After reading the article “Boeing’s Secret” and watching the video “How a Boeing 787 Dreamliner is Built,”
discuss in 400 Words if you believe Boeing is labor intensive, capital intensive, or both. Has Boeing established the “network effect” for their product?
Video:
http://www.youtube.com/watch?v=VRfXyccWUP4
Article:
On Dec. 11, 1996, Boeing Chairman Philip M. Condit closed the deal of his career. After a relentless three-year courtship, he persuaded the initially reluctant directors of defense giant McDonnell Douglas Corp. to agree to a merger. The combination would create the world's largest aerospace company — the first manufacturer ever with the ability to build everything that flies, from helicopters and fighter jets to space stations. "This is, I believe, a historic moment in aviation," Condit proclaimed at a Dec. 15 press conference.
But far from the glare of TV cameras, a disaster was quietly unfolding inside Boeing Co.'s sprawling factories — one that would ultimately wind up costing billions of dollars, cause several executives to lose their jobs, and lead to claims of accounting fraud. Facing an unprecedented surge in orders because of a booming economy, workers were toiling around the clock, pushing the assembly line to the breaking point. At the same time, the company was struggling to overhaul outdated production methods.
These pressures were building up to what was, in essence, a manufacturing nervous breakdown. In the weeks after the merger announcement, parts shortages and overtime approached all-time highs — triggering red warning signals in Boeing's colorcoded system for monitoring factory health. As costs went through the roof, the profitability of airliners such as the 777 swooned. A special team formed to study the crisis in May, 1997, issued a report with a blunt conclusion: "Our production system is broken."
If investors had understood the scope of the problems, the stock would probably have tumbled and the McDonnell deal — a stock swap that hinged on Boeing's ability to maintain a lofty share price — would have been jeopardized. But shareholders never got the full picture until well after the merger was completed on Aug. 1, 1997. Top executives "were hoping against hope that none of the problems would bubble up before they got the deal done," says a Boeing ex-official.
Their wish came true, and the deal sailed through. Recognizing that the bad news would have to come out eventually, company leaders started debating how it should be released. One public-relations manager lobbied for disclosure on Sept. 6 or Sept. 13 — the dates of the funerals for Princess Diana and Mother Teresa — when a grieving public would presumably overlook the story. Those proposals were nixed. On Oct. 8, former McDonnell CEO Harry C. Stonecipher, by then Boeing's president and chief operating officer, shot an e-mail to Condit. "We do know for certain that there is a big surprise coming, and I think we owe the Street a heads-up. We .
Did the aircraft giant exploit accounting rules to conceal a huge .docxcuddietheresa
Did the aircraft giant exploit accounting rules to conceal a huge factory snafu?
On Dec. 11, 1996, Boeing Chairman Philip M. Condit closed the deal of his career. After a relentless three-year courtship, he persuaded the initially reluctant directors of defense giant McDonnell Douglas Corp. to agree to a merger. The combination would create the world's largest aerospace company — the first manufacturer ever with the ability to build everything that flies, from helicopters and fighter jets to space stations. "This is, I believe, a historic moment in aviation," Condit proclaimed at a Dec. 15 press conference.
But far from the glare of TV cameras, a disaster was quietly unfolding inside Boeing Co.'s sprawling factories — one that would ultimately wind up costing billions of dollars, cause several executives to lose their jobs, and lead to claims of accounting fraud. Facing an unprecedented surge in orders because of a booming economy, workers were toiling around the clock, pushing the assembly line to the breaking point. At the same time, the company was struggling to overhaul outdated production methods.
These pressures were building up to what was, in essence, a manufacturing nervous breakdown. In the weeks after the merger announcement, parts shortages and overtime approached all-time highs — triggering red warning signals in Boeing's colorcoded system for monitoring factory health. As costs went through the roof, the profitability of airliners such as the 777 swooned. A special team formed to study the crisis in May, 1997, issued a report with a blunt conclusion: "Our production system is broken."
If investors had understood the scope of the problems, the stock would probably have tumbled and the McDonnell deal — a stock swap that hinged on Boeing's ability to maintain a lofty share price — would have been jeopardized. But shareholders never got the full picture until well after the merger was completed on Aug. 1, 1997. Top executives "were hoping against hope that none of the problems would bubble up before they got the deal done," says a Boeing ex-official.
Their wish came true, and the deal sailed through. Recognizing that the bad news would have to come out eventually, company leaders started debating how it should be released. One public-relations manager lobbied for disclosure on Sept. 6 or Sept. 13 — the dates of the funerals for Princess Diana and Mother Teresa — when a grieving public would presumably overlook the story. Those proposals were nixed. On Oct. 8, former McDonnell CEO Harry C. Stonecipher, by then Boeing's president and chief operating officer, shot an e-mail to Condit. "We do know for certain that there is a big surprise coming, and I think we owe the Street a heads-up. We have an unmitigated disaster on our hands and need some very candid damage control," he wrote in an e-mail that was disclosed in a securities-fraud suit filed against Boeing in Seattle.
Condit, who in his 32 years at Boeing had yet to experience a fai ...
Boeing has faced many difficulties in 2001, including a downturn in the aviation industry after 9/11 that led to layoffs and production cuts. However, analysts say Boeing's commitment to diversifying away from commercial aviation into defense, satellites, and services through acquisitions will help insulate it from downturns. Boeing is also pursuing emerging areas like aircraft financing, in-flight internet services, and air traffic management to boost its success going forward.
Boeing faced many problems in the early 2000s, including declining stock prices, increased competition from Airbus, and a manufacturing crisis. This was compounded by cultural issues following their merger with McDonnell Douglas. An attempted diversification also failed and hurt employee morale. Harry Stonecipher was appointed new CEO in 2003 and announced plans to revitalize Boeing by producing the new 7E7 jet, but critics called for further changes to return Boeing to its innovative roots.
Boeing has implemented a successful long-term strategy focused on innovation, adaptability, and quality. Key elements of their strategy included a 20-year vision implemented in 1996 focused on becoming a global leader in aerospace. This included acquiring McDonnell Douglas and developing game-changing projects like the Boeing 787 Dreamliner. While facing challenges, Boeing's values of innovation, leadership, and commitment to quality have allowed it to thrive and maintain its position as a world leader in aerospace.
Boeing has implemented a successful long-term strategy focused on innovation, adaptability, and quality. Key elements of their strategy included a 20-year vision implemented in 1996 focused on becoming a global leader in aerospace. This included acquiring McDonnell Douglas and developing game-changing projects like the Boeing 787 Dreamliner. While facing challenges, Boeing's values of innovation, leadership, and commitment to quality have allowed it to thrive and maintain its position as a world leader in aerospace.
