American Scandal - Boeing | No Nerds, No Birds | 2

Episode Date: August 20, 2024

For decades, Boeing had a reputation as one of the most trusted companies in the U.S. But after a merger with plane manufacturer McDonnell Douglas in the 1990s, new leader Harry Stonecipher abandoned Boeing’s engineering-first roots in order to boost its stock price, leaving many longtime employees concerned about the future, and the safety of the company’s planes. Need more American Scandal? With Wondery+, enjoy exclusive seasons, binge new seasons first, and listen completely ad-free. Start your free trial in the Wondery App, Apple Podcasts, Spotify or visit wondery.app.link/IM5aogASNNb now.  See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Hi, this is Lindsey Graham, host of American Scandal. Our back catalog has moved behind a paywall. Recent episodes remain free, but older ones will require a Wondery Plus subscription. With Wondery Plus, you get access to the full American Scandal archive, ad-free, plus early access to new seasons and more. Join Wondery Plus in the Wondery app or on Apple Podcasts. podcasts. It's April 29th, 2019 in Chicago, Illinois. An aerospace reporter is sitting in the back of an Uber, gazing out the window as they approach the Field Museum of Natural History. Up ahead, he can see a small group of protesters standing outside the museum's entrance.

Some of them are holding signs that say things like, Boeing's arrogance kills. Others hold poster-sized photos of their loved ones, people the reporter recognizes as victims of the most recent Boeing 737 MAX 8 crash. The reporter has been covering commercial air travel for years, and he's been closely following the situation at Boeing since the first MAX 8 crashed six months ago. Right from the start, he had questions about how a brand new plane could simply fall out of the sky. And since a second MAX 8 crashed just last month, those questions have only grown

more urgent. But so far, Boeing has not been forthcoming with any answers. The company admits that they installed a new software component called MCAS on the planes without telling pilots. They also admit that in both crashes, that system malfunctioned. But the company insists that they followed all proper safety protocols when installing MCAS and that pilot error was what led to the accidents. The reporter thinks there's more to the story, though, and that's why he's here. Boeing has rented out the museum for its annual shareholders meeting, and in a few minutes, the company's CEO, Dennis Mullenberg, is scheduled to hold his first press conference since the two crashes. So when the reporter's Uber pulls up to the curb outside the museum,

he heads straight for the entrance. Inside, he identifies himself to security. They search his bag and make him walk through an x-ray machine before finally directing him to a press room just off the lobby. The room is already filled with other reporters, seated in rows of folding chairs that face a lectern at the front. The reporter shuffles over to a seat in the back. Then he pulls out his notebook and reviews his prepared questions, making sure he'll be ready when called on. Then, after a moment, Mullenberg strides up to the lectern.

His graying hair is trimmed into a crew cut, and he keeps his blue eyes turned down, away from the gaze of his audience. A woman hovers not far behind him, looking ready to jump in if Mullenberg gets himself into trouble. The reporter recognizes her as a member of Boeing's PR team. Mullenberg then pulls a piece of paper from his inside pocket and sets it on the lectern. Then he leans into the microphone with a calm but stern expression on his face. I appreciate you all joining us here this morning.

Before I take your questions, I'd like to share a few brief opening comments. All of us at Boeing are deeply sorry for the loss of life in the Ethiopian Airlines Flight 302 and Lion Air Flight 610 accidents. There's nothing more important to us than the safety of the people who fly in our airplanes every day. 5.3 million people fly safely on Boeing planes. Mullenberg continues in this vein, talking up Boeing's safety record and insisting that the company has been working with regulators to fix the MCAS software. But in addition to the software upgrade we're working on, we're also committed to going above and beyond on training. While we focus

on the safe return to service of the MAX, the fundamentals of our market and our business remain strong. With that, I'll be happy to take your questions. All at once, the journalists raise their hands and Mullenberg points to one near the front. There are a lot of passengers who are afraid of the MAX. Why should they trust Boeing that it will be safe with this upgrade? We do regret the impact that this has had on our passengers. We know we have to work to re-earn that trust. How exactly? Do you think the software upgrade is enough? We know in both accidents there was a chain of events. One of the links in that chain was the activation of the MCAS system because of erroneous angle of attack data.

We know that is a link that we own. It's our responsibility to eliminate that risk. And the software update does exactly that. I'm confident with this change, the MAX will be one of the safest airplanes ever to fly. Mullenberg then points to another reporter. In light of the crisis facing your company, have you considered resigning? I've had the privilege of working for Boeing for 34 years.

