On Boeing, Innovation, Competition, and Job Cuts

Posted by: Michael Arndt on February 19, 2010

What’s that old saying, actions speak louder than words? Boeing Chairman and CEO James McNerney stepped onto the soapbox on Feb. 19 to decry the quality of U.S. education, warning that the nation is producing too few STEM graduates—science, technology, engineering, and math—to compete against China, India, and “places in the Middle East.” Borrowing a term, he added in a speech in Chicago to alumni of Northwestern University’s Kellogg School of Management that the U.S. faces an “innovation deficit.”

After McNerney finished his remarks, in which he also challenged the Obama Administration to grant investment tax breaks and push harder for more free trade pacts, I got an email news alert that Boeing had sent layoff notices to another 1,000 employees. And guess what sorts of workers the company is firing? Four out of five are STEM workers in the aircraft maker’s engineering, operations, and technology unit. They’re the latest in a series of layoffs that will exceed 10,000, according to the company.

A Boeing spokesman confirmed the news report. He also told me that me that the new cuts come primarily in IT support. But he said that while these workers are no longer needed, Boeing is continuing to hire STEM-skilled applicants in R&D, and in the U.S.

In his speech, McNerney said: “We face a global skill shortage. The problem is growing acute in the U.S. We face a skill shortage, not a labor shortage.” There may be 1,000 Boeing employees who could come up with a way to solve that problem.

Reader Comments

Honest Abe

February 19, 2010 6:25 PM

It is a plain fact that most US corporations would, in fact, like to have more STEM-skilled applicants to choose among. It is also a fact that if they could pay them Bangalore wages, they would.

Aviator

February 19, 2010 6:35 PM

The government needs to stop subsidizing Boeing. They are a failure. Lockheed Martin is far superior and it's not because of a lock of guest workers available for Boeing to hire.

Brar

February 20, 2010 10:09 AM

Every corporation in USA wants to hire STEM's but no-one wants to pay them any better than a college drop-out . How do you expect engineers to innovate when most engineering positions in industry are merely dead-end ? Unless we accept the fact that without innovations their is no way we can pull ourselves out of this economic mess , we will continue to fight for "me too" and be beaten by China.

Smoke Detector

February 20, 2010 10:39 AM

Another multi-millionaire CEO making assertions that contradict most available real-world knowledge. What about this Sept 2009 BusinessWeek article concerning a study by the Business Software Alliance: "U.S. Tops IT Competitiveness"? ----- http://www.businessweek.com/technology/content/sep2009/tc20090916_257192.htm ----- It "examines such variables as... the availability of a workforce that is both well-educated and technologically literate". And what about the numerous studies showing a huge number of American-produced recent STEM graduates, only to find that most of the graduates end up pursuing non-STEM-related work because the STEM job market is so poor and unstable? One reference is page 22 of this AFL-CIO study GAMING THE SYSTEM... MANIPULATING THE JOB MARKET: THE CASE OF THE SCIENCE, TECHNOLOGY, ENGINEERING AND MATHEMATICS (STEM) SECTOR ----- http://www.dpeaflcio.org/pdf/Gaming_the_System_Report_.pdf

Let them fail

February 20, 2010 11:15 AM

End the government welfare checks that go to Boeing. Let them fail. Let them move to India. They won't survive without getting that US government check provided by our tax dollars.

Jhumar

February 20, 2010 11:29 AM

The Global Economy is the only REAL factor in this analysis. Employees in the United States CANNOT expect a premium wage for work (yes, even technical work that requires an elite education) which can be done by workers who are paid at a local wage rate in places like India and China. Using very plain economic analysis, a student in the USA cannot afford to pay for a STEM education in the United States only to be eligible for jobs that pay $3.00 - 20.00 (MAX!) per hour. Most Americans cannot afford the USA lifestyle when they earn lower wages.

Kulomtap

February 20, 2010 12:04 PM

Why cant Boeing compete with Airbus instead of just complaining and depending on Defense?

Airbus pays more for their employees than Boeing and yet Airbus outperforms Boeing every year in every measurement from profit, unit delivery, and sales.

Boeing sounds more like Oil Industries.

