Mulally: Global Boeing must share

The News Tribune ^ | 02/07/02 | John Gillie

[Dead Dog]

Competitiveness demands that the new, more global Boeing Co. share its work and its wealth with workers around the world, the company's highest-ranking Pacific Northwest executive said Tuesday in Tacoma.

Alan Mulally, president of Boeing Commercial Airplanes Group, said Boeing can't act like British colonialists extracting wealth from other countries and exporting it all back home.

Mulally, speaking to The News Tribune editorial board, said that with 70 percent of Boeing's commercial airplanes sold to airlines operating outside the United States, Boeing has an obligation to build parts of its aircraft overseas.

"We just operate everywhere," he said. "We need to include everybody around the world in the asset utilization. They buy our products and pay up. We can't just extract wealth from other countries and pay ourselves.

"And the United States has no divine right to our standard of living," Mulally added, defending Boeing's overseas parts production.

The issue of performing work overseas is a sensitive area with Puget Sound Boeing workers who have made limiting out-sourcing one of their top priorities in ongoing labor negotiations.

The Boeing executive said the company wants to concentrate on what it does best: design, sales, marketing and large-scale integration of complex products.

"Competitiveness is at the top - the very top - of our agenda. Whatever we choose to do, we have to do it and add value better than anybody else in the world.

"Because that's what we believe in. That's capitalism. That's market forces."

Mulally said Boeing's skill at large-scale system integration is unique.

"Very few people in the world can build an airplane and make it safe. So the most important thing that we do is product development, sales, marketing, new airplanes, new services and taking care of our customers."

Mulally said doing what the company does best may well mean farming out more parts production elsewhere.

"We just operate in this very global enterprise. Does that mean over time that we'll make less parts? We keep gravitating where we can add more value.

"Does that mean we can include everybody that we can? Absolutely. Does that mean we will keep nurturing our business with China and Singapore and Japan? Absolutely. Is that good for business? Absolutely. Do we want to include everybody that we can? Absolutely."

The Boeing chief said he's eager to see the Puget Sound area solve some of its infrastructure and competitiveness issues so it will be more attractive to businesses. Mulally headed a statewide competitiveness council that recommended solutions to the Legislature.

The penchant for government to repeatedly study what to do and how to finance those improvements and then fail to act is particularly frustrating, he said.

"The most important question is not about transportation, it's not about permitting, it's not about regulation. It's about whether we, the people of the state of Washington - not Boeing - are going to keep pulling together and have great debates, and at the end of the day move forward together.

"I've never seen a set of people who want a proven solution all mapped out before we can more forward with it."

Mulally said he hopes Boeing's layoffs are nearly done. The company has laid off or issued warning notices to more than 28,000 workers.

Mulally in September said the company would lay off about 30,000 workers because of the aftereffects of the Sept. 11 terrorist attacks.

But even if aircraft orders return to more normal levels, Mulally predicted, the company's payroll won't return to former levels.

Boeing will add workers very conservatively.

Increasing productivity will ultimately mean fewer jobs, he said.

John Gillie: 253-597-8663 john.gillie@mail.tribnet.com

[Dead Dog]

I think by "Goeing Global", corporations no longer call themselves "American", nor do they want to.

[Dead Dog]

If you think about it, all this can do is drive down the wages of domestic engineering. So engineers have three choices;

A). accept getting paid less then a high school dropout.

B). move to a third world country and join a growing middle class under a benevolent dictater, while being paid less then a high school dropout

C. Grow a pair, like some very wealthy college dropouts, and go into business for our selves. Some of us may become the next Jack Northrops and "Kelly" Johnsons.

[Dead Dog]

What he didn't say was "Why should we pay American workers a living wage, when the Red Chinese Army provides us with slave labor ??"

Living wage is a misnomer, I can live off minimum wage, just not prosper. It should be "free market price". In in true cost, Boeing isn't going to save any money buying parts overseas to feed assembly lines here. After all costs are considered, supporting "Just in time manufacturing" with suppliers at the other end of a 3 week boat ride is not cost competitive. However, it initially looks like a savings on the balance sheet. In Shareholder Value, perception is everything. Unfortunately, for buy and hold types, reality counts in the long run.

This is especially true for "intellectual capital", engineering, that accounts for less then 3% of program costs.

[L_Von_Mises]

However, in getting an MBA, I learned that Boeing messed up big time by not shifting, say some of the wing construction to the only European firm that could do it, essentially eliminating a necessary and strategic component from a startup called Airbus.

My understanding of this issue is that building the wing is the true "black art" of airplane construction. They wish to keep production that component in the US to ensure that no one else takes their engineering and applies it to their products.

Regarding oversees production, I believe that many countries have domestic content rules for certain purchases. Airplanes fall into this category, so in order to be able to sell them the planes they set up shop in those countries to produce enough of the content there to satisfy the requirements.

It makes for difficult decisions - either don't make the sales in those countries or produce some of the content there and make the sale. I believe that a large portion of the tailsections for Boeing's planes are made in China as a result of the large purchase the Chinese made a few years back.

Their main competitor - Airbus - is heavily subsidized and it is difficult to compete in a market where your competitor is playing by a different set of rules.