Mar 9, 2020 - Economy & Business

Boeing's continued woes will add to coronavirus damage

Illustration of a paper plane going into the trash

Illustration: Aïda Amer/Axios

Somewhat forgotten in the evaluation of the current state of the U.S. economy is the ongoing debacle at Boeing, a flagship American company whose production shutdown led to the New York Fed estimating it would shave 20% off of 2020's GDP growth — and this was before the coronavirus outbreak. Things could be getting worse for Boeing.

Driving the news: A report is due this week from airline safety investigators to coincide with the one-year anniversary of the Ethiopian Airlines crash that was the second in six months for Boeing's 737 MAX jets.

  • On Friday, the House Transportation and Infrastructure Committee released its report outlining a laundry list of Boeing's reckless and unforced errors that led to the two plane crashes and the deaths of 346 people.
  • Over the weekend, co-CEO Dave Calhoun backtracked from a scathing New York Times interview bashing his predecessor that could land him and more top execs in front of lawmakers for congressional hearings.

Why it matters: Boeing is the largest manufacturing exporter in the U.S. and a major employer. Its products cost hundreds of millions of dollars and require thousands of suppliers, some of whom count Boeing as their sole client.

  • Boeing had to reduce production last year amid a recession in U.S. manufacturing and declining business investment that economists and industry insiders expected to bounce back this year.
  • The Council of Economic Advisers estimated that the slowdown cut U.S. GDP in Q2 2019 by 0.4 percentage points, so its outright production halt through Q1 2020 and possibly longer could deliver a much worse financial shock.

What's happening: Friday’s congressional report detailed Boeing’s efforts to avoid putting pilots through flight-simulator training to save money, and alleged that the company's penny-pinching was pervasive, stretching across engineering, marketing and management.

  • The report said this resulted in the company misleading or withholding information from FAA officials.
  • Both crashes occurred after pilots were unable to undo the automated flight-control feature that they were supposed to be trained on when it misfired repeatedly and pushed down the nose of their plane leading to the crash, WSJ reported.

The bottom line: The U.S. economy needs Boeing to get back on its feet, but the widespread malfeasance detailed in the report could mean it stays grounded for even longer as a further spate of government hearings and investigations unfold.

Go deeper: New Boeing CEO criticizes predecessor, looks to future

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