BOEING: "Breaking Up Is (Is Not) Hard to Do"

Chicago-based Boeing Corporation makes 
civilian jets . . . and weapons.

When I lived in Philadelphia in the '80s, there were two related events in the business world that made me sit up and take notice.

The first was the acquisition of a venerable Philadelphia bank -- Girard Bank -- by a big Pittsburgh institution -- Mellon Bank.  People were pissed.  It didn't make complete sense to me, but I eventually learned a little bit about Philadelphia philanthropist Stephen Girard, and I came to understand a little better why people had feelings about the bank. (Hey, nothing personal, Mellon . . . we just like things in Philadelphia the way they are . . . . )

The second was the recognition by Mellon that Mellon had a substantial volume of bad assets on the books -- as in, enough to bring the company down.

In the event, Mellon made a brilliant decision: they split Mellon into two parts -- dubbed "the bad bank" and "the good bank" -- and dealt with them separately. They recognized that as long as Mellon remained a single entity, the investment community would value the entire company in light of the problems occurring in some of its assets. The solution was to quarantine the bad assets, take the hit, and focus on saving the the part of the bank that still had (substantial) value. (See "Rich Bank, Poor Bank: Mellon's Surprise Success" in Business Week, March 8, 1992.)

Every time we talk about the substantial part of the Boeing Corporations that is used for war and violence, I can't help thinking: "bad Boeing, good Boeing."


Everybody's Doing It

There's a lot that goes into making an argument for the breakup of a multinational corporation, and I have been meaning to develop this idea in more detail before posting it to my blog.  However, it seems that we're in a moment where people are talking about corporate breakups and how they're the right thing to do.

Hewlett-Packard Announces Breakup

Today we had the news that Hewlett-Packard will break itself into two companies. (See "Hewlett-Packard Announces Breakup Plan as Technology Landscape Shifts" by Quentin Hardy and David Gelles in The New York Times, October 6, 2014.)

A few weeks ago I noted that an investor was leading an effort to break up the DuPont company. The investor "argues that an overly complex and bloated corporate structure overburdens DuPont's seven business lines, some of which the activist firm argues bear little relation to one another, making it difficult for both investors and the company itself to gauge its prospects." (Wall Street Journal, September 16, 2014) Sound familiar?

In the last decades there have been big corporate breakups of firms like Viacom, Altria, Morgan Stanley, Time Warner, ConocoPhilips, and -- recently right here in the Chicago area -- Abbott Labs.

Sure, "breaking up is hard to do" -- sometimes. But now, it seems, "breaking up is the thing to do."


It seemed like a good idea at the time

It should be remembered, by the way, that today's Boeing Corporation is really a mashup of two aerospace companies -- the civilian aviation oriented Boeing and the military aviation oriented McDonnell Douglas -- in 1997. (See "Building a new Boeing" in The Economist)

The merger was sort of a case of "misery loves company": civilian aviation was in crisis, and the Cold War was over and drastic economizing in defense spending was expected, so why not put both these problems under the same roof?

Boeing has struggled to make things work. It announced in 2006 that it would reorganize the defense division.

"We'll get this thing working eventually . . . . " 
Boeing said it would eat $272 million in the development
of the new KC-46A aerial refueling tanker after discovering
wiring issues in test aircraft." (Defense News, July 26, 2014)

Boeing did a big round of layoffs in its defense business in 2009, following a big drop in defense orders. "In a single day during the spring of 2009, Defense Secretary Robert Gates wiped out a quarter-trillion dollars in potential bookings at Boeing Defense, Space and Security by proposing termination of an array of programs begun during the Bush years, forcing the company to rethink its business plan and reorganize its operations. " (More in Forbes, October 12, 2010.)

Boeing announced another reorganization of its defense division in 2012.

On September 29, 2014, Boeing "said it would move up to 1,400 jobs and change or eliminate hundreds of others over the next three years as part of the consolidation of its defense operations away from its manufacturing base in Washington state." (Wall Street Journal)

Yup -- it's been a tough row to hoe for defense at Boeing. (And that's not even counting things like the refueling tanker fiasco -- a contract awarded, then the award frozen due to a bribery investigation, then the contract re-awarded, then the CFO sentenced to jail for trying improperly influence the contracting process, then a write-off on the program reported this summer due to production issues . . . .)

Hey, shouldn't Boeing stick to its knitting and get its commercial business working? How about shipping the Dreamliner without those pesky battery fires?


Time to jettison "bad Boeing"

In recent months, people have become more and more aware of the role of Boeing's weapons in the violence that we deplore -- in Gaza, in the form of next-generation killer drones, in the creation of deadlier and deadlier nuclear weapons, in provoking conflict on the borders of China.

