Boeing stops production of 737 passenger planes, US GDP collapses?

December 19, according to foreign media reports, analysts and experts said that Boeing’s decision to temporarily suspend production of its best-selling model 737MAX will affect economic growth and employment in the United States, but the impact may be short-lived and concentrated on suppliers. the region where it is located.

JPMorgan Chase believes that the impact of the 737MAX shutdown may go far beyond the corporate profits of Boeing, the aerospace giant. Once the troubled 737MAX is temporarily suspended, it may drag down the annualized growth rate of US GDP by 0.6 percentage points.

Boeing and the U.S. Federal Aviation Administration (FAA), the regulatory authority, are caught in the eye of a storm of public opinion as the investigation into the 737MAX crash deepens. Following the involvement of the U.S. Department of Transportation, the Department of Justice, and the FBI, the U.S. Senate will hold a hearing in the near future to investigate the Boeing 737MAX incident.

For Boeing, in addition to accelerating the software update of the MCAS system of the 737MAX series passenger aircraft, responding to huge regulatory investigations and public opinion pressure, it also needs to worry about order cancellations from the airlines from time to time. Garuda Indonesia just said on Friday that it will cancel its current order of 49 Boeing 737 Max planes. The star model 737MAX, which Boeing has high hopes for, is now uncertain.

And, according to Wall Street bank JPMorgan Chase & Co., the impact of Boeing’s 737 MAX shutdown could go far beyond simply the airline giant’s corporate profits. A temporary shutdown of the troubled 737MAX aircraft could drag down the annualized U.S. GDP growth rate by 0.6 percentage points.

Multiple parties involved in the investigation, FAA and Boeing have a conflict of interest?

According to US media reports, under the proposal of Republican Senator Ted Cruz, the Senate subcommittee in charge of aerospace affairs will hold a hearing on March 27 to investigate Boeing’s actions on October 29 last year and March 10 this year. possible responsibility in an air crash.

Those subpoenaed for the hearing included Acting FAA Administrator Daniel Elwell, DOT Chief Investigator Calvin Scowell and National Transportation Safety Board Chairman Robert Sumwater. In addition, Cruz plans to launch another hearing later, to subpoena Boeing management and pilots and other related aviation industry figures.

The March 10 crash of an Ethiopian Airlines Boeing 737 MAX killed all 157 people on board, less than five months after the October crash of Indonesia’s Lion Air that killed 189 people. Preliminary investigation data showed that there was some “similarity” between the two accidents. The airworthiness of the 737MAX has faced unprecedented questions.

However, when countries around the world set off a wave of “no-flying waves” against Boeing 737MAX, the FAA, which is responsible for certifying Boeing aircraft, insisted that there was not enough evidence to support the decision to ground the plane. It was not until US President Trump publicly requested that the grounding be issued fly command. This relatively “lag” action has caused great controversy in international public opinion.

A few days ago, the US Department of Transportation and the Department of Justice have successively launched an investigation into the FAA’s supervision of Boeing. A grand jury in Washington, D.C., has issued subpoenas to Boeing Co. personnel involved in the development of the plane, seeking emails, text messages and other communications. The U.S. Department of Transportation’s inspector general has stepped in to investigate the safety certification of Boeing’s 737 MAX family of airliners. Even the Federal Bureau of Investigation (FBI) has been dispatched. The Seattle Times reported on the 20th that the FBI is assisting the FAA in its investigation of the certification process of the Boeing 737 Max aircraft.

With the advancement of investigations by various parties, whether there is a conflict of interest between the FAA as a regulator and the aircraft manufacturing industry has attracted public attention. Investigators are reportedly looking into whether the FAA failed to ensure Boeing provided guidance on anti-stall software to pilots because the FAA delegated 737 safety certification in part to Boeing’s teams.

According to reports, the FAA was originally born to regulate and promote the industry, thus fostering a moderate relationship between regulators and business, but this relationship has remained after the FAA has focused on safety regulation in the 1990s. Whether the findings are of problems with Boeing or the FAA’s efforts to certify aircraft safety, it is the latest example of a long-standing blurring of the lines between industry and regulation.

The fate of huge orders is unpredictable, 737MAX production suspension may drag down US GDP

In addition to dealing with a storm of regulatory investigations, trouble for Boeing’s business has followed. More airlines are considering the issue of orders and compensation after Indonesia’s Lion Air plans to terminate orders with Boeing worth about $22 billion, and Norwegian Airline plans to sue Boeing for the loss of grounding the 737 MAX.

According to the latest news on March 22, Garuda Indonesia has said on Friday that it will cancel its current order of 49 Boeing 737 Max planes. The media reported the news. Garuda Indonesia’s chief financial officer was quoted as saying the company may change its 737 Max orders to another type of Boeing jet.

A civil aviation industry insider recently analyzed to the 21st Century Business Herald that from a production point of view, Boeing can negotiate with airlines to replace the 737MAX with the original 737 series, but the problem is that airlines may not be willing to accept it. The 737MAX has no fuel-saving advantage; on the other hand, airlines may directly choose to return the 737MAX and replace it with the Airbus 320neo series. From an airline’s point of view, if you have both 737 and 320 fleets, you can convert 737 to 320neo, but if a company such as Southwest Airlines only has a 737 fleet, you can only choose to wait or choose Boeing’s old model.

