This is the second part of a continuing case on Boeing. Each part considers issues confronting Boeing as it attempts to manage problems associated with the Boeing 737 MAX tragedy. Part 2 integrates concepts covered in Chapters 3 and 4.

Read the case and answer the questions that follow.

CHAPTER 3: The Managers Changing Work Environment and Ethical Responsibilities: DOING THE RIGHT THING

In this section of the case we will discuss Boeings ethical responsibilities and the impact its decisions had on various stakeholders.

Regulating Airplane Makers

The Federal Aviation Administration (FAA), an agency within the Department of Transportation, oversees Boeing as an external stakeholder. Through the years, the FAA has delegated more oversight authority to Boeing, claiming that industry professionals have greater technical expertise. This change benefits Boeing as the company can more quickly get its new planes in the air and minimize bureaucratic-based slowdowns. The resources each party contributes to oversight highlights the seismic shift from government to industry. The FAAs Boeing Aviation Safety Oversight Office, which oversees new plane certifications, has a team of 45 regulators. Compare this with 1,500 Boeing employees who have been given authority by the FAA to handle key certification work.¹

The process of delegation became more complicated with advanced software systems such as the Maneuvering Characteristics Augmentation System (MCAS). (We discussed MCAS and the role it played in two airliner crashes in Part I of the case). According to a panel that investigated the two deadly 737 MAX crashes, vital information regarding MCAS was shared in a fragmented fashion by Boeing with the FAA as part of its certification process. Although MCAS may have been briefed to some FAA personnel, key aspects of the MCAS function such as intended function description, its interfaces, and architecture, were not directly visible to the FAA in a straightforward manner through the certification deliverable documents, says the panels report.² In some cases, Boeing didnt even share information with regulators. For example, the company made MCAS more aggressivein terms of taking control of an aircraft and overriding pilotslater in the MAX development process, and did not submit this change to the FAA as part of the regulatory bodys safety assessment.³ These facts have led many technical experts inside the FAA to question the regulators relationship with Boeing, saying that the agencys delegation has gone too far. For instance, an FAA engineer told the Seattle Times that, We need to make sure the FAA is much more engaged in its assessments of Boeing.⁴

To make matters worse, Boeing emails released to congressional investigators in 2020 showed a culture of mocking federal rules, deceiving regulators, and joking about potential flaws in the MAXs design. Would you put your family on a Max simulator trained aircraft? I wouldnt, said one employee to their colleague in 2018. No, said the colleague. Another employee in 2017 said the MAX is, designed by clowns, who are in turn supervised by monkeys. Boeing employees in some instances even took aim at the competence of the FAA regulators who were reviewing the MAX. One employee, who had just given a presentation to FAA officials, said the MAX was so complicated that agency officials were, like dogs watching TV.⁵

Congressional investigators concluded that Boeing had a culture of concealment and cost-cutting that led to the two fatal MAX crashes. Specifically, a Congressional report found that Boeing was under tremendous financial pressure to compete with rival Airbus, thus making the poor decision to overhaul the 737 rather than develop a new plane. Members of Congress blamed the FAA as well. One example that raised the ire of investigators was the ability of Boeings employees to certify their own planes, which Congress saw as a clear conflict of interest.⁶

Boeing Receives Even More Autonomy

Boeings questionable behavior is even more problematic in light of Congress passing the F.A.A. Reauthorization Act of 2018. The law was enacted before the two deadly MAX crashes and makes it even more difficult for regulators to oversee airplane manufacturers work. Boeing lobbied for the laws passage, saying it would make it more competitive with chief rival Airbus. Some stakeholders have issued dire warnings about the new law. A labor group that represents FAA inspectors, for example, raised concerns that the law would turn the government into a rubber stamp and said regulators could only intervene after a plane had crashed and people perished. Other experts tell the the New York Times that the new rules prioritized Boeings deadlines over passenger safety.⁷

Indeed, Boeing believes that the new law is in its long-term interests. But is it in the interest of passenger safety, knowing what we know about the 737 MAX?

CHAPTER 4: GLOBAL MANAGEMENT: MANAGING ACROSS BORDERS

This section of the case focuses on globalization and the role Boeing has played outside of the United States.

A Truly Global Company

Boeing is one of the most globalized companies in the world. From a revenue perspective, approximately 70 percent of the companys commercial airplane sales come from customers outside the United States. The airplane maker supports airlines and government customers in 150 countries and employs individuals in 65 nations. Boeings international operations is such an important part of its portfolio that the organization established Boeing International in 2001. Boeing International leads the manufacturers growth and productivity initiatives, new business, and industrial partnerships outside the United States.⁸

Boeing also benefits from globalization in its supply chain. Its 787 Dreamliner aircraft, for example, has parts sourced from South Korea, Italy, Japan, Australia, China, Sweden, and others.⁹ The MAX also sources some parts from overseas, including engines that are made by CFM International, a joint-venture between General Electric and Frances Safran.¹⁰

Finally, Boeing creates a product that connects people across the world. The company has more than 10,000 planes in service, or almost half the worlds fleet. And their planes arent only moving people. Boeing has multiple variations of freighters which enable rapid global trade around the globe. In fact, around 90 percent of the worlds cargo travels via Boeing planes.¹¹

United States vs. European Union: A Tale of Tariffs

Typically, global relations and trade agreements dont just focus on one or two companies. Boeing is in a class of its own, however, as Americas largest manufacturing exporter. The airplane maker complained for years that its chief rival, Airbus, was receiving illegal subsidies from the European Union (EU). It claimed these subsidies were in the form of government loans that allowed Airbus to stay competitive with its American rival. The World Trade Organization (WTO) agreed with Boeing in October 2019 and authorized the United States to impose a record $7.5 billion in retaliatory tariffs on the EU. Weeks later, President Trump imposed these tariffs not only on Airbus, but also on European agricultural products such as French wine and Spanish olive oil.¹²

Boeing wasnt able to enjoy its tariff victory for long as the WTO ruled in 2020 that the American airplane maker received illegal subsidies from Washington state. The state has since rescinded those subsidies, but it remains to be seen if the WTO will allow the EU to impose retaliatory tariffs.¹³ EU tariffs would come at a bad time for Boeing. The company is facing numerous claims for compensation, from Norway to India to China, due to the grounding of the 737 MAX.¹⁴ The company also was forced to set up a $100 million compensation fund for the family members of those who perished in the crashes.¹⁵

Experts see the tit-for-tat tariffs as hurting not only Boeing and Airbus, but both the U.S. and EU due to increased globalization. Airbus CEO Guillaume Faury said that close to 40 percent of Airbuss aircraft-related procurement comes from U.S. suppliers. This U.S. supply chain supports 275,000 American jobs in 40 states through spending that has totaled $50 billion in the last three years alone. U.S. airlines also will take a direct hit from American tariffs on Airbus. For example, Delta Air Lines will have to pay 10 percent more for 246 Airbus aircraft it has on order. The worlds largest airline by revenue claims that the U.S. tariffs are an unfair tax on U.S. consumers and companies.¹⁶

Based on the case, which of the following are reasons why Boeing continues to expand internationally?

Multiple Choice

• access to financial capital

• availability of supplies

• new markets

• availability of supplies and new markets

• new markets and access to financial capital