To be considered complete, all written assignments must include propmarilynnhoare
To be considered complete, all written assignments must include proper citations within the body of the paper when relevant, as well as a References section. Failure to cite outside sources is plagiarism and will be treated as such! You must also include a title page. Do not include pictures or graphics. All documents must be in Word format and in APA writing styles.
Read the Getting Boeing Back in the Air Story Below:
The American company Boeing makes airplanes, rockets, satellites, telecommunications equipment, and missiles. Defense production is based in St. Louis, Missouri, and the aerospace business is in Long Beach, California. Passenger jets are made in Seattle, Washington, on the northwest coast, where the company’s 40,000 engineers are based. Boeing is one of America’s biggest exporters. A million people work either for Boeing or for one of its suppliers, and it has been described as “too important to fail” (McNulty and Marcus, 2019, p. 2). Boeing’s main competitor in the passenger jet market is Airbus; other competitors include Lockheed Martin, Northrop Grumman, Raytheon, General Dynamics, SpaceX, BAE Systems, Bombardier, Embraer, and Loral Space & Communications.
Boeing’s new 737 Max aircraft was introduced in 2017. In October 2018, a Lion Air Boeing 737 Max crashed, killing 189 people. Five months later, in March 2019, an Ethiopian Airlines 737 Max crashed, killing 157 people. Investigators found that the plane’s new Maneuvering Characteristics Augmentation System (MCAS) automatically forced the aircraft to stall and nosedive. This system had been omitted from flight manuals and crew training. The U.S. Federal Aviation Authority (FAA) grounded the 737 Max. Boeing’s reputation was damaged. But chief executive Dennis Muilenburg decided to keep making the 737 Max, to demonstrate confidence in the plane, even though they could not be sold. Boeing fired Muilenburg at the end of 2019, and David Calhoun took over as CEO.
To understand how this could have happened, we have to go back to 1997, when Boeing acquired McDonnell Douglas, a competitor with a “finance first ethos.” Boeing took on many McDonnell Douglas executives including their chief executive, Harry Stonecipher, who was known for his aggressive cost cutting. In 2001, Boeing’s chief executive and then president, Phil Condit and Harry Stonecipher, decided to put some distance between the company’s 500 senior management and staff and the plane-makers and moved the headquarters to Chicago—2,000 miles from Seattle. They explained that senior management was being drawn into day-to-day operational decisions when they were so close to the manufacturing base. In a large, modern, multinational company, they felt that senior executives should not have such contact with engineers. Stonecipher said, “When people say I changed the culture of Boeing, that was the intent, so that it’s run like a business rather than a great engineering firm. It is a great engineering firm, but people in ...
The dot-com bubble was a historic speculative bubble covering roughly 1997–2000 during which stock markets saw equity values rise rapidly from growth in the Internet sector. Companies could cause stock prices to increase simply by adding "e-" or ".com" to their names. Due to the rise of the commercial Internet and record venture capital growth, dot-com companies experienced meteoric stock price rises and venture capitalists took on more risk. The bubble burst in March 2000 when the NASDAQ index peaked at over double its value just a year prior. Many dot-com companies could not withstand the financial burden and were forced to file for bankruptcy in the aftermath.
Did the aircraft giant exploit accounting rules to conceal a huge .docxcuddietheresa
Did the aircraft giant exploit accounting rules to conceal a huge factory snafu?
On Dec. 11, 1996, Boeing Chairman Philip M. Condit closed the deal of his career. After a relentless three-year courtship, he persuaded the initially reluctant directors of defense giant McDonnell Douglas Corp. to agree to a merger. The combination would create the world's largest aerospace company — the first manufacturer ever with the ability to build everything that flies, from helicopters and fighter jets to space stations. "This is, I believe, a historic moment in aviation," Condit proclaimed at a Dec. 15 press conference.
But far from the glare of TV cameras, a disaster was quietly unfolding inside Boeing Co.'s sprawling factories — one that would ultimately wind up costing billions of dollars, cause several executives to lose their jobs, and lead to claims of accounting fraud. Facing an unprecedented surge in orders because of a booming economy, workers were toiling around the clock, pushing the assembly line to the breaking point. At the same time, the company was struggling to overhaul outdated production methods.
These pressures were building up to what was, in essence, a manufacturing nervous breakdown. In the weeks after the merger announcement, parts shortages and overtime approached all-time highs — triggering red warning signals in Boeing's colorcoded system for monitoring factory health. As costs went through the roof, the profitability of airliners such as the 777 swooned. A special team formed to study the crisis in May, 1997, issued a report with a blunt conclusion: "Our production system is broken."
If investors had understood the scope of the problems, the stock would probably have tumbled and the McDonnell deal — a stock swap that hinged on Boeing's ability to maintain a lofty share price — would have been jeopardized. But shareholders never got the full picture until well after the merger was completed on Aug. 1, 1997. Top executives "were hoping against hope that none of the problems would bubble up before they got the deal done," says a Boeing ex-official.
Their wish came true, and the deal sailed through. Recognizing that the bad news would have to come out eventually, company leaders started debating how it should be released. One public-relations manager lobbied for disclosure on Sept. 6 or Sept. 13 — the dates of the funerals for Princess Diana and Mother Teresa — when a grieving public would presumably overlook the story. Those proposals were nixed. On Oct. 8, former McDonnell CEO Harry C. Stonecipher, by then Boeing's president and chief operating officer, shot an e-mail to Condit. "We do know for certain that there is a big surprise coming, and I think we owe the Street a heads-up. We have an unmitigated disaster on our hands and need some very candid damage control," he wrote in an e-mail that was disclosed in a securities-fraud suit filed against Boeing in Seattle.
Condit, who in his 32 years at Boeing had yet to experience a fai ...
Boeing has faced many difficulties in 2001, including a downturn in the aviation industry after 9/11 that led to layoffs and production cuts. However, analysts say Boeing's commitment to diversifying away from commercial aviation into defense, satellites, and services through acquisitions will help insulate it from downturns. Boeing is also pursuing emerging areas like aircraft financing, in-flight internet services, and air traffic management to boost its success going forward.
Boeing faced many problems in the early 2000s, including declining stock prices, increased competition from Airbus, and a manufacturing crisis. This was compounded by cultural issues following their merger with McDonnell Douglas. An attempted diversification also failed and hurt employee morale. Harry Stonecipher was appointed new CEO in 2003 and announced plans to revitalize Boeing by producing the new 7E7 jet, but critics called for further changes to return Boeing to its innovative roots.
Boeing has implemented a successful long-term strategy focused on innovation, adaptability, and quality. Key elements of their strategy included a 20-year vision implemented in 1996 focused on becoming a global leader in aerospace. This included acquiring McDonnell Douglas and developing game-changing projects like the Boeing 787 Dreamliner. While facing challenges, Boeing's values of innovation, leadership, and commitment to quality have allowed it to thrive and maintain its position as a world leader in aerospace.