Isn't the time fast approaching when Boeing recognizes that it's not just one or another of their weapons systems -- or weapons systems customers -- that's the problem? Isn't Boeing's entire defense systems division "bad Boeing"?

Last night I watched a new film about the evacuation of Saigon at the end of the Vietnam War. As I watched Huey helicopters being shoved off the deck of a Navy ship into the ocean, to make room for more people seeking refuge, I thought, "That's right: it's gotta go; it's the people that matter."


As they say in business, "The first cut is the easiest."

A no-brainer
During the evacuation of Saigon, Huey helicopters were jettisoned
after delivering passengers to Navy ships, in order to make room
for more incoming rescuers.

9 More Ideas You Won't Hear

at Chicago Ideas Week . . .

Related posts

There was a time when the business world would have bought the argument that commercial Boeing + military Boeing = diversification. The ups and downs of military Boeing could cushion the downs and ups of commercial Boeing (and vice versa). Today, however, investors want to see companies focus on their core business. If there's risk-offsetting to be done, hedges can be set up by risk managers, thank you very much.

(See Which Boeing Are We Talking About Again?)








Now that the Israeli government's killings in Gaza are front-page news -- particularly the way military aircraft is being used to mow down innocent men, women, and children -- Boeing's involvement is in everyone's face.

(See Boeing Has an Israel Problem . . . and Chicago Has a Boeing Problem)






People are talking about cuts to the military. It couldn't happen to a more deserving half of our national budget.
HOWEVER . . . we need a lot more people jumping into this debate, because the cuts being talked about are too timid . . . AND because the most dangerous and illegitimate (and frequently illegal) forms of military force are being advocated for the "efficiency" and "cost-effectivneness."

(See Talk of the Town: Shrink the Military )

Isn't the real problem that fully half of Boeing's business consists of making and selling war materiel? Is it really necessary to identify the one, or two, or three most egregious weapons that Boeing makes? Do we need to pick and choose?  Isn't the real issue that nice, all-American, fly-the-friendly-skies Boeing is one of the core purveyors of war and misery in the world today, by virtue of its Military Aircraft division? I mean, look at their own sanitized version of what they do -- "Strike, Mobility, Surveillance & Engagement, Unmanned & Missile Systems, Global Support" -- even in their own words its readily apparent that they're peddling poison.

(See The Wrong Labor Struggle at Boeing )

It is time now to turn to the dirty secret of American life and the primary dilemma of the antiwar movement: the military money that flows to EVERY Congressional district, and in particular the "good jobs" that members of Congress think they are protecting when they vote for ever-higher levels of military spending.

(See Drones, Permawar, and the Problem of "Good Jobs")










"The U.S.'s use of drone warfare has resulted in the deaths of hundreds of children, many of whom live in countries where we have not declared war, yet Boeing has decided to pursue a Navy contract for the prototype for the next combat drone. This is unacceptable", said Kait McIntyre of the Chicago Anti-War Committee (AWC), at the annual stockholders' meeting of the Boeing Corporation.

 (See Activists Challenge Boeing to Disinvest from Drone Research)

There's been a lot of talk in recent weeks and months about the problem of gun trafficking in Illinois, and how we will never meet our goal of stopping the violence in our communities if we can't stop the flow of guns. Maybe it's time for us to eat our own dog food . . . .

(See What If Illinois Became a "War-Profiteer-Free Zone" ? )

What if we had a massive region in the heart of the country pushing back against the war-crazed conventional wisdom of "more weapons," "more consumption," and "more destruction of the environment"?

(See Another Modest Proposal: A Green, Demilitarized Midwest! )








Other related links

Chris Chadwick
President, Boeing’s defense, space and security unit

"You have to face reality": In recent weeks, the business press has been buzzing about Boeing's admission that it needs to take a major new direction in its military division:

September 18, 2014 - "Boeing Faces a Future Without Fighter Jets As Orders for F/A-18 Dry Up, Executives Shift Focus to Bombers, Drones and Trainers" by Doug Cameron and Robert Wall in The Wall Street Journal

September 18, 2014 - "Report: Boeing plans for post-fighter future" by Brendan McGarry on FoxNews.com

September 18, 2014 - "Are Military Fighter Planes Finished at Boeing?" by Paul Ausick on 24/7 Wall Street

September 18, 2014 - "Boeing shifts focus off fighter jets" by Angela Mueller in St. Louis Business Journal

Chris Chadwick, president of Boeing’s defense, space and security unit, was quoted as saying "You have to face reality."

Just one more reason to break up the company . . .