Boeing – what happens when financial engineering replaces real engineering
wolfstreet.comI'm sorry, but I simply don't see a direct connection between how you choose to finance your company and how you plan your engineering strategy. Boeing made a decision to modify the 737 instead of building a new plane. But that's a perfectly valid strategy. Hell, Boeing's chief rival is Airbus and their equivalent of the 737 Max is the A320 neo- they did exactly the same thing. It's a fine strategy. The problem was that Boeing was trying to cut costs - which is a natural and expected part of a large company. The problem was they executed that badly and the company culture became bad. But that really has nothing to do with the debt structure of the company.
This article continues on the various other articles highlighting that Boeing focussed way too much on financials over anything else. Engineering had way less of a say into things.
See e.g. this article https://www.theatlantic.com/ideas/archive/2019/11/how-boeing...
This article has the interesting bit that Boeing chose to buy back shares instead of e.g. reducing their debt. This probably made sense at the time, as the rating giving to Boeing was high. As a result, Boeing interest rate for loans was low.
As a result of the groundings the rating for Boeing was downgraded. So their interest goes up. Meanwhile, Boeing needs to lend more and more, likely leading to another downgrade of their rating (even more interest).
So this is article is another pointer that engineering had taken quite a bit of a step back.
this is what happens when top management is compensated based on stock value and the bottom line. Instead of doing their job, top management practiced shares buy-backs as a way to increase share price. I think we'll get a new motto soon - if it's Boeing, I'm not going...