Boeing has implemented a successful long-term strategy focused on innovation, adaptability, and quality. Key elements of their strategy included a 20-year vision implemented in 1996 focused on becoming a global leader in aerospace. This included acquiring McDonnell Douglas and developing game-changing projects like the Boeing 787 Dreamliner. While facing challenges, Boeing's values of innovation, leadership, and commitment to quality have allowed it to thrive and maintain its position as a world leader in aerospace.
To be considered complete, all written assignments must include propmarilynnhoare
To be considered complete, all written assignments must include proper citations within the body of the paper when relevant, as well as a References section. Failure to cite outside sources is plagiarism and will be treated as such! You must also include a title page. Do not include pictures or graphics. All documents must be in Word format and in APA writing styles.
Read the Getting Boeing Back in the Air Story Below:
The American company Boeing makes airplanes, rockets, satellites, telecommunications equipment, and missiles. Defense production is based in St. Louis, Missouri, and the aerospace business is in Long Beach, California. Passenger jets are made in Seattle, Washington, on the northwest coast, where the company’s 40,000 engineers are based. Boeing is one of America’s biggest exporters. A million people work either for Boeing or for one of its suppliers, and it has been described as “too important to fail” (McNulty and Marcus, 2019, p. 2). Boeing’s main competitor in the passenger jet market is Airbus; other competitors include Lockheed Martin, Northrop Grumman, Raytheon, General Dynamics, SpaceX, BAE Systems, Bombardier, Embraer, and Loral Space & Communications.
Boeing’s new 737 Max aircraft was introduced in 2017. In October 2018, a Lion Air Boeing 737 Max crashed, killing 189 people. Five months later, in March 2019, an Ethiopian Airlines 737 Max crashed, killing 157 people. Investigators found that the plane’s new Maneuvering Characteristics Augmentation System (MCAS) automatically forced the aircraft to stall and nosedive. This system had been omitted from flight manuals and crew training. The U.S. Federal Aviation Authority (FAA) grounded the 737 Max. Boeing’s reputation was damaged. But chief executive Dennis Muilenburg decided to keep making the 737 Max, to demonstrate confidence in the plane, even though they could not be sold. Boeing fired Muilenburg at the end of 2019, and David Calhoun took over as CEO.
To understand how this could have happened, we have to go back to 1997, when Boeing acquired McDonnell Douglas, a competitor with a “finance first ethos.” Boeing took on many McDonnell Douglas executives including their chief executive, Harry Stonecipher, who was known for his aggressive cost cutting. In 2001, Boeing’s chief executive and then president, Phil Condit and Harry Stonecipher, decided to put some distance between the company’s 500 senior management and staff and the plane-makers and moved the headquarters to Chicago—2,000 miles from Seattle. They explained that senior management was being drawn into day-to-day operational decisions when they were so close to the manufacturing base. In a large, modern, multinational company, they felt that senior executives should not have such contact with engineers. Stonecipher said, “When people say I changed the culture of Boeing, that was the intent, so that it’s run like a business rather than a great engineering firm. It is a great engineering firm, but people in ...
The dot-com bubble was a historic speculative bubble covering roughly 1997–2000 during which stock markets saw equity values rise rapidly from growth in the Internet sector. Companies could cause stock prices to increase simply by adding "e-" or ".com" to their names. Due to the rise of the commercial Internet and record venture capital growth, dot-com companies experienced meteoric stock price rises and venture capitalists took on more risk. The bubble burst in March 2000 when the NASDAQ index peaked at over double its value just a year prior. Many dot-com companies could not withstand the financial burden and were forced to file for bankruptcy in the aftermath.
WorldCom filed for bankruptcy in 2002 despite appearing to have growth potential. The telecom boom of the 1990s led to overexpansion as companies built extensive networks. By 2000, there was too much capacity and fierce price competition emerged. WorldCom grew rapidly through 65 acquisitions from 1991-1997, taking on substantial debt. However, integration of acquired companies was poor. Additionally, WorldCom engaged in fraudulent accounting practices like capitalizing normal operating expenses to inflate profits. When the telecom market declined, WorldCom could not sustain its business model and massive debt, leading to its collapse.
Please Do Not Copy and Paste anything from this report, this is ju.docxrandymartin91030
Please Do Not Copy and Paste anything from this report, this is just history of the case
BP: Example of an Unethical Trifecta
Posted on September 17, 2013 by mensah_henry
From the dawn of time, human beings have relied on the environment to provide with the all the things we need to survive and be successful. It has also helped us develop civilizations and founded industries where there was none. Our exploitation of our environment is part of what makes us successful. The more we have been able to conquer and manipulate our environment, the more we have developed culturally, socially, and economically (Kareiva and Marvier, 2012). The three tenets of culture, society, and economy has been our biggest source of influence in dealing with the environment. Ever since the discovery of oil by the ancient civilizations of Babylonia and Greece, great importance has been placed on our ability to utilize it and the products we get from it (Totten, 2007). Today, the oil industry has grown from nothing to become one of the world’s biggest and most important. British Petroleum (BP) is one of the largest oil companies in the world and a major stakeholder in the United States oil industry.
Although BP has been operating in the United States for a long time, its history and operations have not always been worthy of praise. The company has been in the middle of several issues and held accountable for several incidents that have resulted in the loss of life, property, and massive environmental damage. The United States government has always placed a premium on the environment and its safety and Americans in general are conscious about the environment and what needs to be done to protect it.
The purpose of this paper is to discuss the BP Pipeline case (Case 6.25 on pp. 411-422) and to address the following topics:
• Discuss in detail the ethical, negligence, and environmental issues you see in this case.
• BP had rented the rig from Transocean for $500,000 per day. Transocean had been recognized by the U.S. government for its safety record. Can companies distance themselves from liability and responsibility through the use of contractors?
• Discuss how BP got into the position in which it found itself in late 2006 and what might have prevented the spill, the financial fallout, and the loss of reputation. Be sure to factor in the financial implications of any decision made during the period from 2001 to 2006.
• What was the impact of the emphasis in cost cutting on BP’s culture? What was the influence on the company’s performance?
• Evaluate the social responsibility positions of BP in light of the refinery explosion and the pipeline issue. What can companies learn from the BP experience?
British Petroleum has a large operation in the United States and it has made investments to ensure that it develops these operations to maximize its production and increase profits. One such investment was the acquisition of the vast oil field at Prudhoe Bay, .
