Boeing'S Difficulties Are Dragging Down The New CEO Of The US Manufacturing Industry.

737, Max ceased production, Starliner failed, and CEO Dennis Muhlenberg (Dennis Milenburg) was forced to resign and other negative news, so that Boeing entered the "cold winter". In order to win the trust of regulators and the public, Boeing chose to change hands, but the effect still needs to wait. At the same time, Boeing announced a 737 Max shutdown, and many economists believe it will lead to a weaker slump in the US manufacturing sector.

On December 24th, a senior executive at Boeing, a US aircraft manufacturer, said the latest documents submitted to the US House of Representatives transportation and Infrastructure Committee showed that employees' concerns about safety were "very disturbing".

The executives said the documents included new information from Mark Forkner, the company's senior test driver. Faulkner complained about the existence of "extremely bad" instability in the Boeing MCAS anti stall system flight simulator test. The release of this message will deepen the sense of crisis that envelops Boeing. Since the 737 Max grounded in March, Boeing has lost more than $8 billion and its market value has fallen by over 25%. In December 17th, Boeing announced that it planned to suspend production of 737 Max aircraft from January next year.

This Christmas is hard to say for Boeing. 737, Max ceased production, Starliner failed, and CEO Dennis Muhlenberg (Dennis Milenburg) was forced to resign and other negative news, so that Boeing entered the "cold winter". In order to win the trust of regulators and the public, Boeing chose to change hands, but the effect still needs to wait. At the same time, Boeing announced a 737 Max shutdown, and many economists believe it will lead to a weaker slump in the US manufacturing sector.

The last straw

In December 21st, the Starliner mission test of Boeing's Aerospace Department failed. In a previous test, Starliner was successfully launched by a Russian made rocket engine. The failure is a great blow to the company's efforts to restore astronauts to space in the United States.

At that time, after the launch of Starliner, he praised the Boeing team and the United Launch Alliance ("joint launch alliance") for launching the "historic starship unmanned launch". However, he was hit by National Aeronautics and Space Administration. NASA disclosed that Boeing failed to fulfill its contractual obligations with NASA. Although Starliner entered orbit, it failed to reach its intended destination.

According to the NASA website, Boeing employees said that Starliner was separated from the launcher according to the plan, but a mistake in the mission running time system led to the failure. It was found that the engine did not synchronize to the correct time during the combustion process. When the engine is ignited, there is not enough propellant to reach the international space station.

This is not the first time Boeing has made a mistake. Prior to a trial, Boeing suspended the test temporarily, because one of the three parachutes of Starliner at that time could not be opened, so that the spacecraft could not land safely. The company's engineers eventually found the fault because a pin on the parachute rope was not connected properly. For an enterprise dedicated to space flight, this neglect of detail is fatal.

Starliner test failure has become another stain of Boeing. The failure of the pilot test forced Boeing to finish testing tasks one week ahead of schedule and may further postpone Boeing's plan to transport humans to the space station. In 2014, Boeing received a $4 billion 200 million contract from the US government to develop a spaceship that the United States sent astronauts to the international space station, ending the US dependence on Russia's expensive launch service.

Five years later, Boeing has not yet delivered. Under heavy pressure, Muhlenberg was forced to resign from CEO at 23 local time. Subsequently, Boeing announced that the current chairman of the board of directors, David Calhoun (David Calhoun), will take over the post.

Richard Aboulafia, an aviation analyst at Teal Group, said Boeing decided to remove CEO mainly because of its increasing problems and its poor handling of these problems.

Can changing the team get instant results?

Muhlenberg's series of practices are controversial. His remarks at congressional hearings aroused parliamentarians' anger, and he repeatedly made an overly optimistic forecast of when the 737 Max might resume service, making regulators and airlines uncomfortable. It was reported that Steve Dickson met with Steve Dickson, director of the Federal Aviation Administration in November, and was reprimanded for putting pressure on the regulator.

Dixon said Boeing is promoting an unrealistic and rapid recovery of the maximum speed. Earlier this month, the company's unrealistic 737 Max aircraft return schedule, Federal Aviation Administration (FAA) rarely expressed anger and public condemnation, and worried that it tried to pressure regulators to ask them to act faster.

Boeing has been criticized by regulators and airline customers for failing to provide sufficient information on time to show that the company is trying to upgrade the 737 Max to return to the sky. This series of actions has exacerbated the tension between Boeing and FAA.

Fox Rothschild partner and aviation expert Mark Dombroff said that in order to rebuild trust, Boeing must repair relations with the Federal Aviation Administration and other agencies, and maintain sufficient transparency for passengers traveling.

