The Boeing Big Conundrum as the Max 737 Crisis Unfolds

This is about the case of the Boeing big conundrum as the Max 737 crisis unfolds and why two brand new jetliners crash, killing all passengers and crew?  It is an extremely disturbing situation, and unfortunately has the potential to be an American tragedy of unprecedented corporate corruption and malfeasance! Thankfully, the one thing we can be pretty sure of is that the truth WILL come out! In fact, as we speak: an American corporate tragedy.

The Boeing Big Conundrum as the Max 737 Crisis Unfolds

  • A grand jury in D.C. is hearing evidence gathered by the fraud section of the Justice Dept’s criminal division.
  • FBI agents are seeking info from engineers and others involved in producing BA jets.
  • The U.S. Congress, the S.E.C. & the Transportation Departments Inspector General are conducting separate probes, including executive’s roles in decisions including not disclosing cockpit sensor faults.

Mary Schiavo handling a suit for the family of one of the victims

  • The Boeing Big Conundrum as the Max 737 Crisis Unfolds
    Mary Schiavo

    Mary Schiavo the former inspector general of the transportation department, now in private practice with Motley Rice and considered a formidable authority in transportation law is handling a suit for the family of one of the victims.

  • At least 400 pilots have a class-action suit in the works.
  • At least 35 other individual suits were in the works as of a month ago.

 

CNBC Report on Boeing Ratings

In spite of all this, as of Thursday 8/15/19, CNBC noted that there were 5 strong buys, 8 buys, 7 holds and 2 sells recommendations from the major Wall Street firms covering Boeing.

  • CEO Muilenburg made presentations and conf calls last week where he reiterated his expectation for the Max to be back in action by the 4th quarter.
  • However, for the first time also mentioned that if his forecast was too optimistic, they may have to stop production temporarily. (they cut from 52/month to 42/month after the 2nd crash, all of which are just sitting there. A couple of analysts expressed some consternation about that, as if it never occurred to them as a likely probability.
  • So in essence Wall St is blindly taking management guidance as gospel.
  • Most likely, none want to risk missing out on all the deals BA will need to do to rebuild their balance sheet if and when the dust settles, by issuing a negative report now.

Most powerful legal defense team ever assembled

On the other side of the equation is arrayed what is probably the most powerful legal defense team ever assembled in the history of corporate litigation.

  • It starts with Michael Luttig, former Davis, Polk Sr Ptn, Federal Appellate Court judge, long time Boeing General Counsel, particularly close to Kirkland and Ellis – the main firm handling the defense. Luttig is also apparently at least acquainted with many in the Trump Administration. He was about to retire when BA directors prevailed on him to quarterback the defense team.

Other matters

  • It seems notable that with all the news surrounding this story, that the short interest remains very low. It speaks to the “Status Quo Bias” that is evident.
  • Apparently, at Boeing’s direction their suppliers have continued producing and warehousing at the full 52 jets/month rate, presaging a supplier disaster of unprecedented proportion if production is shut down for any substantial period of time.
  • It is also notable that when BA started taking orders on the Max in 2011 the stock was under $100. While they have only, actually delivered and been paid for 378 jets, it was the backlog building to 5,000 plus, that drove the stock to the mid-$400’s.
  • While it is by far the most important factor in assessing Boeing, the Max is not their only headache.
  • The Boeing Big Conundrum as the Max 737 Crisis Unfolds
    Ali Bahrami

    So far the investigations I’ve read about have focused on the drastically increased role the FAA has ceded to Boeing to “police” their own approvals. Am I the only one who sees that as the ultimate example of “the fox guarding the hen house?” Moreover, the main villain so far is Ali Bahrami, the FAA’s top official in Seattle who supposedly was the force behind the concept of moving power of certification more and more away from engineers of the FAA, and into the hands of the manufacturer.