668 Part 6 CasesBoeings newest commercial jet aircraft, .docxevonnehoggarth79783
668 Part 6" Cases
Boeing's newest commercial jet aircraft, the wide-body
787 jet, is a bold bet on the future of both airline travel
and plane making. Designed to fly long-haul point-to-
point routes, the 250-seat 787 is made largely of com-
posite materials, such as carbon fibers, rather than
traditional materials such as aluminum. Some 80 per-
cent of the 787 by volume is composite materials, mak-
ing the plane 20 percent lighter than a traditional
aircraft of the same size, which translates into a big sav-
ing in jet fuel consumption and costs. The 787 is also
packed full of other design innovations, including larger
windows, greater headroom, and state-of-the-art elec-
tronics on the flight deck and in the passenger
compartment.
To reduce the risks associated with this technological
gamble, Boeing decided to outsource an unprecedented
70 percent of the content of the 787 to other manufac-
turers, most of them based in other nations. In contrast,
50 percent of the Boeing 777 was outsourced, 30 percent
of the 767, and only 5 percent of the 707. The idea was
that in return for a share of the work, partners would
contribute to the estimated $8 billion in development
costs for the 787. In addition, by outsourcing, Boeing
believed it could tap into the expertise of the most effi-
cient producers, wherever in the world they might be
located, thereby driving down the costs of making the
plane. Furthermore, Boeing believed that outsourcing
some work to foreign countries would help it to gamer
sales in those countries. Boeing's role in the entire
process was to design the plane, market and sell it, and
undertake final assembly in its plant in Everett,
Washington. Boeing also believed that by outsourcing
the design of so many components, it could cut down
the time to develop this aircraft to four years from the
six that is normal in the industry.
Some 17 partners in 10 countries were selected to pro-
duce major parts of the aircraft. The rear fuselage was to
be made byVought Aircraft Industries in South Carolina;
Alenia Aeronautical of Italy was to make the middle fu-
selage sections and horizontal tailpieces. Three Japanese
companies, Fuji, Kawasaki, and Mitsubishi, were to pro-
duce the wings. The nose section was to be made by
Toronto-based Onex Corporation. All of these bulky
pieces were to be shipped to Everett for final assembly
aboard a fleet of three modified Boeing 747 freighters
called Dreamlifters.
Until late 2007, the strategy seemed to be working re-
markably well. Boeing had booked orders for over
770 aircraft, worth more than $100 billion, making the
787 the most successful aircraft launch in the history of
commercial aviation, But behind the scenes, cracks were
appearing in Boeing's globally dispersed supply chain. In
mid-2007, Boeing admitted the 787 might be a few
months late due to problems with the supply of special
fasteners for the fuselage. As it turned out, the problems
were much more serious. Byearly 2008 Boeing was adm.
(1) The document discusses the dot-com bubble burst that caused the 2000 stock market crash. (2) Key features of the crisis included dot-com companies overinflating investor perceptions and the failure of the "New Economy" theory. (3) The impact was steep declines in stock prices that resulted in a $5 trillion loss in market capitalization and job losses in the tech sector. (4) Governments imposed new regulations and penalties on companies to increase transparency and prevent future crises.
Boeing is a major aerospace company with commercial, defense, and space divisions. It faces competition from Airbus and other companies in commercial and defense markets. Some key risks Boeing faces include declining commercial aircraft demand following events like 9/11, increasing competition from Airbus, environmental risks, and legal risks from lawsuits.
WorldCom started as a small long distance provider in 1983 and grew through many acquisitions to become the second largest telecom company in the US by 1998. However, the dot-com bust led to revenue shortfalls and high debt. To hide losses and meet Wall Street expectations, WorldCom fraudulently classified $3.8 billion in operating expenses as capital expenditures. An internal audit uncovered the fraud in 2002, and WorldCom filed for bankruptcy, resulting in 57,000 job losses and $180 billion in lost shareholder value. CEO Bernie Ebbers and CFO Scott Sullivan were later convicted for their role in the massive accounting scandal.
The DotCom bubble occurred from 1995 to 2000 as stock markets saw rapid growth in internet-based companies. Many companies saw their stock prices increase simply by adding "e-" or ".com" to their names, despite most having no clear business model. As interest rates increased in 1999-2000, the NASDAQ index peaked and then declined over 10% by March 2000, signaling the bubble had burst. Ultimately the vast majority of DotCom companies failed, causing trillions in stock market losses and widespread job losses in the tech sector. However, some companies like Amazon and Google survived and became industry leaders.
The document discusses the dot-com bubble that occurred from 1993 to 2001 when many internet companies saw their stock prices and valuations increase rapidly before eventually crashing down. It provides background on the development of the internet and web. It describes how speculative investing and overvaluation led to the bubble. When the bubble burst in 2001, many dot-com companies collapsed due to running out of funding. While some internet companies survived, the aftermath saw job losses and some companies engaged in fraudulent accounting practices. The lesson is that popularity does not equal profitability and that sound business fundamentals cannot be ignored to avoid another similar bubble.
WorldCom started as a small long distance provider in 1983 and grew rapidly through acquisitions to become the second largest telecom company by 1998. However, falling revenues due to the dot-com bust and merger failures led to huge pressure to meet Wall Street expectations. WorldCom's leaders, including CEO Ebbers, resorted to fraudulent accounting by misclassifying operating expenses as capital expenditures, hiding $3.8 billion in losses. An internal audit uncovered the fraud in 2002, leading to WorldCom filing for bankruptcy, destroying $180 billion in shareholder value and costing 57,000 employees their jobs. Ebbers and other executives faced legal consequences for their role in the massive accounting scandal.
The document provides an outlook for 2010, summarizing economic activity in 2009 and factors that may influence the future. It discusses the "lost decade" of low stock market returns from 2000-2009 and extreme highs and lows during that period. Notable events from 2009 like bankruptcies and predictions that proved inaccurate are also examined. The presentation aims to educate investors by outlining timeless principles and monitoring economic indicators to help protect entrusted assets in facing future challenges.
The document summarizes the rise and fall of telecommunications company WorldCom. It traces WorldCom's history from its founding in 1983 as a small long distance provider to becoming the second largest telecom company by 1998 after acquiring over 30 other companies. However, to meet Wall Street expectations and cover losses, WorldCom fraudulently reported billions in line costs as capital expenditures between 2000-2002. When the SEC investigated suspicious financial reports, WorldCom admitted to the $3.8 billion accounting fraud, causing its stock price to plummet and filing for Chapter 11 bankruptcy.
Boeing is working around the clock to relocate its world headquarters from Seattle to Chicago by September 4th. The new offices will feature over 225 miles of communication cables and state-of-the-art technology allowing employees to access Boeing facilities worldwide. A local minority-owned firm, Diversified Telecommunications Inc, benefited significantly from the contract to install audio-visual equipment, which provided a financial boost and knowledge transfer opportunity.
