The Boeing Company

views updated

The Boeing Company

7755 East Marginal Way South
Seattle, Washington 98108
U.S.A.
(206) 655-2121

Public Company
Incorporated: July 19, 1934 as Boeing Airplane Company
Employees: 98,700
Sales: $16.34 billion
Stock Exchanges: New York Amsterdam Brussels London Zurich Geneva Basel Tokyo Boston Cincinnati Midwest Philadelphia
SICs: 3721 Aircraft; 3760 Guided Missiles, Space Vehicles, Parts; 3663 Radio and TV Communications Equipment; 3724 Aircraft Engines and Engine Parts; 3728 Aircraft Parts and Equipment, Nee

The Boeing Company was one of America’s most successful corporations and ranked as the country’s number one exporter in the early 1990s. The corporation had the highest sales volume of any aerospace firm in the United States and was the world’s leading manufacturer of commercial jet aircraft. Boeing has been characterized as one of the world’s best managed companies, having made difficult but vital decisions in the face of intensifying global competition, the worst downturn in the history of the airline industry, and substantial defense and space cutbacks in the United States.

Founder William Boeing was raised in Michigan, where his father operated a lucrative forestry business. While he was in San Diego, California, in 1910, Boeing met a French stunt pilot named Louis Paulhan who was performing at the International Air Meet. When Paulhan took Boeing for an airplane ride, it marked the beginning of Boeing’s fascination with aviation.

After two years of study at Yale’s Sheffield School of Science, Boeing returned to Michigan to work for his father. He was sent first to Wisconsin and later to the state of Washington to acquire more timber properties for the family business. In Seattle he met a Navy engineer named Conrad Westerveldt who shared his fascination for aviation. A barnstormer named Terah Maroney gave the two men a ride over Puget Sound in his seaplane. Later Boeing went to Los Angeles to purchase his own seaplane, thinking it would be useful for fishing trips. The man who sold him the plane and taught him how to fly was Glenn Martin, who later founded Martin Marietta.

While in Seattle, Boeing and Westerveldt made a hobby of building their own seaplanes on the backwaters of Puget Sound. It became more than a hobby when a mechanic named Herb Munter and a number of other carpenters and craftsmen became involved. In May of 1916, Boeing flew the first “B&W” seaplane. The next month he incorporated his company as the Pacific Aero Products Company. The company’s first customer was the government of New Zealand, which employed the plane for mail delivery and pilot training.

Boeing and his partners anticipated government interest in their company when the United States became involved in World War I. They discovered their hunch was correct when the company was asked to train flight instructors for the army. After the war, Boeing sold a number of airplanes to Edward Hubbard, whose Hubbard Air Transport is regarded as the world’s first airline. The company shuttled mail between Seattle and the transpacific mailboat which called at Victoria, British Columbia. Later, when the post office invited bids for various airmail routes, Hubbard tried to convince Boeing to apply for the Chicago to San Francisco contract. Boeing mentioned the idea to his wife, who thought the opportunity looked promising. In the prospect, he and Hubbard created a new airline named the Boeing Air Transport Company. They submitted a bid and were awarded the contract.

To meet the demands of their new business Boeing and his engineers developed an extremely versatile and popular airplane called the Model 40. Fitted with a Pratt & Whitney air-cooled Wasp engine, it could carry 1000 pounds of mail and a complete flight crew, and still have room enough for freight or passengers. The Kelly Airmail Act of 1925 opened the way for private airmail delivery on a much wider scale. As a result, a number of airline companies formed with the intention of procuring the stable and lucrative airmail contracts. One of these companies was Vernon Gorst’s Pacific Air Transport, which won various routes along the Pacific Coast. Boeing purchased this company and then ordered a young employee named William Patterson to purchase its outstanding stock. Boeing also purchased Varney Airlines, which began operation in 1925 and won almost every mail contract it applied for until it became over-extended and had financial difficulties.

With the addition of National Air Transport, Boeing’s airline holdings formed the original United Air Lines. In 1928 all these companies were organized under a holding company called the Boeing Aircraft and Transportation Company. In 1929 a larger holding company was formed, the United Aircraft and Transportation Company. Included in this group were the “United” airlines and Stout Airlines; Pratt & Whitney (engines); Boeing, Sikorsky, Northrop, and Stearman (manufacturers); and Standard Steel Prop and Hamilton Aero Manufacturing (propellers). Boeing was made chairman of the company and Fred Rent-schler of Pratt & Whitney was named president.