My intent is to continue to lead on the front of safety and quality and integrity. That's who we are as a company, and that's what I'm focused on. All right, next, you. You've said that MCAS operated as designed. You couldn't possibly have designed a system that would activate 21 times, pushing the nose of the plane down to the point of an unrecoverable dive. In the case of the MCAS failure scenario, there's something called a runway stabilizer procedure. If that kind of scenario occurs, you go through a checklist,

and in some cases that procedure was not completely followed. But the Ethiopian pilots followed that checklist and were still not able to recover. Even from the back of the room, the reporter can see Mullenberg's jaw muscles tensing as he fields one tough question after another. I think it's really important that we all focus on letting the investigation run its due course.

Our job is to focus on safety, not speculation. We're going to continue to support the investigation process, and I would suggest that's the right way to handle this. Mullenberg brusquely answers a few more questions and nods and leaves the lectern. At the back of the room, the reporter is frustrated he never got to ask his questions and shouts out from the back, 346 people have died. Can you answer a few questions about that? But Mullenberg doesn't look back. The reporter checks his watch.

The press conference lasted 15 minutes. This would be shameful behavior from any company, but from the country's preeminent airplane manufacturer, who's had two of its own planes crash within six months, it's unconscionable. So the reporter feels more determined than ever. He's not going to stop investigating until he gets some real answers. And looking around, he can tell he's in a room full of journalists who feel exactly the same way. Get ready for Las Vegas-style action at BetMGM,

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to speak to an advisor. Free of charge. BetMGM operates pursuant to an operating agreement with iGaming Ontario. Make sure to listen to Business Wars wherever you get your podcasts. From Wondery, I'm Lindsey Graham, and this is American Scandal. After two Boeing planes crashed within five months of each other in nearly identical ways, journalists and government leaders became determined to find out exactly what went wrong. What they learned was that, similar to a plane crash, there was a chain of events. At Boeing, this chain stretched back decades, a series of decisions and mistakes that all led to two brand-new Boeing 737 MAX planes nosediving out of the sky. To trace those events back to their starting point,

investigators began in the 1980s when a Boeing plane was involved in another fatal accident. At that time, the response from the company's then-CEO could not have been more different than Dennis Mullenberg's. This is Episode 2, No Nerds, No Birds. It's September 1985, 33 years before the Lion Air crash. Boeing CEO Thornton Wilson is marching through the company's headquarters in Seattle, Washington. As he walks past rows of his employees' desks, he can see that they're trying to avoid eye contact, and he can understand why.

It's a time of crisis for the company. A few weeks ago, a Boeing 747 operated by Japan Airlines crashed into a mountain. 520 people died, making it the deadliest single-plane crash in aviation history. Investigators believe that pressurized air blasted through an opening in the bulkhead, causing the tail to explode. But why that happened is still unknown. Inspectors around the world are examining 747s to see if the accident was caused by a design problem. And if they find one, Boeing's entire fleet of 747s could be grounded. That would be devastating for Boeing. They've never had one of their planes grounded before.

And rival manufacturers like Airbus and McDonnell Douglas will be sure to pounce on Boeing's failure. When Wilson reaches his corner office, Boeing President Frank Schrantz is already inside, waiting. Schrantz has a manila folder in his hand and a worried expression on his face. Schrantz tells Wilson that the investigators have sent over their initial report on the Japan

Airlines crash. They believe the accident was caused by a faulty repair made by a Boeing employee. Wilson sits down hard in his chair. This is not what he was hoping to hear, but he tells Schrantz to give him the details. Schrantz explains that seven years ago, this particular 747 made a hard landing that damaged the tail. Because the damage was significant, Boeing sent a team to Japan to conduct repairs. But it appears that the crew repaired the tail incorrectly. Now investigators believe that this error is what caused the tail to explode and the plane to crash.

Schranz suggests some possible responses. He points out that they could say this is just the investigator's theory, that they don't know for a fact that this specific error actually caused the accident. Or they could say they need more information before commenting. Wilson nods. He knows what Schranz is pitching is the expected response. It's what most companies would likely do in this situation. But to Wilson, it doesn't feel like the expected response. It's what most companies would likely do in this situation. But to Wilson, it doesn't feel like the Boeing response.

Boeing presently controls 52% of the commercial plane market, far ahead of the second-place McDonnell Douglas with just 19%. And Wilson believes they've earned that dominance, in part by being the kind of company that will do the right thing, no matter the cost. So he looks Schrantz in the eye and says Boeing will not deflect. They have to acknowledge that an incorrect repair was made by their own maintenance crew and that all the evidence points to this being the cause of the crash.

