".
https://simpleflying.com/boeing-smart-factories-advanced-manufacturing-techniques-guide/

LaineyAZ

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Re: Thoughts on Boeing
« Reply #31 on: October 13, 2024, 08:32:12 AM »
Boeing CEO total compensation = $32.8 million/year.   Golden parachute for Calhoun worth $45 million.

https://www.cnn.com/2024/06/19/business/boeings-ceo-responsible/index.html

The board of directors that approve this are just spineless.




ChpBstrd

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Re: Thoughts on Boeing
« Reply #32 on: October 14, 2024, 07:31:37 PM »
There *should* be a purge of the entire executive team. Instead, thousands of workers will lose their jobs. Apparently Boeing is too big to be attacked by activist investors, but that size advantage is diminishing by the day. No company ever shrank itself to prosperity.

reeshau

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Re: Thoughts on Boeing
« Reply #33 on: October 15, 2024, 05:32:16 AM »
Boeing announced a $10B secondary stock offering today, and warned it could raise up to $25B in stock and debt over the next three years.  It also said it has renegotiated terms on its current debt.

ATtiny85

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Re: Thoughts on Boeing
« Reply #34 on: October 15, 2024, 05:56:03 AM »
Boeing CEO total compensation = $32.8 million/year.   Golden parachute for Calhoun worth $45 million.

https://www.cnn.com/2024/06/19/business/boeings-ceo-responsible/index.html

The board of directors that approve this are just spineless.

Spineless? I think it's also that they are simply on the take and don't want to be ousted from their board seat. Always fun to read about the $350,000 base "salary" the board of my Fortune 100 company gets each year. On top of us sending our plane to scoop them up for their one hour meetings every so often, all the fancy meals, rooms, and plenty of other benefits. And then as far as I can tell, all they do is sit around and bicker about how to get more pay and benefits on the back of our poor customers. Oh, and then they vote on things they have no idea about. Certainly public companies needs some sort of oversight, but it is ridiculous. I think our board is up to a cool dozen members now. Good work if you can get it.

I don't have a super-large problem with a CEO making a really high salary. Whatever, they are in theory responsible for a bunch of things. However, I have a super-sized problem with all the layers of pay on top of layers of pay. Now that is entirely on the spineless board members. Why does it have to be so complex? I just checked our latest Proxy statement and the "Executive Compensation" section is 43 pages out of 102 pages. 43 pages! Crazy stuff.

And of course the cherry on top is the fact that if ours is fired FOR CAUSE, we pay him $20 million for the pleasure.

Again, whatever, like the famous quote "I have something they will never have. Enough."

markbike528CBX

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Re: Thoughts on Boeing
« Reply #35 on: October 15, 2024, 08:08:18 AM »
Boeing CEO total compensation = $32.8 million/year.   Golden parachute for Calhoun worth $45 million.

https://www.cnn.com/2024/06/19/business/boeings-ceo-responsible/index.html

The board of directors that approve this are just spineless.

Spineless? I think it's also that they are simply on the take and don't want to be ousted from their board seat. Always fun to read about the $350,000 base "salary" the board of my Fortune 100 company gets each year. On top of us sending our plane to scoop them up for their one hour meetings every so often, all the fancy meals, rooms, and plenty of other benefits. And then as far as I can tell, all they do is sit around and bicker about how to get more pay and benefits on the back of our poor customers. Oh, and then they vote on things they have no idea about. Certainly public companies needs some sort of oversight, but it is ridiculous. I think our board is up to a cool dozen members now. Good work if you can get it.

I don't have a super-large problem with a CEO making a really high salary. Whatever, they are in theory responsible for a bunch of things. However, I have a super-sized problem with all the layers of pay on top of layers of pay. Now that is entirely on the spineless board members. Why does it have to be so complex? I just checked our latest Proxy statement and the "Executive Compensation" section is 43 pages out of 102 pages. 43 pages! Crazy stuff.

And of course the cherry on top is the fact that if ours is fired FOR CAUSE, we pay him $20 million for the pleasure.

Again, whatever, like the famous quote "I have something they will never have. Enough."
High CEO and director pay is why I vote against "Executive Compensation"  and nearly every other board recommendation when I get my proxy votes.

MustacheAndaHalf

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Re: Thoughts on Boeing
« Reply #36 on: October 17, 2024, 02:10:37 AM »
Boeing announced a $10B secondary stock offering today, and warned it could raise up to $25B in stock and debt over the next three years.  It also said it has renegotiated terms on its current debt.
Boeing ($BA) has a $95 billion valuation for 100% of the company.  But those shares need to make room for $10 billion in new shares, which means existing shareholders will get diluted by about 10%.  They're going to lose money.

Boeing also pre-announced some figures, which I assume is the reason for the +3% price bump.  I guess more details will be available next week, when they announce quarterly earnings.

ChpBstrd

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Re: Thoughts on Boeing
« Reply #37 on: October 17, 2024, 06:36:11 AM »
Boeing announced a $10B secondary stock offering today, and warned it could raise up to $25B in stock and debt over the next three years.  It also said it has renegotiated terms on its current debt.
Boeing ($BA) has a $95 billion valuation for 100% of the company.  But those shares need to make room for $10 billion in new shares, which means existing shareholders will get diluted by about 10%.  They're going to lose money.

Boeing also pre-announced some figures, which I assume is the reason for the +3% price bump.  I guess more details will be available next week, when they announce quarterly earnings.
It would be a lovely candidate for a bear spread, except for the risk of an executive team shakeup. How that hasn't happened yet is a mystery to me.