Boeing and Rentschler became extremely wealthy in this reorganization by exchanging stock with the holding company in a method similar to J. P. Morgan’s controversial capital manipulation. They multiplied their original investments by a factor of as much as 200,000 times. It was, however, entirely legal at the time. In 1933 the government conducted an investigation of fraud and other illegal practices in the airline industry. Boeing was called upon to testify and explain his windfall profits before a Senate investigating committee. Under examination he admitted to making $12 million in stock flotations.

Boeing was so infuriated with the investigation that he retired from the company (at age 52) and sold all his aviation stocks. Upon Boeing’s departure the company’s production manager, Phil Johnson, was named the new president. But Boeing was not forgotten by the aircraft industry. In 1934 William Boeing was recognized for his emphasis on innovation and experimentation in aeronautical research and development. He was awarded the Daniel Guggenheim medal, “for successful pioneering and achievement in aircraft manufacturing and air transport.”

In 1934 a government investigation of collusion in the airmail business led to a suspension of all contracts awarded. As a result, the U.S. Congress declared that airline companies and manufacturers could not be part of the same business concern. This led to the break up of the three aeronautic conglomerates: Boeing’s United, the Aviation Corporation of the Americas, and North American Aviation. All of the Boeing company’s aeronautic properties east of the Mississippi became part of a new company, United Aircraft, operated by Fred Rentschler. The western properties, principally the Boeing Airplane Company, remained in Seattle exclusively manufacturing airframes. Pat Patterson was put in charge of the commercial air carriers which retained the name of United Air Lines and based its operations at Chicago’s Old Orchard (later O’Hare) airport.

In the years leading up to World War II the Boeing company led the way in developing single-wing airplanes. They were constructed completely of metal to make them stronger and faster; more efficient aerodynamic designs were emphasized; retractable landing gear and better wings were developed, along with multiple “power plant” technology; finally, directional radios were installed which enabled better navigation and night flying. Boeing had established itself as the leading manufacturer of airplanes.

When the United States launched its wartime militarization program, Boeing was called upon to produce hundreds of its B-17 “Flying Fortresses” for the Army. During the war the B-17 became an indispensable instrument for the U.S. Air Corps. In June of 1944, when production was at its peak, Boeing’s Seattle facility turned out 16 of these airplanes every 24 hours. By this time the company was also producing an improved bomber called the B-29 “Super Fortress.” It was this airplane that dropped the atomic bombs on Hiroshima and Nagasaki in August of 1945.

Boeing’s president, Phil Johnson, died unexpectedly during the war. He was replaced with the company’s chief lawyer, William M. Allen, on the last day of the war. Under Allen’s leadership, Boeing produced a number of new bombers, including the B-47, B-50, and the B-52. Boeing’s B-307 Stratoliner, a B-17 converted for transporting passengers, was succeeded by the B-377 Stratocruiser in 1952. The Stratocruiser was a very popular double-deck transport, most widely used by Northwest Orient. It was also Boeing’s only airplane built for the commercial airline market since before the war.

In the spring of 1953 Bill Allen convinced the secretary of the U.S. Air Force, Harold Talbot, to allow Boeing the use of the government-owned B-52 construction facilities for the development of a new civilian/military jet. Boeing invested $16 million in the project, which was intended to put the company ahead of the Douglas Aircraft Company. Douglas had dominated the commercial airplane market for years with its popular propeller-driven DC series.

This new jet, the B-707, first flew on May 15, 1954. American Airlines, a loyal Douglas customer, was the first to order the new jet. Their defection so alarmed Douglas that the company accelerated development of its nearly identical DC-8 passenger jetliner. The government later took delivery of Boeing’s military version of the jet, the KC-135 tanker, alternately known as the “missing 717.”

Boeing, which changed its name to The Boeing Company in 1961, enjoyed a large degree of success and profitability with the 707. The company devoted its resources to the development of a number of other passenger jet models, including the 720 (a modified 707) and the 727, which was introduced in 1964. The 727 was Boeing’s response to a successful French model called the Caravelle. The Caravelle’s engines were located in the rear of the fuselage, uncluttering the wings and reducing cabin noise. Boeing adopted this design for its three-engine 727, which carried 143 passengers. Douglas, eager not to be left out, introduced a similar two-engine model called the DC-9 in 1965.

During this time the company also recognized a demand for a smaller 100-passenger jetliner for shorter routes. As a result, Boeing developed the 737 model. The 737 seemed to run counter to the general trend at Boeing of building larger, more technologically advanced jetliners, but it did have a place in the market and made a profit.

