By Lambert Strether of Corrente.
[Nader’s] niece, 24-year-old Samya Stumo, was among the 157 victims of an Ethiopian Airlines flight crash last month, less than six months after a flight on the same aircraft, the Boeing 737 Max 8, crashed in Indonesia.
Nader comments, in Stumo’s obituary in the Berkshire Eagle:
“She was compassionate from the get-go. She’d be 8 years old and she’d get a pail of hot water and go to her great-grandmother and soak her feet and rub her feet and dry them. She was always that way.”
Blinded by its greed, BOEING haphazardly rushed the 737 MAX 8 to market, with the knowledge and tacit approval of the United States Federal Aviation Administration (“FAA”), while BOEING actively concealed the nature of the automated system defects. Numerous decisions by BOEING’s leadership substantially contributed to the subject crash and demonstrate BOEING’s conscious disregard for the lives of others, including but not limited to BOEING’s role in: designing an aircraft with a powerful automated flight control system [the MCAS] susceptible to catastrophic failure in the event a single defective sensor; failing to properly inform pilots of the existence of the new flight control system and educate and train them in all aspects of its operation; failing to properly address the new system in the aircraft’s flight manual; refusing to include key safety features as standard in the aircraft rather than optional upgrades; delivering 737 MAX aircraft with a version of the flight control system that was materially different from the version presented to the FAA during certification; and failing to take appropriate action after BOEING learned that the 737 MAX aircraft was not performing as intended or safety, as was made tragically clear with the crash of Lion Air Flight JT 610.
BOEING’s decision to put profits over safety is further evident in BOEING’s repeated claims that the 737 MAX 8 is so similar to its earlier models that it does not require significant retraining for those pilots familiar with the older generation of 737s.
All pretty much conventional wisdom at this point! The suit also calls for exemplary (punitive) damages; I’ve embedded the complaint at the end of the post, in case any readers care to dig into it. I’m not going to examine the case in this post; rather, I’m going to focus on three items from Naders letter that I think advance the story: His framing for 737 MAX airworthiness; his highlighting of Boeing’s stock buybacks; and his call for Boeing CEO Muilenburg’s defenestration.
Nader on 737 MAX Airworthiness
From Nader’s letter:
Aircraft should be stall-proof, not stall-prone.
(Stalling, in Nader’s telling, being the condition the defective MCAS system was meant to correct.) Because aircraft that are aerodynamicallly unstable, llke fighter jets, have ejection seats! Now, a pedant would point out that Nader means commercial aircraft, but as readers know, I eschew pedantry in all contexts. That said, Nader manages to encapsulate the problem in a single sentence (using antithesis, isocolon, and anaphora). Now, we have pilots in the commentariat who will surely say whether Nader’s formulation is correct, but to this layperson it seems to be. From 737 MAX, a fan/geek site, on the business and technical logic of the MCAS system:
The LEAP engine nacelles are larger and had to be mounted slightly higher and further forward from the previous NG CFM56-7 engines to give the necessary ground clearance. This new location and larger size of nacelle cause the vortex flow off the nacelle body to produce lift at high AoA [Angle of Attack]. As the nacelle is ahead of the C of G, this lift causes a slight pitch-up effect (ie a reducing stick force) which could lead the pilot to inadvertently pull the yoke further aft than intended bringing the aircraft closer towards the stall. This abnormal nose-up pitching is not allowable under 14CFR §25.203(a) “Stall characteristics”. Several aerodynamic solutions were introduced such as revising the leading edge stall strip and modifying the leading edge vortilons but they were insufficient to pass regulation. MCAS was therefore introduced to give an automatic nose down stabilizer input during elevated AoA when flaps are up.
Nader on Stock Buybacks
From Nader’s letter, where he is addressing Muilenberg (“you”) directly:
Boeing management’s behavior must be seen in the context of Boeing’s use of its earned capital. Did you use to reinvest in R&D, in new narrow-body passenger aircraft? Or did you, instead, essentially burn this surplus with self-serving stock buybacks of $30 billion in that period? Boeing is one of the companies that MarketWatch labelled as “Five companies that spent lavishly on stock buybacks while pension funding lagged.”
Incredibly, . As you well know, stock buybacks do not create any jobs. They improve the metrics for the executive compensation packages of top Boeing bosses [ka-ching]. Undeterred, in .
To make your management recklessly worse, in in buybacks. Apparently, you had amortized the cost of the Indonesian Lion Air crash victims as not providing any significant impact on your future guidance to the investor world.
Holy moley, that’s real money! Nader’s detail on the stock buybacks (see NC here, here, and here) interested me, because it bears on Boeing’s 2011 decision not to build a new narrow-body aircraft in 2011. I summarized the decision-making back in March:
(2) Choice of Airframe: The Air Current describes the competitive environment that led Boeing to upgrade the 737 to the 737 MAX, instead of building a new plane:
Boeing wanted to replace the 737. The plan had even earned the endorsement of its now-retired chief executive. “We’re gonna do a new airplane,” Jim McNerney said in February of that same year. “We’re not done evaluating this whole situation yet, but our current bias is to not re-engine, is to move to an all-new airplane at the end of the decade.” History went in a different direction. Airbus, riding its same decades-long incremental strategy and chipping away at Boeing’s market supremacy, had made no secret of its plans to put new engines on the A320. But its own re-engined jet somehow managed to take Boeing by surprise. Airbus and American forced Boeing’s hand. .