MustacheAndaHalf

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Re: Thoughts on Boeing
« Reply #38 on: October 18, 2024, 02:52:31 AM »
Quote
Boeing names aerospace veteran Kelly Ortberg CEO to steer turnaround

July 31 (Reuters) - Boeing (BA.N), opens new tab on Wednesday named aerospace industry veteran Kelly Ortberg as its CEO to turn around the planemaker beset by legal and regulatory problems after a quarter in which it lost more than $1 billion.
Ortberg will start on Aug. 8 with the monumental task of rebuilding trust with regulators, the industry and the public during a quality crisis, and as the company's finance chief warned it would continue to burn cash.
https://www.reuters.com/business/aerospace-defense/boeing-names-kelly-ortberg-new-ceo-2024-07-31/

My guess is the new CEO needs to get familiar with the company before making dramatic changes.  That also explains the $15 billion of new money from a mix of stock offerings ($10 billion) and bonds ($5 billion).  Although Boeing also said it may raise another $10 billion over the coming few years.  That buys Boeing time to keep doing what they're doing, while the new CEO figures out what needs to change.

Perhaps the stock dilution represented an expected step by the new CEO, which could also explain the price bump while investors got diluted.

GilesMM

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Re: Thoughts on Boeing
« Reply #39 on: October 18, 2024, 05:29:39 AM »
It would be a lovely candidate for a bear spread, except for the risk of an executive team shakeup. How that hasn't happened yet is a mystery to me.

It has happened, just two months ago, with an outsider brought in as CEO.

iris lily

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Re: Thoughts on Boeing
« Reply #40 on: October 18, 2024, 10:38:42 AM »
It is a major employer here.

Rolling furloughs are taking place. 17,000 being laid off.

markbike528CBX

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Re: Thoughts on Boeing
« Reply #41 on: October 18, 2024, 03:17:28 PM »
For all the Boeing distaste here, try

https://forum.nasaspaceflight.com/index.php?topic=56372.400

TL:DR   Boeing was the senior space leader when the contract was awarded.
Got paid about 2x the other contractor to develop the capsule.
Original schedule 2017. Other contractor delivered in 2020, and now 4 years later, 2 unmanned and one crewed test missions, Boeing doesn’t have a capsule with which NASA can assure astronaut safety.

Sorry, a summary, not a tl:DR

blue_green_sparks

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Re: Thoughts on Boeing
« Reply #42 on: October 18, 2024, 09:08:14 PM »
It is a major employer here.

Rolling furloughs are taking place. 17,000 being laid off.
I remember layoff days, working in my cubicle. Stack of folded boxes out in the hallway, ready for the victims to pack up. After what seemed like a year, the boss was like "OK its over".

GuitarStv

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Re: Thoughts on Boeing
« Reply #43 on: October 19, 2024, 03:22:54 PM »
It is a major employer here.

Rolling furloughs are taking place. 17,000 being laid off.
I remember layoff days, working in my cubicle. Stack of folded boxes out in the hallway, ready for the victims to pack up. After what seemed like a year, the boss was like "OK its over".

To be fair, big layoffs are very common in the aerospace sector.  I don't know anyone who has worked for ten years in the field without being through at least a couple rounds of layoffs.

Duke03

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Re: Thoughts on Boeing
« Reply #44 on: October 29, 2024, 10:11:06 AM »
I recently sold all my bank stocks that I bought during covid and rolled all the sweet profits into Boeing.  It fits my investment style.  I love buying old companies that are on hard times.  Even better if that company is a Monopoly. I've done this time and time again and have made a lot of money doing it.  It's not sexy investing just buying and holding for years.  I did the same thing with GE. I started buying GE at $20 a share and chased it down all the way to $6 knowing that if you break it up and sell off the pieces its book value was worth 10x that.

GuitarStv

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Re: Thoughts on Boeing
« Reply #45 on: October 29, 2024, 12:06:58 PM »
Boeing's IS-33e satellite recently exploded for unknown causes and has littered the upper atmosphere with at least 500 (large enough to be tracked) new flying chunks of space garbage.  Here's hoping we don't Kessler up the skies and screw over our communications forever.

markbike528CBX

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Re: Thoughts on Boeing
« Reply #46 on: October 29, 2024, 02:09:20 PM »
Boeing's IS-33e satellite recently exploded for unknown causes and has littered the upper atmosphere with at least 500 (large enough to be tracked) new flying chunks of space garbage.  Here's hoping we don't Kessler up the skies and screw over our communications forever.

While Boeing made the satellite, Intelsat was the operator.
https://en.wikipedia.org/wiki/Intelsat_33e

This satellite was in Geostationary orbit, well above the upper atmosphere.
https://en.wikipedia.org/wiki/Geostationary_orbit
It is a lot less crowded up there.
Any satellites or debris are moving at lower relative velocities to each other, limiting the knock-on (Kessler) effects of a strike, compared to Low Earth Orbit (LEO).

......Even better if that company is a Monopoly.

Boeing is only a US monopoly in large commercial aircraft.
In defense, Lockheed Martin and Northrup Grumman compete.

In Geostationary orbit spacecraft production, Lockheed Martin, Airbus, Maxar, Thales Alenia

In LEO , Rocketlab leads a lot of smaller non-SpaceX (Starlink, Starshield) manufacturers.