Will Boeing move to Beijing?

Will Boeing move to Beijing? http://www.dailyfinance.com/2009/08/31/will-boeing-move-to-beijing/#
Peter Cohan
Aug 31st 2009 at 11:00AMText SizeAAAFiled under: Company News, Boeing
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Boeing (BA) CEO Jim McNerney is eager to move the company to China. Whether moving Boeing to China means shifting its headquarters from Chicago to Beijing is up in the air. But Boeing already has $600 million in supplier partnerships with China -- such as a deal with Shenyang Aircraft Corporation to build an assembly for the 787's vertical fin. And Stan Sorscher, who spent 20 years at Boeing before taking a post at the Society of Professional Engineers in Aerospace (SPEEA) in 2000, told me that engineers he spoke with believe that McNerney is hooked on the idea of shifting more of Boeing's aircraft development to China.

Sorscher told me that McNerney recently hosted a meeting with a group of engineers to discuss how Boeing should build its next aircraft. The conclusion of the meeting was that McNerney is comfortable with the way the 787 was developed but thinks it could use a bit of tweaking -- and he'd like to shift more of the design and manufacturing of future Boeing aircraft to China.


This would leave Boeing as a systems integrator which outsources product development to China and other countries. According to Sorscher, the engineers were very nervous in their presentation -- perhaps fearing that they would be punished for bringing McNerney the bad news that they believed Boeing should never repeat what it has done in the design and manufacturing of the 787. The engineers reportedly believe that in the future Boeing should take far greater authority and responsibility for aircraft design.

During the meeting, the engineers thought that McNerney was relaxed and that he agreed with them. Sorscher said that the engineers even told him that McNerney was talking through their slides for them. But months later, the engineers realized that McNerney was just seeing what he wanted to see in their presentation.

According to Sorscher, McNerney wants to partner with China rather than compete. He likes the idea of outsourcing the design and manufacturing of future aircraft there and -- with some minor tweaks -- is comfortable with shifting future aircraft design and manufacturing work to suppliers as Boeing did with the 787.

Who's right, McNerney or the Boeing engineers? McNerney might argue that outsourcing limits Boeing's financial risk, gives it access to more global talent while cutting its labor costs. Sorscher is suggesting that McNerney's approach threatens Boeing's engineers by giving them less to do. But if Sorscher is right, Boeing needs to return to the problem-solving approach that worked for the company in 1995 with its successful 777 program.

I'd argue that if Boeing can quickly overcome the problems with the 787 that have been publicized in places like the Wall Street Journal -- such as structural problems where the wing and the fuselage join and fuselage wrinkling -- along with problems that have yet to be formally acknowledged -- such as failures in the 787's Environmental Control System (ECS) and Electrical System (ES) -- then McNerney will be proven right.

But at this point, it appears that McNerney may be suffering from confirmation bias -- an approach to processing information that stifles inconvenient truths while embracing news that paints the picture that the decision-maker wants to see.

And for the 787 -- which has 850 orders and a $154 billion backlog -- this style of decision-making could be costly.

Peter Cohan is a management consultant, Babson professor and author of eight books including, You Can't Order Change. Follow him on Twitter. He has no financial interest in the securities mentioned.