Why? The earlier butchered launch of the 787:
Boeing justified the decision thusly: There were huge and excruciatingly painful near-term obstacles on its way to a new single-aisle airplane. In the summer of 2011, the 787 Dreamliner wasn’t yet done after billions invested and years of delays. More than 800 airplanes later here in 2019, each 787 costs less to build than sell, but it’s still running a $23 billion production cost deficit.…. The 737 Max was Boeing’s ticket to holding the line on its position — both market and financial — in the near term. Abandoning the 737 would’ve meant walking away from its golden goose that helped finance the astronomical costs of the 787 and the development of the 777X.
So, we might think of Boeing as a runner who’s tripped and fallen: The initial stumble, followed by loss of balance, was the 787; with the 737 MAX, Boeing hit the surface of the track.
So, Dennis. How’s that workin’ out for ya? How does the decision not to build a new plane look in retrospect? Ygeslias writes in Vox, in April:
Looking back, Boeing probably wishes it had just stuck with the “build a new plane” plan and toughed out a few years of rough sales, rather than ending up in the current situation. Right now the company is, in effect, trying to patch things up piecemeal — a software update here, a new warning light there, etc. — in hopes of persuading global regulatory agencies to let its planes fly again.
What Nader’s focus on stock buybacks shows, is that Boeing had the capital to invest in developing a new plane. From Bloomberg in 2019:
For Boeing and Airbus, committing to an all-new aircraft is a once-in-a-decade event. Costs are prohibitive, delays are the norm and payoff can take years to materialize. Boeing could easily spend more than on the NMA, according to Ken Herbert, analyst with Canaccord Genuity, and Airbus may be forced into a clean-sheet design if sales take off.
The sales force has been fine-tuning the design with airlines for at least five years, creating a “will it or won’t it?” drama around the decision on whether to make the plane, known internally at Boeing as the NMA, for new, middle-of-market airplane.
Now, it is true that the “huge and excruciatingly painful near-term obstacles” referred to by the Air Current are sales losses that Boeing would incur from putting a bullet into it’s cash cow, the 737, before it turned into a dog (like now?). Nevertheless, Beoing was clearly capable, as Yglesias points put, of “tough[ing]out a few years of rough sales.” So what else was “excruciatingly painful”? Losing the stock buybacks (and that sweet, sweet executive compensation). Readers, I wasn’t cynical enough. I should have given consideration to the possibility that Muilenburg and his merry men were looting the company!
Nader on Muilenburg
Finally, from Nader’s letter:
Consider, in addition, the statement of two Harvard scholars—Leonard J. Marcus and Eric J. McNulty, authors of the forthcoming book, You’re It: Crisis, Change, and How to Lead When it Matters Most. These gentlemen did not achieve their positions by using strong language. That is why, the concluding statement in their CNN article on March 27, 2019, merits your closer attention:
“Of course, if Boeing did not act in good faith in deploying the 737 Max and the Justice Department’s investigation discovers Boeing cut corners or attempted to avoid proper regulatory reviews of the modifications to the aircraft, Muilenburg and any other executives involved should resign immediately. Too many families, indeed communities, depend on the continued viability of Boeing.”
These preconditions have already been disclosed and are evidentially based. Your mismanagement is replete with documentation, including your obsession with shareholder value and executive compensation. There is no need to wait for some long-drawn out, redundant inquiry. Management was criminally negligent, 346 lives of passengers and crew were lost. You and your team should forfeit your compensation and should resign forthwith.
All concerned with aviation safety should have your public response.
I can’t find anything to disagree with here. However, I’ll quote from commenter Guido at Leeham News, March 29, 2019:
What I don’t understand: Muilenburg was the CEO when the MCAS code was implemented. Muilenburg was the CEO when Boeing “tweaked” the certification of the B737Max. It was the Boeing management that decided, that the B737Max must under no circumstances trigger simulator training for pilots.
Muilenburg has for sure not written the code for MCAS by himself, but as the CEO he is responsible for the mess. He is responsible, that the first version of MCAS was cheap and fast to implement, but not safe. It was basically Muilenburg, who allowed a strategy, that was basically: Profits and Quickness before safety. Muilenburg has the responsibility for 346 dead people. You can’t kill 346 people with your new product and still be the highly paid CEO of the company. There have to be consequences.
Why are there no calls, that Muilenburg must step down?
Nader has now issued such a call. As [lambert preens modestly] did Naked Capitalism on March 19.
Wrapping up, Muilenberg has plenty of other lawsuits to worry about:
However, a search of court documents and news reports shows the company is facing at least 34 claims from victims’ families and one claim seeking class certification on behalf of shareholders. The claims allege Boeing is responsible for losses after installing an unsafe anti-stall system, called “MCAS” (Maneuvering Characteristics Augmentation System), on its 737 Max 8 planes, suspected to have played a role in both crashes. Boeing CEO Dennis Muilenburg said it was “apparent” the system had been activated in both crashes.