  • So far, the huge gaping hole that I have read little about is BA, senior management’s role in all this. After all, “What incentive does…or should…the FAA have for determining whether BA beats out Airbus for an order from American Airline or Southwest, etc??? Particularly versus making absolutely certain that competitive issues have NOTHING to do with the timetable for delivering a passenger jet that will be entrusted, first and foremost with the safe passage of its passengers??? Who, we should be asking has the incentive to win those orders? For sure it should NOT be the FAA. Rather, it is Boeing and Boeing alone that does have the incentive, or that should be the case.
  • For a little background aside! Boeing began taking orders for the Max in 2011, but did not make their first delivery until 2017 (as noted above they have delivered and been paid for 378 – 737 Max jets) However, as of the second crash BA had amassed a backlog of more than 5,000 orders for the Max. Is it possible that the pressure to deliver jets asap so the company could recognize the associated revenue and profits, added to the tremendous sense of urgency that would have FAA concerns being over-ruled at higher levels to speed things up? But why??? Who did it benefit? If it was the FAA or anyone in it, not good! Have to find that out!
The Boeing Big Conundrum as the Max 737 Crisis Unfolds
Undelivered Boeing 737 MAX aircraft that were grounded by aviation agencies, seen at parking lot at Boeing Field in Seattle

The FAA claims that they didn’t have the budget to hire competent engineers

The FAA claims that they didn’t have the budget to hire competent engineers. I must say, this is the first time I’ve ever heard that! How about you? Haven’t you always considered the FAA to be the very epitome of regulators? The ones who protected us from the corporate greed that could lead to cutting corners to generate more profits, to pay higher corporate/management bonuses? Yikes! So why would the FAA take such an interest in BA’s success vs. Airbus, since that is clearly not their job? Why, since we know that the folks who do have that incentive are the folks who work at BA. At the top of that list are CEO Muilenburg and the previous Chairmen, who are three of the largest holders of BA stock. So perhaps the authorities investigating this case should pose these questions:

  • Did Dennis Muilenburg or any other member of mgmt. past or present, or any Board member have anything to do with pressuring the FAA to cede more and more control to BA?
  • Did any one of the above participate in the decision to not inform the FAA that the MCAS were far more powerful and dangerous than originally thought, or that their very presence in essence meant that this was a different aircraft than was being represented by mgmt.?
  • Did they participate in the decision to tell the FAA that there was no need to mention the MCAS and their purpose/power in the pilot’s manual, or for that matter to provide pilot training?
  • Had Dennis Muilenbuurg or any member of the sales team make representations/guarantees to certain buyers about delivery dates and a lack of pilot training requirement, prior to the test flights that revealed the effect of the heavier engine and adjusted engine placement on the wings?
  • Did company management in any way succumb to the pressure of deliveries/revenue/earnings stock price/glory? Did they compromise integrity and above-all-else concern for the safety of passengers in order to look good to customers and make deliveries, so BA could recognize the revenue & profits in support of stock price?
The Boeing Big Conundrum as the Max 737 Crisis Unfolds
A grounded Boeing 737 Max aircraft in Orlando, Fla.

 

Was there any financial benefit offered?

Finally, another VERY big question??? Was there any financial benefit, cash payment, gift of options/warrants/stock or any other type of reward from BA directly or indirectly through others, to any FAA officials or relatives?

Otherwise, how to answer that extremely perplexing question of who was incentivized to do what? It MUST be answered!

Kirkus Reviews, the gold-standard for independent reviews, has to say about "What Goes Around Comes Around":

A stable, positive, non preachy, objective voice makes the book stand apart from others in the genre. The author gives readers not just points or principles to ponder, but real human experiences that demonstrate them. A successful guide that uses anecdotes to reveal powerful truths about life.

~ Kirkus Reviews

“A stable, positive, non-preachy, objective voice makes the manual stand apart from others in the genre.  A successful guide that uses anecdotes to reveal powerful truths about life.” – Kirkus Reviews

“I’ve read a number of books that focus on sharing a similar message, including “The Secret” by Rhonda Byrne, “The Answer” by John Assaraf & Murray Smith, “The Celestine Prophecy” by James Redfield, “Think and Grow Rich,” by Napoleon Hill, and I must say that I find Rob’s to be my favorite. – Sheryl Woodhouse, founder of Livelihood Matters LLC

The Boeing Big Conundrum as the Crisis Unfolds

The Boeing Big Conundrum as the Crisis Unfolds