Boeing’s 20-Year ‘Capital Light’ Manufacturing A Disaster: Fortune

By the end of 2019, Boeing faced significant challenges. Two crashes involving Boeing’s 737 Max passenger jet resulted in the deaths of 346 people.

Boeing's "capital-light" strategy relied more heavily on external suppliers and prioritized efficiency and cost-cutting, sometimes at the expense of thorough quality checks. I Photo: The Boeing Company Facebook

These tragedies were attributed to a faulty flight software system, and extensive investigations revealed quality control issues throughout Boeing’s supply chain.

This prompted the hiring of David Calhoun, an accountant by training and a 26-year veteran of General Electric, as reported by Matthew Heimer and Nicholas Gordon for Fortune.

Boeing's stock has declined by 24% this year, and airline CEOs, Boeing’s key private-sector customers, have expressed growing frustration.

However, as Shawn Tully of Fortune has extensively covered, Boeing's problems likely run deeper than what Calhoun could resolve—and these issues predate his tenure by decades.

Tully argues that over the years, Boeing shifted from an engineering-first company to one emphasizing “capital-light” manufacturing. This strategy relied more heavily on external suppliers and prioritized efficiency and cost-cutting, sometimes at the expense of thorough quality checks.

“Managerial decisions over more than 20 years and four CEOs gradually weakened the once-vaunted system of quality control and troubleshooting on the factory floor,” Tully writes, “leaving gaps that allowed various defects to slip through.”

While the capital-light strategy initially appeared successful, with Boeing's stock soaring from $70 to $425 between 2010 and 2018, the October 2018 737 Max crash exposed systemic issues.

Subsequent safety and production challenges have eroded trust in Boeing among investors, customers, and passengers.

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