Schranz blanches and asks if Wilson is sure. This is a big admission. There could be fines or lawsuits. But Wilson is certain that this is the right move. And it's not purely about integrity. If Boeing admits to one isolated mistake on a single repair, then it's less likely that the regulators will feel the need to ground the entire 747 fleet.

Schrantz nods and says he'll start working with the communications department to put together a statement. As Schrantz leaves the office, Wilson leans back in his chair and feels good about this decision. They're going to respond honestly and face whatever consequences, because that's the Boeing way. Thornton Wilson's decision to own up to the maintenance team's error catches Japanese regulators by surprise. But it shouldn't have. Boeing had been operating with that level of integrity for decades. When Boeing first started designing commercial airplanes in the 1950s,

the aviation industry was young and regular people were nervous about taking to the skies. The leaders at Boeing knew they had to change that, and in order to grow their business, make people feel safe. So when designing their first commercial planes, the company instituted rigorous testing protocols. And when hard choices came up between costs and safety, Boeing always chose safety. In October 1959, the company decided to delay the release of its new 707 commercial jet to completely overhaul the design of its rudder following a test flight accident. The change was expensive, but it was the safest thing to do, so Boeing did it. Their commitment to safety paid off. Over the next three decades, Boeing became one of the most successful and trusted brands in the world.

Pilots eventually came up with a saying, If it's not Boeing, we aren't going. The company also earned a reputation for valuing its engineers. Executives came out of the engineers' ranks, and every employee, from top to bottom, was encouraged to speak up if they saw something that could be improved. By the late 1960s, Boeing was the most dominant aircraft manufacturer in the world, and their latest plane, the 737, became the workhorse for many airlines.

But in the early 1990s, things started to shift. In 1992, one of Boeing's most reliable customers, United Airlines, stuns the company when it halts orders of the 737 and instead buys planes from Boeing's European competitor Airbus. Airbus was founded in 1970 and had long lagged behind Boeing in market share, but they started to turn things around when they announced a revolutionary new plane called the A320. In addition to roomier seats, the A320 had a redesigned flight control system that allowed the plane to fly almost entirely on autopilot. It was a genuine breakthrough, and soon Airbus' sales started cutting into Boeing's market share, culminating in the surprise deal with United Airlines in 1992. And in the years after, Airbus continues to cut into Boeing's market share.

And in the years after, Airbus continues to cut into Boeing's market share. So in 1996, when Boeing CEO Phil Condit gets word that rival company McDonnell Douglas is interested in a merger, he's all ears. On paper, the merger makes perfect sense. McDonnell Douglas is known for its military planes, but its commercial aircraft division is weak. Boeing is the opposite. So together, they should be formidable across the board. Going into merger talks, Boeing has the upper hand. McDonnell Douglas has faced a series of setbacks and is on shaky financial ground.

They need this merger to survive. But McDonnell Douglas' CEO, Harry Stonecipher, is a shark. Unlike Boeing's Phil Condit, who rose through the engineering ranks, Stonecipher studied under Jack Welsh, the notoriously cutthroat leader of General Electric, obsessed with cost-cutting and profits. And like his mentor, Stonecipher dominates the negotiations. Later, industry observers would note that during the merger, the McDonnell-Douglas team acted like hunter-killer assassins, going up against a group of Boy Scouts. So when the deal closes in 1997, it's a huge win for McDonnell Douglas. The joint company retains the Boeing name,

but Stonecipher and another McDonnell Douglas executive become two of the largest individual stockholders and also take high-ranking executive roles. Behind closed doors, people say that Condit, who is technically still CEO, now just does stone ciphers bidding. Condit is seen as too conflict-averse to stand up to Jack Welch's protege. And soon, longtime Boeing employees begin to notice changes in how the company is run. In May 1999, Boeing engineer Stan Sorcher is reviewing some designs at his desk. He's lost track of how many times he's gone over them, but he's not going to stop until he's sure he hasn't missed anything. This is the way. Sorcher has worked for Boeing for almost 20 years, and he has a reputation for

being a perfectionist, and he's proud of that. In the business of aeronautical engineering, mistakes can be deadly. So Saucer is deep in thought when an assistant comes by and drops a memo on his desk. Saucer picks it up and begins to read. But before he's even two sentences in, he's already rolling his eyes. Earlier in the week, a representative from the hedge fund that is now Boeing's largest shareholder stopped by to meet with the finance team. Boeing's CFO liked what he had to say so much that she's had the whole thing transcribed and distributed throughout the company. And as Sorcher continues reading it, he becomes more and more