Boeing’s next engineering accomplishment was the creation of a very large passenger transport designated the 747. This new jetliner was capable of carrying twice as many passengers as any other airplane. Its huge dimensions and powerful four-engine configuration made it the first of a new class of “jumbo jets,” later joined by McDonnell Douglas’s DC-10 and Lockheed’s 1011 Tri-Star.

The 747 program required such a large investment that it nearly forced the company into bankruptcy. One hundred and sixty orders were placed for the jetliner by the time it was delivered in 1969, but no more were placed until 1972. During this period, Boeing was also developing the 2707, a supersonic transport better known as the “SST.” Progress on this aircraft was slow and costly. Despite the support of Senator Henry Jackson, the U.S. Congress voted not to fund further development of the SST. Shortly thereafter Boeing abandoned the project altogether.

In 1969 a new chief executive was appointed to head the organization. An engineer named Thornton Wilson took charge of Boeing in a way reminiscent of his predecessor, Bill Allen, 25 years before. Faced with an impending disaster, Wilson’s response was to pare the workforce down from 105,000 to 38,000. The layoffs at Boeing had a profound effect on the local economy, as unemployment in Seattle rose to 14 percent.

Wilson’s strict austerity measures paid off quickly. Soon Boeing’s jets were rolling off the tarmac and employees were called back to work. After the company’s initial recovery, it received a deluge of commercial airplane orders and military contracts. Boeing started development of two new passenger jet models intended to take the company into the twenty-first century.

These new jetliner models, the 757 and the wide-body 767, became available in the early 1980s. Utilizing advanced technology and improved engines, these jetliners were Boeing’s response to McDonnell Douglas’s MD series and the European Airbus consortium’s 300 series. The current customer in the commercial jetliner market is more concerned with labor costs than fuel efficiency, owing to consistently cheaper oil. However, Boeing’s newest entries are doubly efficient, requiring smaller crews as well as less fuel. Besides the 757 and 767, Boeing offered an updated 737 for the shorter-range rural’ ’puddle-jumper” market and modified 747s capable of greater range and passenger capacity.

During this period of prosperity with commercial jetliners, Boeing made several attempts to diversify its business. Not all of them were successful. In the 1970s Boeing entered the metro-rail business, manufacturing mass transit systems for Boston, San Francisco, and Morgantown, West Virginia. The systems were modern, computerized, and efficient. They were also prone to frequent breakdowns. After fulfilling its obligation to rectify the systems (at great cost), Boeing decided to discontinue its ground transport business.

Most of Boeing’s business in the early 1990s came through four principal divisions: civilian aircraft manufactured and sold by the Boeing Commercial Airplane Company; helicopters for the armed services produced by the Boeing Vertol Company, acquired in 1960; strategic and tactical missiles and space products produced by Boeing Aerospace; and bombers, tankers, and high-technology surveillance aircraft built by the Boeing Military Airplane Company.

Boeing’s military business has been more stable than its commercial airlines business. That stability did not, however, ensure the company against debilitating losses in its civilian business during the 747 crisis or during the period after “deregulation” in America when demand for new jetliners declined. Despite steady revenue from government contracts, Boeing’s military divisions have remained viable and competitive in winning contracts, and in designing, developing, and producing a wide variety of state-of-the-art military hardware.

Boeing’s major contributions to the military include the KC-135 tanker and the versatile mainstay of the United States Air Force, the B-52 bomber. The company builds E-3 Airborne Warning and Control System aircraft (AWACs) for the Air Force, the North Atlantic Treaty Organization, and Saudi Arabia. In addition, Boeing builds the E-4 command post and the E-6 submarine communications aircraft. Under a consortium led by Northrop, it is developing a new bomber intended to replace the aging B-52, designated the B-1B. Boeing’s other (top secret) project is a role in the development of the F-19 Stealth bomber. Boeing’s Vertol facilities, located in Philadelphia, produce CH-46 and CH-47 (Chinook) helicopters.

In the aerospace division, Boeing won a $4 billion defense department contract in 1980 to manufacture the air-launched cruise missile. It builds the MX intercontinental ballistic missile and the Roland air defense missile. The company also provides modernization services for existing Minuteman ICBMs. Boeing’s aerospace business includes the production of inertial upper stage boosters for satellites delivered into orbit by Titan rockets or the Space Shuttle. But the dismantling of the USSR in the late 1980s, which ushered in substantial defense budget cuts, promised to limit the growth of this business segment.