Ash

February 20, 2010 4:49 PM

Americans continue to fool themselves about jobs in high technology. Many of those jobs have been outsourced offshore. Many of the technology workers in remote countries, such as India, have been educated in the USA. Furthermore, they have spent time working for American corporations, either employed directly or through the H-1B Visa programme. These workers represent formidable competition for American workers because their wages are so low. The average American high technology worker cannot compete with his very well-educated counterpart in India.

baburaman

February 20, 2010 7:53 PM

Talk is cheap particularly from the CEO of The Boeing CO.
The debacle of 787 development under this CEO is due to the uneducated school drop outs in the The Boeing Co not listening to the educated Engineering and Technology crowd.

McNerney is trying to be a politician after his failure as a Manager

@Ash

February 21, 2010 2:28 PM

I just finished up a large off-shoring fiasco, and I doubt any of the Indian engineers had US degrees. They may have worked in the US on an outsourcing visa, such as the H1b. But we actually lost money compared to what it would have cost to do it onshore. The tech skills, communication skills, and ability to innovate was very low.

2020 Innovator

February 21, 2010 10:43 PM

Large corporations, with rare exceptions, have not been founts of either innovation or job growth. In fact, over the last 25 years there has been a net DECLINE in the number of employees working for the Fortune 500. Small and mid-sized businesses are by far the greatest source of both innovation and job growth. Forget subsidies for dinosaur corporations - how about more support for the real core of our economic and technological leadership!?

Ash

February 21, 2010 10:55 PM

In the case of the off-shoring fiasco, mentioned by the earlier writer, my guess is that the project employed poor-quality engineers from India. Those engineers got the job because they bid it at a low price. I, also, have been on projects wherein the so-called low cost foreign contractors ended up costing the Company more in the long run. The issue is that Corporations look at the lowest-price bid. Agents for American engineers often cannot offer its candidates for a cost as low as the foreign providers. The thing to remember is that foreign providers often DO have better engineers who will work for a lower wage.

reikennordim

February 22, 2010 1:10 AM

McNerney is giving reasons for setting shop in countries like India and China instead of coming up with ways to promote STEM in the U.S. For every job outsourced or moved by companies like Boeing they should put a heavy fine, increase corporate tax and reduce defense contract awards. Sure the global economy will level the playing field but why fund it with U.S tax payer money.

Thisisme

February 22, 2010 11:55 AM

Do know where you are getting your facts that Boeing is being subsidized by the government, they are not. It is the management wanting to change the company to an integration company that is killing Boeing. Boeing started going downhill after they merged with McDonald Douglas.

@reikennordim

February 22, 2010 1:36 PM

To reikennordim: It would be very wrong to fine companies for using offshore employees because pressures of the Global Economy will cause economic behaviour to change. That it, the companies that are fined will abuse the immigration process (or they will do something else) to gain access to cheap labour. The bottom line is that, as long is there is cheap labour available, Corporations all over the world will strive to take advantage of it to gain profits. This is basic economic behaviour that will not be regulated by the imposition of fines. Remember: some smart Officer of a Corporation will find the loopholes to any practise that attempts to "punish" a company for seeking the lowest-cost employees. The employees of ANY company represent the HIGHEST EXPENSE that company has, so there will always be the motivation to choose cheap labour.

Joe Adam

February 22, 2010 11:28 PM

This nation’s education system is plagued. Everyone wants to earn more but work less. Primary school students only spend 6 hours in school. After 3:00 pm, parents need to pay for their kids to be in “after-school”. After the snow storm (about two weeks ago), the schools in DC area were closed for one whole week. And it took another week for the schools to go back to norm. Isn’t it weird that this happens in the nation with the best infrastructure in the world?

reikennordim

February 23, 2010 12:34 AM

To Thisisme: What do you call companies such as Boeing that use heavy lobbying to snag defense contracts that would have gone elsewhere. How about being one of the lowest corporate tax payer for past few years?
To @Reikennordim : I agree about not to penalize companies just because they want to stay profitable. What "Global Economy" are we talking about, one where India and China keep their currency exchange rates low? one where carbon emissions equality makes no sense to be enforced? one where foreign markets are restricted? Sure we too can stay competitive just throw some of those standards out.