outraged. The hedge fund rep says that while Boeing thinks it's special because it makes planes, it still has to compete with companies that practice values-based management. That is, companies that keep production costs low and stock prices high. The memo even threatens that if Boeing doesn't improve its stock price, it might become the target of a hostile takeover. When Sorcher's done reading, he's fuming. He gets up and walks over to a co-worker in a cubicle a few rows down. And over the three-quarter height wall, he can see his colleague reading the same memo with a scowl on his face. Sorcerer wraps on the fabric-covered wall of the cubicle. Reading something interesting? You see this BS? Yeah. It's like our new overlords don't understand you can't just run a plane company the same way you run a widget company. You ever think it'll click with

them that the product we make has the potential to kill hundreds of people in one go? Well, if it does, I don't think they'll even care. They're all bean counters. It's all about the bottom line to them. Now, speaking of bean counters, you see that interview that Deborah Hopkins gave to Bloomberg? I don't even remember who that is. Our new CFO. That's where this memo came from. She said it's important that Boeing not be overly focused on the plane itself. Oh, God, what does that even mean?

It means forget about the plane. It's about profit. Sorcerer's colleague then leans forward, speaking lower. Well, look, Stan, I'm legitimately worried about what's going to happen. All these changes are making the planes worse, and the thought's keeping me up at night. I know. I'm worried, too. So what do we do? Well, we're still engineers, and engineers have always been the heart and soul of this company, so we'll keep doing what we do, ensuring that we make the best, safest planes out there. We can't just keep our mouths shut when we see corners cut.

Sorcher's colleague nods, but he doesn't look fully convinced. Sorcher turns back to his workstation, determined to go over the designs he was reviewing one more time, because he feels an even greater sense of responsibility to ensure that they're perfect. of responsibility to ensure that they're perfect. Later in 1999, Stan Sorcher's faith in his employer is shaken further when the union representing the engineers begins negotiations for a new contract. Boeing comes out with an aggressively lowball offer.

They refuse to write any kind of bonus structure into the new contract and even suggest rolling back some of the health and dental benefits included in the old one. The engineers are livid. Talks reach an impasse, and a strike is threatened. But Boeing President Harry Stonecipher directs his human resources team not to restart negotiations. In December 1999, members of the Engineers Union formally reject Boeing's contract offer and authorize a strike. But even with that threat looming, Boeing executives refuse to budge. So the union announces a walk-off set for February 9, 2000.

But on the morning of the planned event, Engineer Stan Sorcher finds himself alone in the cold, standing outside the 737 factory in Renton, Washington. Sorcher checks his watch. It's five minutes after nine, and a wave of trepidation washes over him. The plan was for everyone to walk off the job at 9 a.m. sharp and then make their way over to a local football field where engineers from all the factories in the area would congregate for a rally. But Sorcher has a sneaking feeling that the others have gotten cold feet. For decades, Boeing has treated its engineers so well that the union was more symbolic than a true bargaining organization.

They've rarely had this kind of impasse over contract negotiations before. So Sorcher worries that even though the engineers are angry, they don't think striking is for them. Some have voiced concerns that striking is for autoworkers and coal miners, not engineers with PhDs. But to Saussure, this strike is not about money and benefits. It's about forcing executives to acknowledge that Boeing is nothing without its engineers. The strike is about preserving the soul of the company. So Saussure checks his watch again. It's now eight past the

hour and still no sign of any other striking engineers. He's about to give up when he hears what sounds like a stampede behind him. He turns to see a mass of engineers pouring out of the factory. And as they get closer, he can hear them chanting, no nerds, no birds. With their glasses, he can hear them chanting, no nerds, no birds. With their glasses, chunky sneakers, and calculator watches, they're a far cry from the popular image of union workers. But they're acting like a union. Sorcerer breaks into a wide grin. He rushes over to join the group and asks one of the engineers near the front what took them so long. He's told that they decided to march around the factory floor before coming outside. And it was great. All of the machinists cheered them on.

And he wishes Sorcher could have seen the look on some of the managers' faces. Sorcher then takes a look back at the stream of engineers behind him and thinks about the thousands more they're about to meet at the football field. And he feels a sliver of hope. If Boeing executives care so much about profits, they'll want to end this strike as soon as possible. I'm Jake Warren, and in our first season of Finding, I set out on a very personal quest to find the woman who saved my mom's life. You can listen to Finding Natasha right now,

exclusively on Wondery+.. In season two I found myself caught up in a new journey to help someone I've never even met but a couple of years ago I came across a social media post by a person named Loti. It read in part, three years ago today that I attempted to jump off this bridge but this wasn't my time to go. A gentleman named Andy saved my life. But this wasn't my time to go. A gentleman named Andy saved my life. I still haven't found him. This is a story that I came across purely by chance,