Boeing's development of the Sonic Cruiser project in the early 2000s was a failure that cost the company its leadership position in the commercial aircraft market. The Sonic Cruiser, which would have carried 225 passengers at near supersonic speeds, was the wrong aircraft developed at the wrong time as the 9/11 attacks plunged the aviation industry into an economic downturn. Despite meetings with customers over 4-5 years, Boeing struggled to decide whether the Sonic Cruiser or a more efficient aircraft was the right path. Rival Airbus capitalized on Boeing's indecision and ultimately Boeing canceled the Sonic Cruiser project in 2003, acknowledging it needed more research.
American International Group (AIG) is a major American insurance corporation headquartered in New York City. It was founded in 1919 in Shanghai, China and provides insurance, financial services, and other products worldwide. AIG suffered a liquidity crisis during the 2008 financial crisis due to losses on mortgage-backed securities, requiring a $182 billion bailout from the U.S. Federal Reserve to avoid bankruptcy.
Flash Memory, Inc. requires additional working capital to finance forecasted sales growth as it nears its commercial bank's notes payable limit. A financial analysis projects sales, expenses, assets and liabilities for 2010-2012, determining Flash will need $2.6 million in additional financing by 2011 to fund operations and maintain growth. Alternative financing options are explored to provide the necessary working capital without exceeding the notes payable limit.
1. The document lists the top 10 largest bankruptcies in history by total assets. The largest was Lehman Brothers in 2008 with $691 billion in assets.
2. The second largest was Washington Mutual, which declared bankruptcy in 2008 with $327.9 billion in assets and was acquired by JPMorgan Chase.
3. WorldCom filed for bankruptcy in 2002 with $103.9 billion in assets, making it the largest corporate fraud in U.S. history at that time.
*2012 Fundraising overview
*2013 Funds expected and LP commitment plans
*Buyout and venture deal-making review
*Exits: a round-up of trade sales, secondary buyouts and IPOs
*Views from the industry
After reviewing the Coleman (2016) article on executive compensation.docxAMMY30
After reviewing the Coleman (2016) article on executive compensation and reading this week's assigned readings, choose one of two statements below and construct an argument supporting your position:
The market trend towards escalating executive compensation reflects the critical importance of an executive to an organization’s long-term viability.
The growing compensation inequity between executive management and the average employee threatens to destabilize organizational morale and societal justice.
.
After reviewing the chapter on Recognizing Contributions, perform .docxAMMY30
**After reviewing the chapter on Recognizing Contributions, perform a self reflection and evaluate how well you recognize the contributions of your staff. For the assignment, develop an action plan for the next 12 months to improve your recognition efforts.
***Please write about and share what you gained.***
**Reflection paper and action plan (12 months) is the assignment requirement.
Textbook Reference
Kouzes, J. & Posner, B. (2012). The leadership challenge : how to make extraordinary things happen in organizations. San Francisco, CA: Jossey-Bass.
.
After reviewing the chapter on Recognizing Contributions, perform a .docxAMMY30
After reviewing the chapter on Recognizing Contributions, perform a self reflection and evaluate how well you recognize the contributions of your staff. For the assignment, develop an action plan for the next 12 months to improve your recognition efforts.
***Please reply when you are finished with this self-reflection and share what you gained.*** 2 page
Textbook Reference
Kouzes, J. & Posner, B. (2012). The leadership challenge : how to make extraordinary things happen in organizations. San Francisco, CA: Jossey-Bass.
.
After reviewing the background materials and doing your own research.docxAMMY30
After reviewing the background materials and doing your own research, discuss the value in looking at other countries’ policy successes and failures. How can it be beneficial to health policy development in our own country?
Be sure to support your answer with citations from reliable sources.
.
After reviewing the articles and videos, please address the followin.docxAMMY30
After reviewing the articles and videos, please address the following questions:
https://hbr.org/2016/05/different-cultures-see-deadlines-differently
https://hbr.org/video/2363497345001/reaching-across-cultures-without-losing-yourself
https://www.youtube.com/watch?v=4DSV1NUGS3o
1. How do you define cultural communication?
2. Do you agree with the concepts presented by Molinsky as he reviews the importance of global dexterity? Why or why not?
3. In your organization, what ideas regarding cultural communication do you think are important? How will you apply them as a leader?
Please reference a minimum of three external sources to support our points.
.
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Similar to After reading the article Boeing’s Secret” and watching the video .docx
WorldCom filed for bankruptcy in 2002 despite appearing to have growth potential. The telecom boom of the 1990s led to overexpansion as companies built extensive networks. By 2000, there was too much capacity and fierce price competition emerged. WorldCom grew rapidly through 65 acquisitions from 1991-1997, taking on substantial debt. However, integration of acquired companies was poor. Additionally, WorldCom engaged in fraudulent accounting practices like capitalizing normal operating expenses to inflate profits. When the telecom market declined, WorldCom could not sustain its business model and massive debt, leading to its collapse.
Please Do Not Copy and Paste anything from this report, this is ju.docxrandymartin91030
Please Do Not Copy and Paste anything from this report, this is just history of the case
BP: Example of an Unethical Trifecta
Posted on September 17, 2013 by mensah_henry
From the dawn of time, human beings have relied on the environment to provide with the all the things we need to survive and be successful. It has also helped us develop civilizations and founded industries where there was none. Our exploitation of our environment is part of what makes us successful. The more we have been able to conquer and manipulate our environment, the more we have developed culturally, socially, and economically (Kareiva and Marvier, 2012). The three tenets of culture, society, and economy has been our biggest source of influence in dealing with the environment. Ever since the discovery of oil by the ancient civilizations of Babylonia and Greece, great importance has been placed on our ability to utilize it and the products we get from it (Totten, 2007). Today, the oil industry has grown from nothing to become one of the world’s biggest and most important. British Petroleum (BP) is one of the largest oil companies in the world and a major stakeholder in the United States oil industry.
Although BP has been operating in the United States for a long time, its history and operations have not always been worthy of praise. The company has been in the middle of several issues and held accountable for several incidents that have resulted in the loss of life, property, and massive environmental damage. The United States government has always placed a premium on the environment and its safety and Americans in general are conscious about the environment and what needs to be done to protect it.
The purpose of this paper is to discuss the BP Pipeline case (Case 6.25 on pp. 411-422) and to address the following topics:
• Discuss in detail the ethical, negligence, and environmental issues you see in this case.
• BP had rented the rig from Transocean for $500,000 per day. Transocean had been recognized by the U.S. government for its safety record. Can companies distance themselves from liability and responsibility through the use of contractors?
• Discuss how BP got into the position in which it found itself in late 2006 and what might have prevented the spill, the financial fallout, and the loss of reputation. Be sure to factor in the financial implications of any decision made during the period from 2001 to 2006.
• What was the impact of the emphasis in cost cutting on BP’s culture? What was the influence on the company’s performance?
• Evaluate the social responsibility positions of BP in light of the refinery explosion and the pipeline issue. What can companies learn from the BP experience?