Added to the uncertainty of potential expenses for Boeing are pending regulator probes. The U.S. Justice Department initiated a criminal investigation into Boeing’s Federal Aviation Administration certification, as well as how it marketed its 737 Max 8 planes. The U.S. Department of Transportation’s Office of Inspector General is also conducting an inquiry.
On April 9, the lawsuit seeking class certification was brought on behalf of shareholders who purchased Boeing stock between January 8, 2019 and March 21, 2019. The proposed class period covers a time frame beginning after the Lion Air crash, and extending beyond the Ethiopian Airlines crash, when Boeing’s stock experienced a steep decline.
But then again, Muilenberg may know — or think — that Boeing, as a national champion, is too big to fail. So, if Boeing gracefully exits from the commercial aviation business, it may find the warm embrace of government contracting more comfortable. Perhaps that’s why propaganda like this suddenly started showing up in my Twitter feed:
Boeing showed off a new unmanned defense system that has fighter-like performance and would work with manned aircraft operations. pic.twitter.com/hFiGg0Aevj
— CNET (@CNET) April 27, 2019
I suppose it’s too much to ask that the CEO of a too-big-to-fail company be asked to resign, even if he did kill a lot of people. But if Nader can do with the 737 MAX, at the end of his career, what he did with the Corvair (“a one-car accident”), when he was coming up, everybody except for a cabal of looters and liars in Boeing’s Chicago C-suite will be a lot better off. So we can hope.
APPENDIX 1: The Rosy Scenario
From Ask the Pilot:
I keep going back to the DC-10 fiasco in the 1970s.
In 1974, in one of the most horrific air disasters of all time, a THY (Turkish Airlines) DC-10 crashed after takeoff from Orly Airport outside Paris, killing 346 people. The accident was traced to a faulty cargo door design. (The same door had nearly caused the crash of an American Airlines DC-10 two years earlier.) McDonnell Douglas had hurriedly designed a plane with a door that it knew was defective, then, in the aftermath of Paris, tried to cover the whole thing up. It was reckless, even criminal. Then, in 1979, American flight 191, also a DC-10, went down at Chicago-O’Hare, killing 273 — to this day the deadliest air crash ever on U.S. soil — after an engine detached on takeoff. Investigators blamed improper maintenance procedures (including use of a forklift to raise the engine and its pylon), and then found pylon cracks in at least six other DC-10s, causing the entire fleet to be grounded for 37 days. The NTSB cited “deficiencies in the surveillance and reporting procedures of the FAA,” as well as production and quality control problems at McDonnell Douglas.
That’s two of history’s ten deadliest air crashes, complete with design defects, a cover-up, and 619 dead people. And don’t forget the 737 itself has a checkered past, going back to the rudder problems that caused the crash of USAir flight 427 in 1994 (and likely the crash of United flight 585 in 1991). Yet the DC-10, the 737, and America’s aviation prestige along with them, have persevered. If we survived the those scandals we can probably manage this. I have a feeling that a year from now this saga will be mostly forgotten. Boeing and its stock price will recover, the MAX will be up and flying again, and on and on we go.
This is how it happens.
Maybe. But in 1974, the United States was commercial aviation. Airbus had launched its first plane, the A300, only in 1972. We were also an imperial hegemon in a way we are not now. For myself, I can’t help noticing that it was Boeing’s takeover of a wretched, corrupt McDonnell Douglas — the famous reverse takeover — that ultimately turned Boeing from an engineering company into a company driven by finance. With resulits that we see.
APPENDIX 2: The Stumo ComplaintStumo-Complaint
APPENDIX 3: The Corvair
A Road and Track editor tested out how bad the Corvair really was. Their summary:
He explains the inherent compromise of the early car’s suspension:
“A pair of short half shafts connected the [rear] wheels to the frame-mounted differential. Only the inboard ends of the shafts could articulate, so as the suspension compressed or extended, the wheels tilted at extreme angles. This had the effect of dramatically reducing the rubber on the road. In an aggressive turn, the rear end tended to lose traction before the front, causing oversteer, or fishtailing. That wasn’t all, however. There was a chance, a slim one, that the outside rear wheel could tuck in under the body and potentially trip the car into a rollover. These effects were further exasperated when owners failed to heed the Corvair’s unconventional recommended tire pressures: 15 psi in the front and 26 psi in the rear.”
Webster took two Corvairs—including a yellow four-door that, get this, was originally owned by Ralph Nader—to an airfield to see what they’d do in different cornering scenarios. Almost immediately, he experienced oversteer that only got worse as the speeds rose:
“To avoid spinning the car, I have to counter-steer almost immediately after initiating the turn. To racers, this behavior is known as “loose,” and it’s generally preferred to a front end that simply understeers, or plows. But I could see how the lightly trained driver might get into trouble. That was Nader’s point: The average driver wasn’t equipped to handle an over-steering car.”
See, all the Corvair needed to overcome the “inherent compromise” of the design was an MCAS system! Then everything would have been fine.