but it instantly moved me. And it's taken me to a place where I've had to consider some deeper issues around mental health. This is season two of Finding. And this time, if all goes to plan, we'll be finding Andy. You can listen to Finding Andy and Finding Natasha exclusively and ad-free

on Wondery Plus. Join Wondery Plus in the Wondery app, Apple Podcasts, or Spotify. On January 5th, 2024, an Alaska Airlines door plug tore away mid-flight, leaving a gaping hole in the side of a plane that carried 171 passengers. This heart-stopping incident was just the latest in a string of crises surrounding the aviation manufacturing giant, Boeing. In the past decade, Boeing has been involved in a series of damning scandals and deadly crashes that have chipped away at its once sterling reputation. At the center of it all, the 737 MAX, the latest season of business wars, explores how

Boeing, once the gold standard of aviation engineering, descended into a nightmare of safety concerns and public mistrust. The decisions, denials, and devastating consequences bringing the Titan to its knees, and what, if anything, can save the company's reputation. Now, follow Business Wars on the Wondery app or wherever you get your podcasts. You can binge Business Wars, The Unraveling of Boeing, early and ad-free right now on Wondery Plus. On the morning of February 9th, 2000, 23,000 of Boeing's engineers walk off the job. It's the largest white-collar workers' strike in U.S. history.

But Boeing President Harry Stonecipher and other top executives still refuse to come back to the bargaining table. They're convinced the engineers will break, so they let the strike drag on for weeks. But the engineers don't back down, and they decide to take their case directly to the company's shareholders. Near the end of the month, several members of the union, including Stan Sorcher, show up at a Boeing shareholder retreat. There, Sorcher approaches the hedge fund representative who lectured Boeing's finance team on value-based management. Sorcher lets him know that the total cost of the bonuses and benefits that the union is asking for amounts to just $75 million. The hedge fund rep can't believe how small that number is.

To him, $75 million is a rounding error. Meanwhile, the ongoing strike might cost Boeing 10 times that. So a few days later, the union gets word that Boeing is ready to come back to the table. So a few days later, the union gets word that Boeing is ready to come back to the table. It takes another several weeks to reach a deal, but ultimately Boeing gives in to almost all of the engineers' demands. But this win does not earn the engineers the respect they were hoping for. Their relationship with management remains antagonistic. And 18 months after the strike, Boeing announces that its top executives will no longer work in the same city where its planes are designed and built.

The company is moving its corporate headquarters from Seattle to Chicago. This news comes as a shock to engineers and industry insiders. Boeing has been based just outside of Seattle since it was founded in 1916. And the integration between the corporate offices and the factories had been considered a key to Boeing's success. Veteran engineers theorized that the move is intended to create literal distance between them and the executives, and ultimately, to give the engineers less say. But as these internal battles drag on, Boeing faces another fight with rival Airbus as they continue to gain on Boeing's market share. Rapidly expanding airlines like JetBlue and EasyJet opt to fly

Airbus A320s instead of Boeing 737s, and in 2003, Airbus surpasses Boeing in sales for the first time. The news comes at a tumultuous time for Boeing. Phil Condit has just resigned as CEO, and Harry Stonecipher has been named as his replacement. But shortly into Stonecipher's tenure, it's revealed that he's been having an affair with another executive, and the board asks for his resignation.

Eventually, board member Jim McNerney is named the new CEO. To fight back against Airbus' ascent, McNerney pins all his hopes on the new plane that Boeing's in the process of designing. The 787, also known as the Dreamliner, is to be the most cost-efficient plane the company has ever built. The goal is to have the Dreamliner cost 60% less than what it cost to build Boeing's previous plane, the 777,

designed over a decade earlier. But the only way to hit that goal is to outsource as much of the design and manufacturing as possible. This is a major reversal of company policy. For years, Boeing's own engineers designed every component of their planes. They then either manufactured them in-house or sent extremely detailed specs to third parties. But for the Dreamliner, Boeing plans to oversee companies around the world who have won contracts to design and build many of the new plane's components. It's a lot of moving pieces to keep track of, and cracks in the system quickly start to show. In 2008, the president of the engineers' union, Cynthia Cole, visits the Boeing production facility in Everett, Washington,

30 miles north of Seattle. And as she walks the factory floor, a quality assurance engineer approaches her with a worried look. He asks Cole if he can speak with her privately. Cole leads the engineer off the noisy factory floor and into a vacant office. They sit down in battered swivel chairs on either side of a metal desk. The engineer leans forward, keeping his voice low, as if he's afraid of being overheard. Cynthia, listen, we have a major problem here.

