Boeing's Lost Spirit

Outsourcing proves bad for business

“Outsourcing is another form of trade that benefits the U.S. economy by giving us cheaper ways to do things.” – Janet Yellen, currently U.S. Treasury Secretary, in 2004.

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It doesn’t take an aerospace engineer to observe that the most important part of an aircraft is the fuselage.

Wings, engines, avionics, barf bags – these are all essential, but without a fuselage, what is the point?

Boeing sold its fuselage manufacturing operation for about $1 billion in 2005. Now it it plans to buy it back for $8.3 billion.

They called it efficiency. They promised profitability. They delivered folly.

It took nearly a quarter century for Boeing to acknowledge its miscalculations. Now it wants to buy back Wichita, Kan.-based Spirit AeroSystems, which built the fuselage that made headlines in January when a door plug blew out mid-flight, terrifying Alaska Airlines passengers.

This is hardly Boeing’s biggest blunder after recently agreeing to plead guilty to a felony related to two 737 Max crashes that killed 346 people. But it’s a costly admission that this oversized company has gone overboard with outsourcing.

Boeing gets 737 fuselages delivered by train. (Photo Credit: Dan Bennett from Seattle, USA, CC BY 2.0, via Wikimedia Commons.)

First it was about money, now it’s about safety

Decades ago, Boeing decided to transform itself from a manufacturer to a systems integrator, assembling components that it outsourced from others, including Chinese suppliers.

Here’s a quote from a 2005 Boeing press release when it sold the fuselage operation that became Spirit:

"This agreement fully supports our strategy to focus Boeing on large-scale systems integration, which is where we are most competitive and can add the most value to our airplanes and services. … Boeing will benefit from lower procurement costs and the Wichita/Tulsa operations now can grow by winning new business with other customers."

And here’s a quote from a Boeing press release from July 1 now that the company wants to buy back Spirit for billions more:

"We believe this deal is in the best interest of the flying public, our airline customers, the employees of Spirit and Boeing, our shareholders and the country more broadly. By reintegrating Spirit, we can fully align our commercial production systems, including our Safety and Quality Management Systems, and our workforce to the same priorities, incentives and outcomes – centered on safety and quality."

The deal is Boeing’s costly confession that its over-reliance on outsourcing eroded its controls over production, quality and safety.

Boeing stock has nosedived about 53% since 2019, losing nearly $140 billion in market value.

We’re left wondering what the corporate efficiency experts and financial engineers of the early 2000s think now – or have they long cut and run?

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