British Petroleum has a large operation in the United States and it has made investments to ensure that it develops these operations to maximize its production and increase profits. One such investment was the acquisition of the vast oil field at Prudhoe Bay, .
668 Part 6 CasesBoeings newest commercial jet aircraft, .docxevonnehoggarth79783
668 Part 6" Cases
Boeing's newest commercial jet aircraft, the wide-body
787 jet, is a bold bet on the future of both airline travel
and plane making. Designed to fly long-haul point-to-
point routes, the 250-seat 787 is made largely of com-
posite materials, such as carbon fibers, rather than
traditional materials such as aluminum. Some 80 per-
cent of the 787 by volume is composite materials, mak-
ing the plane 20 percent lighter than a traditional
aircraft of the same size, which translates into a big sav-
ing in jet fuel consumption and costs. The 787 is also
packed full of other design innovations, including larger
windows, greater headroom, and state-of-the-art elec-
tronics on the flight deck and in the passenger
compartment.
To reduce the risks associated with this technological
gamble, Boeing decided to outsource an unprecedented
70 percent of the content of the 787 to other manufac-
turers, most of them based in other nations. In contrast,
50 percent of the Boeing 777 was outsourced, 30 percent
of the 767, and only 5 percent of the 707. The idea was
that in return for a share of the work, partners would
contribute to the estimated $8 billion in development
costs for the 787. In addition, by outsourcing, Boeing
believed it could tap into the expertise of the most effi-
cient producers, wherever in the world they might be
located, thereby driving down the costs of making the
plane. Furthermore, Boeing believed that outsourcing
some work to foreign countries would help it to gamer
sales in those countries. Boeing's role in the entire
process was to design the plane, market and sell it, and
undertake final assembly in its plant in Everett,
Washington. Boeing also believed that by outsourcing
the design of so many components, it could cut down
the time to develop this aircraft to four years from the
six that is normal in the industry.
Some 17 partners in 10 countries were selected to pro-
duce major parts of the aircraft. The rear fuselage was to
be made byVought Aircraft Industries in South Carolina;
Alenia Aeronautical of Italy was to make the middle fu-
selage sections and horizontal tailpieces. Three Japanese
companies, Fuji, Kawasaki, and Mitsubishi, were to pro-
duce the wings. The nose section was to be made by
Toronto-based Onex Corporation. All of these bulky
pieces were to be shipped to Everett for final assembly
aboard a fleet of three modified Boeing 747 freighters
called Dreamlifters.
Until late 2007, the strategy seemed to be working re-
markably well. Boeing had booked orders for over
770 aircraft, worth more than $100 billion, making the
787 the most successful aircraft launch in the history of
commercial aviation, But behind the scenes, cracks were
appearing in Boeing's globally dispersed supply chain. In
mid-2007, Boeing admitted the 787 might be a few
months late due to problems with the supply of special
fasteners for the fuselage. As it turned out, the problems
were much more serious. Byearly 2008 Boeing was adm.
(1) The document discusses the dot-com bubble burst that caused the 2000 stock market crash. (2) Key features of the crisis included dot-com companies overinflating investor perceptions and the failure of the "New Economy" theory. (3) The impact was steep declines in stock prices that resulted in a $5 trillion loss in market capitalization and job losses in the tech sector. (4) Governments imposed new regulations and penalties on companies to increase transparency and prevent future crises.
Boeing is a major aerospace company with commercial, defense, and space divisions. It faces competition from Airbus and other companies in commercial and defense markets. Some key risks Boeing faces include declining commercial aircraft demand following events like 9/11, increasing competition from Airbus, environmental risks, and legal risks from lawsuits.
WorldCom started as a small long distance provider in 1983 and grew through many acquisitions to become the second largest telecom company in the US by 1998. However, the dot-com bust led to revenue shortfalls and high debt. To hide losses and meet Wall Street expectations, WorldCom fraudulently classified $3.8 billion in operating expenses as capital expenditures. An internal audit uncovered the fraud in 2002, and WorldCom filed for bankruptcy, resulting in 57,000 job losses and $180 billion in lost shareholder value. CEO Bernie Ebbers and CFO Scott Sullivan were later convicted for their role in the massive accounting scandal.
The DotCom bubble occurred from 1995 to 2000 as stock markets saw rapid growth in internet-based companies. Many companies saw their stock prices increase simply by adding "e-" or ".com" to their names, despite most having no clear business model. As interest rates increased in 1999-2000, the NASDAQ index peaked and then declined over 10% by March 2000, signaling the bubble had burst. Ultimately the vast majority of DotCom companies failed, causing trillions in stock market losses and widespread job losses in the tech sector. However, some companies like Amazon and Google survived and became industry leaders.
The document discusses the dot-com bubble that occurred from 1993 to 2001 when many internet companies saw their stock prices and valuations increase rapidly before eventually crashing down. It provides background on the development of the internet and web. It describes how speculative investing and overvaluation led to the bubble. When the bubble burst in 2001, many dot-com companies collapsed due to running out of funding. While some internet companies survived, the aftermath saw job losses and some companies engaged in fraudulent accounting practices. The lesson is that popularity does not equal profitability and that sound business fundamentals cannot be ignored to avoid another similar bubble.
WorldCom started as a small long distance provider in 1983 and grew rapidly through acquisitions to become the second largest telecom company by 1998. However, falling revenues due to the dot-com bust and merger failures led to huge pressure to meet Wall Street expectations. WorldCom's leaders, including CEO Ebbers, resorted to fraudulent accounting by misclassifying operating expenses as capital expenditures, hiding $3.8 billion in losses. An internal audit uncovered the fraud in 2002, leading to WorldCom filing for bankruptcy, destroying $180 billion in shareholder value and costing 57,000 employees their jobs. Ebbers and other executives faced legal consequences for their role in the massive accounting scandal.
The document provides an outlook for 2010, summarizing economic activity in 2009 and factors that may influence the future. It discusses the "lost decade" of low stock market returns from 2000-2009 and extreme highs and lows during that period. Notable events from 2009 like bankruptcies and predictions that proved inaccurate are also examined. The presentation aims to educate investors by outlining timeless principles and monitoring economic indicators to help protect entrusted assets in facing future challenges.
The document summarizes the rise and fall of telecommunications company WorldCom. It traces WorldCom's history from its founding in 1983 as a small long distance provider to becoming the second largest telecom company by 1998 after acquiring over 30 other companies. However, to meet Wall Street expectations and cover losses, WorldCom fraudulently reported billions in line costs as capital expenditures between 2000-2002. When the SEC investigated suspicious financial reports, WorldCom admitted to the $3.8 billion accounting fraud, causing its stock price to plummet and filing for Chapter 11 bankruptcy.