What's going on? The parts we're getting from these new suppliers, they're not up to par. They're nowhere near the standards we had when we made them in-house. Have you spoken to your supervisor? He won't listen. He just says we have to keep our part in the process on schedule. We can't let a backlog of fixes slow down production. That's really what he said? Yes. He says if he talks about the problem, he'll get into trouble.

No one wants to hear this. Don't take this the wrong way. I'm trying to get the facts here. But what's your relationship like with your supervisor? I mean, do you get along? Well, it used to be fine. But ever since we started on the Dreamliner, he's a different guy. So there's no interpersonal reason or any other reason you can think of that your supervisor wouldn't want to hear from you specifically? Not that I can think of, because it's not just me. I know several other people have raised concerns. They've gotten the same response, and these aren't minor problems. I have a friend who told me that with one new vendor, they had to tell them 18 times that the plane's smoke detectors

had to connect to the electrical system. 18 times? That's not good. No, it's not, and I could go on. Sometimes when we look at the manuals these companies send with their parts, half the pages are blank with the word proprietary stamped across them. So we don't even know how some of these parts work? No. And if there's a problem with the manufacturing, we wouldn't even know about it. You gotta do something. After this troubling report, Cole heads back into the factory and watches his workers weld together sections of a Dreamliner's massive fuselage.

What this engineer just told her is alarming and suggests that Boeing's culture clash between engineering and executives is reaching a breaking point. Over the next several months, Cynthia Cole hears from more and more Boeing engineers. Some send her emails, others come up to her when she's visiting facilities. She even gets recognized by concerned employees when she's in the grocery store or eating at restaurants. They all share similar stories. They're seeing major problems with the parts coming in from new third-party vendors, but when they try to discuss the issues with their supervisors, they're told that this schedule is the utmost importance and nothing can get in its way. In response, Cole arranges a series of town hall meetings where engineers can speak directly to

senior managers about the problems they're seeing. Over and over, the engineers tell the managers that the outsourcing isn't working. Finally, in 2009, even Boeing senior executives are forced to admit that their outsourcing experiment is a failure. Boeing is forced to spend $50 billion to bring all the work on the Dreamliner back in-house. And as a result of this failed outsourcing endeavor, the new plane is now behind schedule and over budget. But soon the company has another problem on its hands. While Boeing has been dealing with the crisis of the Dreamliner, rival Airbus has been working on a new plane of its own. In December 2010, Airbus announces that

it's building a new version of its A320, the chief competitor to Boeing's best-selling plane, the 737. They're going to call it the A320neo and suggest that its engines will be 15% more fuel efficient after a complete redesign. Fuel is one of the biggest overhead costs for an airline, so it's no surprise when Airbus quickly racks up orders for its new plane. The A320neo is potentially a major threat to Boeing. So in January 2011, Boeing's president of commercial planes, Jim Albaugh, calls a meeting of his division to discuss how to respond. On the day of the meeting, Albaugh walks into a conference room at the new company headquarters in Chicago. Other top-level executives from the commercial planes division are already gathered around the table.

Their faces are grim. Albaugh takes a seat at the head of the table and kicks off the meeting by announcing that he isn't worried at all about the new Airbus plane. But he knows that others at the table are, and he wants to hear their concerns. One executive in wire-rimmed glasses and a quarter-zip sweater speaks up. He says that he thinks the appeal of a more fuel-efficient plane from Airbus will heavily eat into 737 sales. But Alba shakes his head. He thinks that Airbus is over-promising with the Nio, which will likely face production delays and go over budget, just as Boeing's Dreamliner did. And he's skeptical that the Nio will actually be able to deliver as much fuel efficiency as Airbus is promising. With that in

mind, Alba thinks Boeing is better off designing a competitor for the NIO after they've completed work on the Dreamliner. That model is finally set to be delivered to its first customer in July, six months from now, and two years later than originally promised. The executive shakes his head, though, and says he doesn't mean disrespect, but this sounds like a decision made out of fear of having another debacle like the Dreamliner. And fear isn't the basis for good decision-making. Allbaugh rejects that premise and says the opposite is true. Rushing into designing a new plane just because Airbus made a few sales would be a decision made out of fear.