It is understood that the 737MAX is a new generation of narrow-body aircraft launched by Boeing, designed to replace the traditional 737-800 and other models, and has been widely welcomed by the market after its launch. As of the end of January 2019, 5,011 orders have been received worldwide. In addition to the more than 300 units delivered, there are currently more than 4,000 undelivered orders. It is not difficult to imagine that if the market loses confidence in the 737MAX model and chooses to switch to Airbus, or even just replace it with an old model, it will have a big impact on Boeing’s development path.

According to Boeing’s financial report, the commercial aircraft business in 2018 increased significantly by 60% year-on-year, contributing $101.1 billion in revenue to Boeing. However, according to Wall Street bank JPMorgan Chase & Co., the impact of Boeing’s 737 MAX shutdown may go far beyond the airline giant’s quarterly corporate profits.

A temporary shutdown of the troubled 737 MAX aircraft could drag down annualized U.S. GDP growth by 0.6 percentage points, JPMorgan chief U.S. economist Michael Feroli said in a note to clients, according to reports. “Total 737 sales are expected to reach $35 billion this year, with about 90 percent of that being contributed by the MAX model, which accounts for about a quarter of total U.S. domestic aircraft production,” said Michael Feroli.

After the global ban on Boeing 737MAX aircraft, Boeing has announced that it will suspend deliveries of the model, but production and manufacturing are still going on. “Boeing is continuing to produce aircraft, and most, if not all, of the finished product will have to go into inventory until the end of the investigation. In principle, this means that GDP is now largely unaffected,” said Michael Feroli.

On April 4, 2019, Boeing CEO Dennis Muilenburg faced a near-impossible task: He must apologize for the crashes of two 737 MAX jets. The two accidents, one in October 2018 and the other in March 2019, killed a total of 346 passengers and crew. The court of public opinion has found Boeing guilty; Muilenburg must now win back the public’s trust. He had to admit that Boeing was responsible for the two crashes, while also convincing the public that the company would improve in the future.

This is a tough challenge, and other leaders have tackled it before, but not everyone has succeeded. Apology statements often come across as empty words—saying what people expect, but not what they meant, just making excuses, or blaming someone else for the fault. Empty, perfunctory apologies not only fail to repair relationships with stakeholders, they can make things worse.

Muilenburg’s initial response was met with resistance and did little to restore credibility.

To win back trust, it’s important to grasp the basic principles of apology: When a crisis arises, you must first decide whether an apology is necessary—and sometimes apology is not the best strategy. If necessary, there are three key questions companies must answer in order to respond appropriately: Are we speaking the truth? Who do we act on behalf of? How do our actions benefit those who trust us?

Determine the content of your apology

The first step in deciding whether an apology is necessary is to determine what your apology is about: competence or integrity.

Capability problems refer to loss of reliability: the product or service is either ineffective or not up to expectations. Integrity issues refer to dereliction of duty: companies fail to treat stakeholders fairly or take responsibility for the results of their actions, whether their actions are intentional or unintentional. Examples of this include misrepresenting facts under certain circumstances, putting profits over customer safety, or refusing to deliver on promises.

In terms of competence, an apology can effectively restore trust. When it comes to integrity issues, denial is a better strategy, but only if the company does things with fairness and integrity—a point we want to stress. It turns out that questions of competence are easier to understand, because the public knows that even the most capable companies and individuals sometimes make mistakes. An apology for a responsiveness question should demonstrate that the individual or company is aware of their mistake, knows where they are wrong, communicates it, and convinces stakeholders that the company’s behavior will change in the future.

Trust issues related to integrity are more difficult to overcome, because failure to maintain integrity can result in the person being identified as having a personality problem. In the public view, trust issues involving integrity arise because individuals or corporate leadership are inherently evil. On these kinds of issues, denial can challenge the public to blame your subconscious for the fault. You have to convince them that, as a person of integrity, you will never do the behavior you are accused of. (But it’s worth noting: The researchers found that you won’t win back trust if you don’t admit mistakes when the evidence is solid.)

The first step to the right response is to identify the type of trust issue between you and your stakeholders – is it competence or integrity? If you determine that your trust issue is related to integrity and you have been wrongly accused, then you should issue a denial. If you think your trust issues are related to competence, then you need to apologize.

effective apology

When thinking about how to make an effective apology, companies can use our three questions to explain their motivations.

Of course, listening can be broken down into several different levels. Not every conversation requires the highest level of listening skills, but many times, improving focus and listening skills can be beneficial in human-to-human conversations. Consider what level of listening skills you want to target:

Companies that don’t understand apology can pay a huge price. In Boeing’s case, the company has faced a series of lawsuits brought by relatives and shareholders of the victims. There are early signs that regulators outside the U.S. will change their rules and will no longer agree to the Federal Aviation Administration (FAA) to decide whether the 737 MAX is safe to fly. Shareholders reacted to Boeing’s actions by pulling down the company’s share price — Boeing lost $13 billion in the first trading day after the March 10 Ethiopian Airlines crash. Of course, not all of the losses are directly related to Muilenburg’s statement. But we believe that an effective apology helps companies rebuild trust so they can better handle these aftermaths.

Leaders should also recognize that even if an apology is perfect, it is only the first step. The greater the damage, the harder it will be for the company to regain the trust of its stakeholders. No matter how powerful an apology may be, the public will not be forgiven if the company fails to deliver on its lip service, make up for the harm it caused, and prevent a similar situation from happening again.

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