This is Calhoun's top priority. Calhoun, 62, is no stranger to the crisis and the aviation industry. He has worked in General Electric for more than 20 years. He worked in the GE aviation department for several months before the terrorist attacks disrupt the aviation industry in September 11, 2001. In addition, Calhoun is an executive of Blackstone Group, a member of the board of directors of Caterpillar Inc and chairman of Gates industries. He was recognized by many people for his rich resume.

Steve Schwarzman, chief executive of Blackstone Group, said in a statement that "a world-class leader like David is not only good for the company but also important for the country."

Jeff Sonnenfeld, Professor of management at Yale University, believes that Calhoun is the perfect candidate to lead the troubled aircraft manufacturer.

Sonnenfeld said that Calhoun's relationship with Boeing's former CEO James Mcnani was the first requirement for his position. Boeing began to produce 737 Max from 2005 to 2015 when he was at the helm of the company. "He is a pupil of Mike Nani, so if you are looking for the positive influence of Mike Nani, you will find that he worked there when Mike Nani came back."

Timm Schulze-Melander, an industrial expert at Redburn, a European Research Institute, said Calhoun's experience in Boeing's board of directors would enable him to "run the company in a short time without having to be familiar with it for a long time".

However, some analysts are not optimistic about Boeing's decision to change management. Argus research analyst John Eade says Boeing has more work to do to prove that it will enable the once popular 737 Max to be reused. "There is too much uncertainty about when the plane will fly again."

FAA said on 23 that they would not comment on Boeing's business decision, nor did they set a time to complete the re certification of 737Max.

737 MAX will suspend production or drag us GDP0.5 points in the first quarter.

In December 17th, Boeing announced that it planned to suspend the production of 737 Max aircraft from January 2020. Boeing's decision is undoubtedly to admit that the company will spend more time than expected to allow 737 Max to return to the sky.

Aboulafia pointed out, "if they get some information from FAA, they say that things will look good next January or February, and they will not do so."

Edward Jones industry analyst Jeff Windau said that the 400 aircraft that Boeing had made but could not deliver could be a major factor in the decision to suspend production. This is "taking into account the storage space, and once the aircraft is ready to return to service, you can deliver them in a more efficient way".

DePaul University professor and aviation expert Joe Schwieterman added that the long term grounded flight made Boeing in trouble. The suspension made the company lose the economies of scale it needed to produce a large number of aircraft. However, Boeing was forced to store them on the ground due to the continued production of the grounded aircraft, so they could depreciate because they could not deliver.

Schwieterman said, "closing the plant will help Boeing save money, but it will also destroy the network of about 900 companies supplying parts to Max and other 737 aircraft. Airlines will not pay for them before they are ready to fly. So Boeing is really in a dilemma here. "

According to a person familiar with the situation, Boeing said that the company was not planning to dismiss or lay off workers at the London low plant during the shutdown. Some of the 12000 workers in the factory will be temporarily transferred.

Even so, cut-off will still cut us economic output because Boeing is one of the main drivers of American manufacturing. As of October this year, the output of the US aviation industry was $106 billion 400 million, down 17% from the same period last year, mainly because Boeing had cut output by 737 Max.

Aboulafia also said that the shutdown of 737 Max could hinder the development of the US economy in the next few months and could exacerbate the trade balance between the import and export of the United States, "because this is the largest single manufactured product exported to China."

Worse still, Boeing's slide will exacerbate the difficulties of the US manufacturing sector. Manufacturing is the weakest link in the slowing US economy. Analysts believe that if the airline giant is unable to obtain regulatory approval and restart the production of the aircraft, its chain reaction will be enough to have a considerable impact on US economic growth early next year.

Joseph Brusuelas, chief economist at RSM, wrote in a report that the impact of the shutdown is far beyond the scope of Boeing's business. "Losses will affect the entire economy, affecting inventory channels, factory orders, industrial production, and ultimately affecting the number of employees in the huge supplier network of Boeing."

Spirit AeroSystems Holdings Inc. has more than 50% of its revenue from 737 aircraft components. The company has been producing aircraft fuselage at a rate of 52 per month, and now it has completely stopped production. Spirit said the shutdown would have adverse effects on Spirit's business, financial position, operating results and cash flow, which had not been predicted before.

Capital Economics senior American economist Michael Pearce said: "suppliers may also suspend investment plans. The longer the duration of discontinuation, the more likely it will cause a wider impact on consumption and investment growth.

JP Morgan predicts that a 737 Max suspension will drag down 0.5 percentage points of GDP growth in the first quarter of next year. If so, the outlook for us economic growth in the first quarter of 2020 will be very bleak, perhaps only around 1%, far below the previous forecast of 1.6%. JP Morgan also predicted that even if decided to suspend production, Boeing still needs to spend more than 1 billion dollars per month on 737Max.

Steve Tusa, an analyst at JP Morgan chase, said that in the longer term, Boeing's massive backlog of orders or sustained reputational damage is a negative factor. But what is even more worrying is that the aircraft may not fly at all.