And Boeing shouldn't rush into any new projects until it sees how the NEO performs. The other executive isn't convinced, but he doesn't push the point further, and the group tacitly agrees to table the conversation. Albaugh brings the meeting to a close, but as he walks out of the conference room, he hopes he's making the right decision. Another black eye after the Dreamliner

would be a major setback for Bowen, and that can't happen on his watch. He was hip-hop's biggest mogul, the man who redefined fame, fortune, and the music industry. The first male rapper to be honored on the Hollywood Walk of Fame, Sean Diddy Cone. Diddy built an empire and lived a life most people only dream about. Everybody know ain't no party like a Diddy party, so. Yeah, that's what's up. But just as quickly as his empire rose, it came crashing down.

Today I'm announcing the unsealing of a three-count indictment, charging Sean Combs with racketeering conspiracy, sex trafficking, interstate transportation for prostitution. I was f***ed up. I hit rock bottom, but I made no excuses. I'm disgusted. I'm so sorry. Until you're wearing an orange jumpsuit, it's not real. Now it's real. From his meteoric rise to his shocking fall from grace, from law and crime, this is The Rise and Fall of Diddy. Listen to The Rise and Fall of Diddy exclusively with Wondery Plus. At an air show in Paris in June 2011, Airbus sells over a thousand of its new planes on spec,

indicating that the A320neo will be more of a threat than Boeing's head of commercial planes, Jim Albaugh, had anticipated. But Albaugh sticks to his guns, insisting that Boeing can wait on designing a new plane to counter the Neo, until, about a few weeks later, when he receives a call from American Airlines. That day, Albaugh is answering emails in his office when his assistant tells him that American Airlines CEO Gerard Arpy is on the line. American is one of Boeing's most important customers. They've bought Boeing planes exclusively since the 1990s, so Alba tells his assistant to put Arpy through.

the 1990s, so Alba tells his assistant to put Arpy through. Alba takes a deep breath and picks up the phone. Gerard, always a pleasure. How are you? I'm well, thanks. Good, good. It's been too long since I've had some good barbecue. I'm going to need to get down to Fort Worth soon. Well, you're welcome anytime. Great, I'll get something on the books soon. To what do I owe this call? You're welcome anytime. Great. I'll get something on the book soon. To what do I owe this call? Well, it's a courtesy call, actually. Courtesy call?

Yeah. I wanted to let you know that we're strongly considering putting an order for 100 A320 Neos. Alba suppresses the urge to throw the phone across the room. Ah, well, I appreciate the heads up, Gerard, but I'm surprised. Why switch horses now, after all this time with Boeing? Well, the fuel savings they're offering, we can't turn that down. But that's all speculative at this point. Our engineers have assessed the design and the specs. We're pretty confident they'll get close to what they're promising.

Okay, but remember, Airbus uses an entirely different cockpit control system than we do. Your pilots are going to have to do a lot of retraining. That'll probably wipe out any savings you have from fuel costs. Yeah, and that's why we haven't pulled the trigger yet. And if Boeing could come back to us with a competitive offer, we'd be happy to reconsider. Well, we absolutely will. Just give me a little time to put something together. That's great to hear, Jim, because I wasn't sure if Boeing was working on a plane that could match NIO's efficiency. Don't worry about that. We'll be in touch as soon as we can. Just don't place that order until you hear from us,

all right? Alba hangs up the phone and a wave of fury overtakes him. Boeing has a full-time sales staff in Dallas to make sure that Boeing keeps Americans' business. He can't believe they could have missed something like this. Albarn knows if American Airlines is considering a deal with Airbus, other longtime Boeing customers probably are too. So to avert disaster, Boeing needs to figure out a way to make a plane that's competitive with the Airbus A320neo. They need to do it fast. that's competitive with the Airbus A320neo, and they need to do it fast.

After Jim Albaugh's call with American Airlines, Boeing holds a series of emergency meetings to figure out how best to compete against Airbus. They need to make an offer that will keep American buying Boeing, and the easiest option is to upgrade the 737. With bigger engines and a few other tweaks, the plane can be more fuel efficient. But there's some pushback within the company about redesigning the 737 yet again. It's already on its ninth iteration, and there are several elements about its design that still date back to the 1960s but can't be changed. Some executives argue that Boeing should take this opportunity to design a new plane from scratch. They point out that more young pilots around the world are learning to fly on Airbus's automated system, and that it might be a good idea for Boeing to update its cockpit control system to make it easier and safer to fly, like Airbus's.

to make it easier and safer to fly, like Airbus's. But other executives counter that the 737 is a workhorse. It alone accounts for over a third of Boeing's plane sales, so why fix what isn't broken? Ultimately, though, it comes down to time. Airbus has a significant head start on designing the NEO. So if Boeing hopes to make American Airlines a counteroffer, they need to be able to tell them that they can deliver the new plane no more than a year after Airbus. And if they can't do that,

they're designing one from the ground up. So a week after his phone call with American Airlines CEO Gerard Arpy, Jim Albaugh calls him back and pitches him on a redesigned, more fuel-efficient version of the 737. And on July 20, 2011, American Airlines agrees to split their new airplane order between Boeing and Airbus. It's not the total win that Albaugh was hoping for, but it's not a complete embarrassment either. At the same time, another key Boeing customer, Southwest Airlines, also agrees to buy several hundred of the redesigned 737s. But Southwest's commitment comes with a catch. They don't want their pilots to undergo any new training on the new aircraft. Pilot training is another major expense for airlines.