Boeing is working around the clock to relocate its world headquarters from Seattle to Chicago by September 4th. The new offices will feature over 225 miles of communication cables and state-of-the-art technology allowing employees to access Boeing facilities worldwide. A local minority-owned firm, Diversified Telecommunications Inc, benefited significantly from the contract to install audio-visual equipment, which provided a financial boost and knowledge transfer opportunity.
Boeing's development of the Sonic Cruiser project in the early 2000s was a failure that cost the company its leadership position in the commercial aircraft market. The Sonic Cruiser, which would have carried 225 passengers at near supersonic speeds, was the wrong aircraft developed at the wrong time as the 9/11 attacks plunged the aviation industry into an economic downturn. Despite meetings with customers over 4-5 years, Boeing struggled to decide whether the Sonic Cruiser or a more efficient aircraft was the right path. Rival Airbus capitalized on Boeing's indecision and ultimately Boeing canceled the Sonic Cruiser project in 2003, acknowledging it needed more research.
American International Group (AIG) is a major American insurance corporation headquartered in New York City. It was founded in 1919 in Shanghai, China and provides insurance, financial services, and other products worldwide. AIG suffered a liquidity crisis during the 2008 financial crisis due to losses on mortgage-backed securities, requiring a $182 billion bailout from the U.S. Federal Reserve to avoid bankruptcy.
Flash Memory, Inc. requires additional working capital to finance forecasted sales growth as it nears its commercial bank's notes payable limit. A financial analysis projects sales, expenses, assets and liabilities for 2010-2012, determining Flash will need $2.6 million in additional financing by 2011 to fund operations and maintain growth. Alternative financing options are explored to provide the necessary working capital without exceeding the notes payable limit.
1. The document lists the top 10 largest bankruptcies in history by total assets. The largest was Lehman Brothers in 2008 with $691 billion in assets.
2. The second largest was Washington Mutual, which declared bankruptcy in 2008 with $327.9 billion in assets and was acquired by JPMorgan Chase.
3. WorldCom filed for bankruptcy in 2002 with $103.9 billion in assets, making it the largest corporate fraud in U.S. history at that time.
*2012 Fundraising overview
*2013 Funds expected and LP commitment plans
*Buyout and venture deal-making review
*Exits: a round-up of trade sales, secondary buyouts and IPOs
*Views from the industry
Similar to After reading the article Boeing’s Secret” and watching the video .docx (17)
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After reviewing the Coleman (2016) article on executive compensation and reading this week's assigned readings, choose one of two statements below and construct an argument supporting your position:
The market trend towards escalating executive compensation reflects the critical importance of an executive to an organization’s long-term viability.
The growing compensation inequity between executive management and the average employee threatens to destabilize organizational morale and societal justice.
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After reviewing the chapter on Recognizing Contributions, perform .docxAMMY30
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***Please write about and share what you gained.***
**Reflection paper and action plan (12 months) is the assignment requirement.
Textbook Reference
Kouzes, J. & Posner, B. (2012). The leadership challenge : how to make extraordinary things happen in organizations. San Francisco, CA: Jossey-Bass.
.
After reviewing the chapter on Recognizing Contributions, perform a .docxAMMY30
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***Please reply when you are finished with this self-reflection and share what you gained.*** 2 page
Textbook Reference
Kouzes, J. & Posner, B. (2012). The leadership challenge : how to make extraordinary things happen in organizations. San Francisco, CA: Jossey-Bass.
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After reviewing the articles and videos, please address the followin.docxAMMY30
After reviewing the articles and videos, please address the following questions:
https://hbr.org/2016/05/different-cultures-see-deadlines-differently
https://hbr.org/video/2363497345001/reaching-across-cultures-without-losing-yourself
https://www.youtube.com/watch?v=4DSV1NUGS3o
1. How do you define cultural communication?
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3. In your organization, what ideas regarding cultural communication do you think are important? How will you apply them as a leader?
Please reference a minimum of three external sources to support our points.
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After reviewing Georgia v. Randolph and Fernandez v. Californi.docxAMMY30
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Georgia v. Randolph
and
Fernandez v. California
, answer the following questions:
What defenses, if any, were asserted in these cases?
How did these cases impact law enforcement and prosecutors?
Do you agree with the U.S. Supreme Court’s decisions?
Were these decisions consistent with each other? How does consistency in legal decisions positively and negatively impact law-enforcement officers and attorneys?
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Discuss the challenges that law enforcement faces when seizing digital evidence and propose at least two solutions.
Discuss the five-paragraph SMEAC that should ideally find a place in any investigation plan. Which one of these do you feel is the most important? Why?
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After reading Library ArticlesDevine, K., Kloppenborg, .docxAMMY30
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Library Articles:
Devine, K., Kloppenborg, T. J., & O’Clock, P. (2010). Project measurement and success.
Journal of Health Care Finance,
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Sandrik, K. M. (2008). Navigating today's opportunities for capital.
Healthcare Financial Management, 62
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Schuhmann, T. M. (2009). Hospital capital spending: Shifting and slowing even before the financial meltdown.
Healthcare Financial Management, 63
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Investment Decisions
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.
After reading Trifles by Susan Glaspell complete the following works.docxAMMY30
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“Trifles” Worksheet
Name: ___________________ Period ____
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A. Outside: What is the weather? ________________
Specifically, where is the murder site/ farmhouse located? ________________
B. Inside the house:
List two things that let the audience “feel” how literally cold it is: ____________________________________________________________________
3. List three significant details that are evidence of a poorly kept kitchen: ___________ ____________________________________________________________________
4. Thumbnail Sketch: Make a comment about each of the characters
A. Attorney Henderson_________________________________________________ B. Sheriff Peters ______________________________________________________ C. Mr. Hale __________________________________________________________ D. Mrs. Peters ________________________________________________________ E. Mrs. Hale _________________________________________________________
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7. Why hadn’t Mrs. Hale gone to see Minnie Wright in over a year? _______________ _____________________________________________________________________
8. Why does Mrs. Peters not like the phrase “married to the law”? _________________ ____________________________________________________________________
9. Why do the women hide the dead bird? ____________________________________
_____________________________________________________________________
10. What other action might they have taken?___________________________________
_____________________________________________________________________
How is each of these important?
A. John Wright’s decision not to pay for a party [shared] telephone line
B. Bird cage with broken door
C. Dead bird with its neck rung
D. Millie sang in the choir thirty years before
E. The quilt pieces
(The Log Cabin quilt pattern has been a favorite because it was a wonderful & frugal pattern for using up fabric scraps. In many of the old quilts the center square was red to symbolize the hearth of the home, its symbolic heart. The overall effect of the log cabin quilt is achieved by the use of light and dark fabrics and how they are arranged.)
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After reading through Chapter 1, the focus was on targeting the five.docxAMMY30
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(ii) What is the institutional power and the personal right you would remove, and explain why;
(iii) What institutional power and personal right would you add to the U.S.