@Reikennordim

February 23, 2010 12:38 PM

To Reikennordim: you have it right. The "Global Economy" I am talking about is one in which the playing field is not really level with respect to environmental practises and local wage rates. The USA has taken on the role of an environmental "watchdog" of sorts, and, as such, has imposed economic sanctions (i.e., FINES) on the Corporations that do not follow emissions and other environmental guidelines. The solution for those Corporations was to locate its operations offshore, thereby creating a situation wherein American jobs are lost to lower-cost providers and the business of the Corporations can carry on unfettered by environmental restrictions. The availability to locate the business offshore, where there are few environmental rules, has proved to be a BIG advantage to Corporations because they don't have to pay fees for polluting the environment AND because they also have access to very cheap labour. It is a win-win for Corporations. American towns and their citizens lose in this equation, but that is the way of the world in this Brave New Millennium wherein the Global Economy sets the rules, the prices, etc.

Jimbo

February 23, 2010 8:13 PM

Indian and Chinese workers don't randomly sue the company like minority-protected groups and union groups do. The two union strikes cost Boeing BILLIONS... Once the kinks are worked-out of the 787 program, all of the IT workers AND the Shop Floor will be outsourced. The company will save billions - No more health/retirement/education benefits to pay for, no more workman's comp, employee payroll/FICA/SSN/State Tax overhead - Just cheap labor... It is a very bright future for the company.

@Thisisme

February 24, 2010 12:46 PM

Well, if Boeing is not government subsidized, they will not care if they lose all their government contracts.

george naing

February 24, 2010 11:05 PM

Many commenters blame Boeing for outsourcing jobs to other countries.

What if Boeing outsources its capital, marketing, R&D ,everything out of America?

That is, what if Boeing becomes a citizen of another country and exports back into America?

Then, will you welcome it back for outsourcing jobs back into America?

Or Boeing dares not make such an open, honest move?

george
EthicMinds

jp

February 26, 2010 1:28 PM

so boeing is coming to south carolina with a new plant, getting tons of tax incentives (taking money from public education). South Carolina is 49th or 50th in high school graduation rates, so Boeing appears to be talking out of both sides of its mouth.

amr

March 1, 2010 12:30 PM

business is not an philanthropic act,it means generating profits. If a company can't stay afloat,its obvious to cut cost and look for cheap options,low wages,less stringent govt rules
if india r china provides that then there is no point to hesitate

america is a big ship which will sink taking entire world together
but wants to stay afloat alone

isnt that strange

Tom

March 5, 2010 11:47 PM

Boeing needs to outsource jobs, the company has to make a profit and answer to their stock holders, I feel there’s a problem with trust, finger pointers, blaming the union and the union blaming management, both are finding it hard to perform their jobs while looking over their shoulders, from distrusting finger pointers, stealing knowledge, confidence and the quality of the skills, Boeing will continue to fall if this problem is not recognized. Boeing needs to get smaller and achieve continuity of the people they have. They have the brightest American engineering team in the world who, once given the opportunity will put our economy back on track .Boeing is smarter then what you think. it know the problem and will correct it.. Good-bye Finger Pointers

george kyaw naing

March 7, 2010 9:51 PM

Boeing or Ford or WalMart or whatever has all the rights to outsource jobs, to lay off jobs --- I agree.

But if they are getting benefits from American society, don't they also have
obligations to America? It is right to make profit at the expanse of a society on whom you depend?

If Asia or Africa is so good, why don't they migrate there?

All I ask is: do it fairly.

george
EthicMinds

George Rathbun

March 10, 2010 10:44 PM

DC's love affair with Boeing is probably the reason Alabama will not get the NG/EADS tanker deal and taxpayers will pay more for the Boeing planes.

George Rathbun
My Blog

Bob

April 10, 2010 11:10 PM

Company like boeing and many other drop their older employees for youngers and cheaper, then they outsource to risk sharing partners who will take on all the risk and make very low ROI and face bankrupty if the program is late. Then they manipulate the tax code to avoid paying tax and lobby the hell out of governement to leverage all they can to get cheap money. Its the new recipe for biz 2.0. I hope those kind of company just outsource everything they can and we will just sit on our fat ass and wait for our welfare check and eat water mellon all day. I think people should just stay home next monday and let those big company who use and then trow away their ressources what they think.

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