Every hour a pilot spends in a simulator is time they're not allowed to fly a plane full of paying customers. Southwest is Boeing's biggest customer. They exclusively fly 737s. So Boeing takes their demand seriously and assures Southwest that pilots will be able to step straight out of old 737s and into the new without any simulator training. And to show that they mean it, Boeing promises it will pay Southwest $1 million per plane if any simulator training is required. To accomplish this goal, Boeing will have to make sure

there are as few changes as possible to how the new plane flies. If there's too big a change to any of the onboard systems or controls, the Federal Aviation Administration will require pilots to take additional training, and Boeing will owe Southwest Airlines hundreds of millions of dollars. So in December 2011, Executive Jim Albaugh writes a memo to everyone on the 737

redesign team, telling them that he wants this to be the simplest redesign in Boeing history. He only wants engineers to touch the part of the airplane directly impacted by the new, more fuel-efficient engines, and maybe a few other small tweaks, nothing more. One veteran Boeing engineer is sitting at his desk when this memo comes in. And it's not a surprise. Albaugh and the other executives have been stressing this point for months. This will be a quick and dirty update. So the engineer doesn't give the memo much more thought and moves on to the next email in his box.

He's halfway through reading it when he's interrupted by the sound of hammering coming from down the hall. He tries to ignore it, but it just doesn't stop. So he picks up his coffee and follows the sound to the conference room that's been assigned for all meetings about the plane they're now calling the 737 MAX 8. Inside the noisy conference room, he finds a manager installing a large digital clock on the far wall. The engineer asks what's going on, and the manager says it's a countdown clock. It shows the time left to reach the MAX 8's next milestone. So every time people sit in a meeting about the MAX, they'll be reminded that they're racing against the clock. The engineer nods. He's well aware that Boeing has promised American, Southwest, and other

customers that they'll start delivering the MAX by 2017, about five years from now. And that may sound like plenty of time, but it makes the engineer feel uneasy. The process for designing and building an airplane is an arduous one. Even when making changes to an existing plane, each new component requires several rounds of test flights and a lengthy certification process with the FAA. And all of that needs to be completed before the plane can be manufactured and delivered to customers. On top of all that, the engineering team has only a general idea about how they're going to make the MAX more fuel efficient. There are still a lot of details to work out. So the engineer knows issues will come up because they always do. And in the past,

design teams at Boeing felt comfortable speaking up when they saw a potential problem, even if it meant delaying a plane's delivery. But as the design and production process of the Dreamliner made clear, those days are over. And by installing this clock, Boeing's management is sending the message that they want this plane delivered on time, no matter what. So the engineer just hopes that no one is put in the position of choosing speed over safety, because for the first time in his career with Boeing, he's not sure which one management will pick. From Wondery, this is episode two of Boeing for American Scandal. In our next episode,

development of the 737 MAX 8 doesn't go according to plan, and Boeing is forced to make some questionable decisions to hit its goals. If you're enjoying American Scandal, you can unlock exclusive seasons on Wondery Plus. Binge new seasons first and listen completely ad-free when you join Wondery Plus in the Wondery app, Apple Podcasts, or Spotify. And before you go, tell us about yourself by filling out a survey at wondery.com slash survey. If you'd like to learn more about this story, we recommend the book Flying Blind by Peter Robison and the documentary Downfall, The Case Against Boeing, directed by Rory Kennedy.

This episode contains reenactments and dramatized details. And while in most cases we can't know exactly what was said, all our dramatizations are based on historical research. American Scandal is hosted, edited, and executive produced by me, Lindsey Graham for Airship. Audio editing by Christian Paraga.

Sound design by Gabriel Gould. Music by Lindsey Graham. This episode is written by Austin Rackless. Edited by Emma Cortland. Fact-checking by Alyssa Jung-Perry. Produced by John Reed. Managing producer, Olivia Fonte. Senior producer, Andy Herman.

Development by Stephanie Jens. And executive producers are Jenny Lauer-Beckman, Marsha Louis, and Erin O'Flaherty for Wondery.