Western Railroad Discussion > Railroads and the "Boeing problem"

Investment analyst Cameron Dawson was on Bloomberg this morning, talking about the "Boeing problem". She any many others see the difficulty as a follow through on Jack Welch's style of management, from which Boeing CEO Dave Calhoun came. It's not unlike the problem many railroads have.

In Welch's practice, cash flow was the goal. Generate more cash flow. Cut corners if you have to. Sell off low performing divisions, and invest the money in high cash flow businesses. If you substitute "operating ratio" for "cash flow", you could describe a lot of current railroading.  Tighten those screws. Cut that crew base. Lay off more people, push the remainder that much harder. Make that local pickup three times weekly instead of six. Drive off that high profit, infrequent boxcar traffic. Throw away those work orders, and deny all those time claims.

In Boeing's case, it resulted in a lot of traveling work. People moved all over the factory, tightening bolts here, putting in fasteners all the way over there. Quality control suffered as the work, and the checking, was spread out. Cash flow went up, costs of manufacturing went down, but quality suffered. That has been identified as an issue in the Alaska Air door blow out, as a series of door bolts were not applied, and the work was not checked before panels went over the plug. The work records have been lost.

How investors and Ms Dawson would answer if they were faced with Boeing saying "the cost of our aircraft is going up 10%, and the assembly time will be 10 days longer, and cash flow will be 5% less" is pretty easy to guess.  Same result if Alan Shaw, Jim Vena, etc said "we want well rested employees, and we are committed to safety. We are installing ultrasound wheel scanners on all haz-mat carrying lines. We expect this will make a 70 operating ratio the floor below which we can't go".  They would be on the golf course full time while their successors picked up the whip...

Looks like some of the U.P. executives are seeing the writing on the wall: https://www.progressiverailroading.com/people/news/UP-announces-retirements-executive-appointments--71532

Jack Welch's corporate style faded since the '90s. It worked then, but not now as seen with PSR. Here's the latest casualty:

Boeing CEO resigns

I assume you saw that Boeing's CEO and others are leaving:

The 5 big threats Boeing faces (yahoo.com)

I hope that I am not being too graphic here, but Boeing (and major railroad management), I think. are going to find that "unscrewing the pooch" may not be possible.

It all goes back to the immutable laws of business. You can't economize to prosperity. You have to leverage your advantages and grow. A business is either growing or dying.

> Jack Welch's corporate style faded since the '90s.
> It worked then, but not now

It worked then, meaning ... stockholders smiled,
which they don't now?

I never thought much Welch, forget the president of the time but he was the big adviser. to my recollection problem tho was a little more complicated, like GE health care, lack of focus with too many business groups as you can see with the spin offs.

As far as cash flow, a lack of attention is full of company graveyards. As I seem to remember Boeing has been an up and down business somewhat the the nature of the business.

Bob

Posted from Android

robj Wrote:
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> As far as cash flow, a lack of attention is full
> of company graveyards. As I seem to remember
> Boeing has been an up and down business somewhat
> the the nature of the business.

The big thing is that Boeing has lost its reputation and getting it back will not be easy.

timz Wrote:
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> > Jack Welch's corporate style faded since the
> '90s.
> > It worked then, but not now
>
> It worked then, meaning ... stockholders smiled,
> which they don't now?

Right, they don't smile when their share value is down 20% in 3 months

Major airline CEO's demanded a "cottonwood hoodown" with the boeing board with out the CEO present.....
Board is looking for sacifical lambs.... one gone many to go....
Difference here is that customers have significant influence with boeing BUT rail shippers have very limited influence with the railways and thier PSR cult....

Posted from Android

trainjunkie Wrote:
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> It all goes back to the immutable laws of
> business. You can't economize to prosperity. You
> have to leverage your advantages and grow. A
> business is either growing or dying.

And a business can endure growth/shrink cycles, if it's managed properly. So dying doesn't have to lead to death.

It wasn't long ago that Wall St. accepted business cycles, and money moved accordingly. Wall St. has lost its mind recently, expecting everything to grow forever, and in the process, prop things up and cheat to do so. Ponzi schemes always have a bad ending.

For tech companies where safety problems are neglegible or indirect, people can get away with Ponzi schemes. Wall St. idiots have become complacent because of that, and are infecting companies where safety is impacted. I see no solution except a market crash that hurts only wallets, and hopefully doesn't kill any more people.

robj Wrote:
-------------------------------------------------------
> I never thought much Welch, forget the president
> of the time but he was the big adviser. to my
> recollection problem tho was a little more
> complicated, like GE health care, lack of focus
> with too many business groups as you can see with
> the spin offs.

Mergers and acquisiton as tools for artificial growth. That was a big thing in the 1980s. So Jack Welch doesn't deserve to "own" a management style, he was just continuing that manipulative trend. Hopefully, GE is done cleaning up his mess now... and it's taking how long? Two decades?

The financial media loves to create "heroes" to recruit idiots to participate in the legalized Ponzi scheme. Besides Welch, there's Gates and Jobs. Like you, I was not impressed with Welch, although it had more to do with my early awareness of financial media as mostly fake news decades ago. It's funny the hype goes into overdrive near the end of a "hero's" career, and we got the hype in full gear for the owner of BNSF right now.

ts1457 Wrote:
-------------------------------------------------------
> The big thing is that Boeing has lost its
> reputation and getting it back will not be easy.

Boeing is under pressure from Airbus, and in fact, it's safe to speculate that the original 737MAX problem of moving the engines more forward of the wings was to fit bigger more efficient turbofan engines to compete with  the Airbus 32x series.

The "legacy" 737s had too low of a wing-to-ground clearance, but Boeing wanted to keep the "737" name and reputation, and furthrmore, cheat the recertification process to compete. So they used software (now hyped as A.I.) to "fly" the plane. It seems the "I can get away with it" culture didn't end there.

cchan006 Wrote:
-------------------------------------------------------
> robj Wrote:
> --------------------------------------------------
> -----
> > I never thought much Welch, forget the
> president
> > of the time but he was the big adviser. to my
> > recollection problem tho was a little more
> > complicated, like GE health care, lack of focus
> > with too many business groups as you can see
> with
> > the spin offs.
>
> Mergers and acquisiton as tools for artificial
> growth. That was a big thing in the 1980s. So Jack
> Welch doesn't deserve to "own" a management style,
> he was just continuing that manipulative trend.
> Hopefully, GE is done cleaning up his mess now...
> and it's taking how long? Two decades?
>
> The financial media loves to create "heroes" to
> recruit idiots to participate in the legalized
> Ponzi scheme. Besides Welch, there's Gates and
> Jobs. Like you, I was not impressed with Welch,
> although it had more to do with my early awareness
> of financial media as mostly fake news decades
> ago. It's funny the hype goes into overdrive near
> the end of a "hero's" career, and we got the hype
> in full gear for the owner of BNSF right now.

Many of the business strategies promulgated by Jack Welch were seen in earlier conglomerate builders like Harold Geneen (ITT), Henry Singleton (Teledyne) and many others. Any good manager can manage any business, no technical requirements needed. If you have access to strong cash value generating businesses, and can float your own stock at a good price (which needs good press coverage), you will be successful. Rupert Murdoch learned that lesson for News Corporation. You can use your own high value stock to buy good companies, then squeeze them into great companies.

It works until it doesn't work anymore.