Boeing established an “Advanced Products Group” in the latter years of the decade to oversee the company’s more futuristic aircraft and keep it at the technological vanguard. Boeing’s three-engine 777, originally scheduled to be introduced with the 757 and 767, attracted little interest and was temporarily shelved. The development of the fuel-efficient, 150-passenger 7J7 was also delayed when declining fuel costs and rising research and development expenses reduced demand. Perhaps their most radically designed project was the 907 flying wing. Equipped with eight jet engines, this airplane could carry 1000 passengers, twice the capacity of a 747. Looking something like a boomerang, it was scheduled for service sometime in the 21st century. If this project is successful, it could allow Boeing to change the future of aviation once again.

Frank Shrontz advanced to Boeing’s chief executive office in 1986, at the start of the world’s largest aircraft order binge in history, and led the manufacturer from sales of $16.3 billion in 1986 to $29.31 billion in 1991. Although Boeing remained profitable, its earnings declined steadily in the mid 1980s and its stock dropped twenty points in October 1987. Boeing jets were involved in four fatal air accidents from December 1988 to March 1989, and the company missed its first delivery deadline in two decades when the 747-400 experienced production delays. These internal problems were exacerbated by increased competition from Airbus, which was heavily subsidized by a consortium of European companies and governments.

Nevertheless, in 1990, Boeing chalked up record sales and net profits of $27.6 billion and $ 1.4 billion, respectively, and ended the year with a $97 billion backlog. But after its experiences of the 1980s, and due to CEO Shrontz’s vigilance, Boeing began to institute retrenchment moves. Although the manufacturer experienced three years of rising sales and earnings from 1989 to 1992, prospects for the company’s—and the industry’s— future, were not bright. Worldwide orders of all aircraft declined from 1,662 in 1989 to 439 in 1991, and cancellations from the besieged airlines diminished expected delivery figures even more. The commercial airline industry’s downturn started in 1990, heralding brutal price wars and canceled aircraft orders. By the fall of 1992, Boeing’s stock suffered on Wall Street, selling for about $35 per share, down from a high of nearly $62 in 1990.

Shrontz moved to reduce Boeing’s cost structure by 20 to 30 percent by 1997, even though his firm was the world’s lowest-cost aircraft producer. Production cuts soon led to layoffs. Boeing’s workforce declined each year from 1989 to 1993, for a total of 40,000 jobs lost. Early in 1994, Shrontz announced that about 30,000 jobs—one-fourth of the company’s remaining workforce—would be eliminated over the course of the year. Sales for 1993 declined to $25.44 billion from 1992’s $30.18 billion, and net earnings slid from $1.55 billion to $1.24 billion. Despite Boeing’s cost cutting measures, industry analysts worried that the commercial airplane industry had entered a period of vast, irrevocable change, wherein airlines’ continuously mounting debt would prevent them from purchasing Boeing planes, no matter how inexpensive they were.

Principal Subsidiaries:

Aileron Inc.; Aldford Ltd.; Andsell Ltd.; Aldford-1 Corp.; Aldsell-1 Corp.; Argosystems Inc.; A.S.I. Electronics; Astro, Ltd.; Boeing Technology International, Inc.; Boeing of Canada, Ltd.; Boeing International Corp.; Boeing Financial Corp.; Boeing Equipment Holding Company; Boeing Leasing Co.; Boeing International Sales Corp.; BCS Richland, Inc.; Boecon Corp.; Boeing Aerospace Operations Inc.; Boeing Canada Technology Ltd.; Boeing China Inc.; Boeing Commercial Space Development Co.; Boeing Defense & Space-Corinth Co.; Boeing Defense & Space-Irving Co.; Boeing Domestic Sales Corp.; Boeing Computer Support Services, Inc.; Boeing Agri-Industrial Co.; BE&C Engineers, Inc.; Boeing Georgia, Inc.; Boeing Operations International, Inc.; Boeing Middle East, Ltd.; Astro-II, Inc.; Boeing Sales Corp.; Boeing Investment Co., Inc.; Boeing Mississippi, Inc.; Boeing Nevada Inc.; Boeing Sales Corp. Ltd.; Energy Enterprises Inc.; Longacres Park Inc.; Montana Aviation Research Co.; Rainier Aircraft Leasing Inc.; 767ER Inc.; Boeing Offset Co., Inc.; Boeing Petroleum Services, Inc.