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Boeing (BA) likely will benefit from Airbus's current management crisis and the severe production troubles clouding the future of its A380 jetliner. But the new leader of Boeing's commercial airplane division, in his first extensive interview since becoming chief executive officer on Sept. 1, says he won't be crowing about his archrival's struggles. In fact, Scott Carson is confident Airbus will bounce back stronger than ever.
That's because Carson, 60, knows firsthand the thorny situation confronting Airbus. Wiring, design, and software challenges that brought the assembly of the 555-seat superjumbo to a halt in 2006 share an eerie resemblance to Boeing's own factory implosion in 1997 and 1998. Nearly identical issues at Boeing stopped production on the 747 and the new version of the 737 for several months. The problem? Boeing managers had sought to upgrade outdated computer software systems and streamline production while boosting aircraft production rates. The turmoil cost Boeing $2 billion.
SMALL WORLD. As a fellow aviation aficionado, Carson says he feels for his "friends"in Toulouse, who also share his all-consuming passion for the aviation industry. After all, there are only two companies in the world that design and build large commercial airlines, and Airbus has proved to be a worthy competitor. Many of Boeing's suppliers also supply parts to Airbus. Commercial aviation is a small, somewhat insular world. "So can you imagine something like this?" Carson asked rhetorically. "Yeah, you could imagine it. Would we hope for it? No. We wouldn't hope for it for ourselves, obviously, and we wouldn't hope for it for Airbus, because it has such a consequential impact on our customers."
One airline that is severely affected by A380 delays is Dubai-based Emirates. The ambitious airline placed orders for 45 of the megajets. CEO Tim Clark has said the company is considering its options and may cancel some orders. Emirates is also a big Boeing customer. And on Sunday, Emirates took the next step to firming up an order for 10 new Boeing 747-8 freighters worth about $2.8 billion at list prices, in response to its displeasure with Airbus.
But Carson knows that a severely weakened competitor in a duopoly could have serious ramifications for the entire industry. "I think having healthy competitors is better for all of us," Carson says. "It makes us better because we are always striving for that last increment of advantage, and it helps keeps us centered. And I think that's powerful. So when I look at the current situation, it's clearly not permanent and it's clearly not healthy. I would rather see a healthy Airbus than one that's going through what they're going through. And they will get through it."
DREAMLINER CHALLENGES. What's more, Boeing is entering the critical production phase of its own radical new carbon-fiber jet known as the 787 Dreamliner. And caution is the order of the day. The first parts are getting built, and full-scale production of the first airplane is about to begin. Carson acknowledges the Dreamliner has weight and schedule challenges of its own, but he is confident Boeing will deliver the first airplanes in 2008 as promised. Still, it's fair to assume Carson is going to earn his big paycheck over the next 12 months. "All airplanes are really hard in the developmental phase," Carson says.
Boeing has already experienced some mild turbulence on the 787 program. Some of the carbon-fiber test fuselage sections showed various forms of delamination and had to be discarded. But instead of covering up the problem, Boeing execs acknowledged it when asked by a reporter. Carson says the lessons of 1997 and 1998 have been seared into the memory of most executives who survived that challenging time. "What that taught us is being open in how you communicate what issues you are facing and be disciplined in how you deal with them," Carson says. "They are the keys to success in both addressing challenges and in avoiding surprises with customers. We were using a new tool, some modified materials. What it taught us is that we needed to regroup a little bit, but it is part of the normal tool trial process as opposed to 'an event.'"
FULL DISCLOSURE. Carson is candid about the challenges still facing the Dreamliner program. "We are schedule-challenged on the program and we've talked a lot about that," he says. "We are weight-challenged on the program, and we've talked a lot about that with our customers, and we haven't been shy with the investment community, and we're managing all of those. The phase we're in is the critical phase—when you begin assembly and work toward rollout and then ultimately flight test."
Carson, who has spent his entire career at Boeing, spent a significant chunk of it helping Boeing dig itself out of the production crisis in 1997 and 1998. Alan Mulally, then the chief executive of Boeing Commercial Airplanes, tapped Carson to be his chief financial officer. The company then took on the tough task of transforming the airplane division into a leaner and more profitable enterprise.
Airbus executives would do well to heed how Boeing pulled itself up and got itself back into the game. One of the most significant changes, says Carson, was to open the financial books to engineers and production managers. "Previously, like a lot of big organizations that had grown up, you operated in silos," Carson says. "The financial information was owned by finance, but the engineers and production people weren't smart enough to be able to absorb it, or so we thought at the time. So we shared openly what our plan was and we all owned it together. We worked through problems together. It was an open, collaborative management style that brought us forward."
MOVING THE DOT. During that time, Carson says Boeing managers had to change plans on a weekly, if not daily, basis, as the tough environment demanded new thinking and changes. Execs resisted the temptation to over-commit on production or to force an answer on people. "But we encouraged them every week by putting the data in front of them," Carson recalls. "We used to call it 'Move the Dot.' How do you improve? You move the dot week by week. And if your dot didn't move, we'd talk about it, make light of it, we'd cajole people, but we were in it together. Because until the dot moved, the plan was what the plan was. And that dynamic caught on in 15 months' time. Not only did we move the dot, we began a journey toward record levels of profitability for this enterprise, at a time we were reducing head count, reducing facilities, adjusting production rates up and down; it was a really exciting time."
The kind of changes Boeing was forced to make are the kind leading airline companies want to see Airbus adopt. While the two companies have different philosophies of employment, layoffs, and government involvement, Airbus can learn a lot from Boeing's changes. Key airline execs are clearly watching the company's next moves. "What I would like to see is Airbus seriously analyze the shortfalls, fix them and become a stronger, lean-and-mean manufacturing machine," says John Plueger, president of International Lease Finance (AIG), the world's largest airplane leasing company, which has 10 A380s on order. "Everybody is talking about the cloud of woe around Airbus. They have a tremendous opportunity to fix whatever is wrong and make it a better, more efficient company."
In the meantime, Carson can be only so sympathetic. He's got his own business to run and, quite frankly, plans to keep the pressure on his rival. After all, Airbus wouldn't expect anything less.
Holmes is a correspondent in BusinessWeek's Seattle bureau
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