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A personal right is one that protects or empowers the people, such as "the right of the people to keep and bear arms." (Second Amendment)
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3 - the organizational challenges faced
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Cultural Element / AOL culture / Time Warner culture / Culture adopted
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BPSC-105 important questions for june term end exam
After reading the article Boeing’s Secret” and watching the video .docx
1. After reading the article “Boeing’s Secret” and watching the
video “How a Boeing 787 Dreamliner is Built,”
discuss in 400 Words if you believe Boeing is labor intensive,
capital intensive, or both. Has Boeing established the “network
effect” for their product?
Video:
http://www.youtube.com/watch?v=VRfXyccWUP4
Article:
On Dec. 11, 1996, Boeing Chairman Philip M. Condit closed the
deal of his career. After a relentless three-year courtship, he
persuaded the initially reluctant directors of defense giant
McDonnell Douglas Corp. to agree to a merger. The
combination would create the world's largest aerospace
company — the first manufacturer ever with the ability to build
everything that flies, from helicopters and fighter jets to space
stations. "This is, I believe, a historic moment in aviation,"
Condit proclaimed at a Dec. 15 press conference.
But far from the glare of TV cameras, a disaster was quietly
unfolding inside Boeing Co.'s sprawling factories — one that
would ultimately wind up costing billions of dollars, cause
several executives to lose their jobs, and lead to claims of
accounting fraud. Facing an unprecedented surge in orders
because of a booming economy, workers were toiling around the
clock, pushing the assembly line to the breaking point. At the
same time, the company was struggling to overhaul outdated
production methods.
These pressures were building up to what was, in essence, a
2. manufacturing nervous breakdown. In the weeks after the
merger announcement, parts shortages and overtime approached
all-time highs — triggering red warning signals in Boeing's
colorcoded system for monitoring factory health. As costs went
through the roof, the profitability of airliners such as the 777
swooned. A special team formed to study the crisis in May,
1997, issued a report with a blunt conclusion: "Our production
system is broken."
If investors had understood the scope of the problems, the stock
would probably have tumbled and the McDonnell deal — a
stock swap that hinged on Boeing's ability to maintain a lofty
share price — would have been jeopardized. But shareholders
never got the full picture until well after the merger was
completed on Aug. 1, 1997. Top executives "were hoping
against hope that none of the problems would bubble up before
they got the deal done," says a Boeing ex-official.
Their wish came true, and the deal sailed through. Recognizing
that the bad news would have to come out eventually, company
leaders started debating how it should be released. One public-
relations manager lobbied for disclosure on Sept. 6 or Sept. 13
— the dates of the funerals for Princess Diana and Mother
Teresa — when a grieving public would presumably overlook
the story. Those proposals were nixed. On Oct. 8, former
McDonnell CEO Harry C. Stonecipher, by then Boeing's
president and chief operating officer, shot an e-mail to Condit.
"We do know for certain that there is a big surprise coming, and
I think we owe the Street a heads-up. We have an unmitigated
disaster on our hands and need some very candid damage
control," he wrote in an e-mail that was disclosed in a
securities-fraud suit filed against Boeing in Seattle.
Condit, who in his 32 years at Boeing had yet to experience a
failure, responded that the disclosure should be delayed. "My
bias is to soften the third-quarter hit with some warning," he
3. wrote. "Assuming the scale of the problem remains, use the
fourth quarter to prepare the Street to take the real hit then."
On Oct. 22, Condit made the bombshell announcement: The
company's massive production problems would force it to write
off $2.6 billion — by far the biggest charge in Boeing's history.
Overnight, shares fell 8%, to $49.88, wiping out about $4.3
billion in value. As investors digested the scope of the mess, the
company lost years of hard-earned credibility and the stock fell
a further 12%, to 43, by Oct. 27. The stock stayed in a trough
throughout 1998 and won the dubious distinction of being dog
of the Dow that year.
The story of how Boeing kept its 1997 production disaster
secret has never been made public. Although the company
subsequently fixed the assembly-line problems — and it has
recently received praise for its diversification efforts — the tale
provides a sobering view of how easily management can keep
investors in the dark. It also sheds light on the little-known
"program-accounting" method used in aerospace to this day. A
controversial system that many analysts criticize for its lack of
transparency, it continues to give Boeing broad leeway to goose
earnings — and to make it one of the toughest companies in
America to evaluate. In a deal approved by U.S. District Judge
Thomas S. Zilly on Feb. 20, 2002, Boeing settled a private
securities-fraud suit over the 1997 episode for $92.5 million.
The company did not admit guilt. Although some of the
evidence uncovered by the plaintiffs' lawyers was revealed in
court documents, the vast majority was locked under seal at
Boeing's request.
In a three-month investigation, BusinessWeek has reconstructed
this hidden chapter in the company's history — and analyzed its
current implications. New details supplied by several inside
witnesses indicate that Boeing did more than simply fail to tell
investors about its production disaster. It also engaged in a wide
4. variety of aggressive accounting techniques that papered over
the mess. Critics say the company should have taken charges for
the assembly-line disaster in the first half of 1997, even if it
meant jeopardizing the McDonnell merger. They also claim that
Boeing took advantage of the unusual flexibility provided by
program accounting-a system that allows the huge upfront
expense of building a plane to be spread out over several years
— to cover up cost overruns and to book savings from
efficiency initiatives that never panned out. "Boeing managed
its earnings to the point where it got caught," says Debra A.
Smith, a partner at Constraints Management, a Seattle-area
manufacturing consultancy, and a former senior auditor at
Deloitte & Touche who worked on the company's account
during the early 1980s. "Boeing basically decided in the short
run that [managing earnings] was a lesser evil than losing the
merger," adds Smith, a onetime accounting professor at the
University of Puget Sound in Tacoma, Wash.
At a time when investors are asking themselves how far
Corporate America can be trusted, the Boeing saga provides rich
new evidence that companies have much greater leeway to
manipulate their numbers than most people suspect. The
aerospace giant was a widely held blue chip that had a huge
short-term incentive to prop up its stock price. Taking
advantage of an investment community willing to tolerate the
company's opaque reporting system, executives managed to
conceal fundamental operational problems for nearly a year.
Some of these officials, including Condit, are still at Boeing. To
this day, they insist that they had no obligation to disclose cost
overruns when they occurred in the first half of 1997 — which
raises the question of how swiftly they would let investors know
if a similar problem arose today.
As is often the case, none of the outside watchdogs ever barked.
The board never forced Condit to come clean about the
company's production problems. Stock analysts and business
5. journalists underestimated them. And although the company's
auditor, Deloitte & Touche, raised red flags about Boeing's
troubles, it doesn't seem to have put much pressure on its big
client to share this information with investors (page 120). As a
result, Boeing's financial reporting in early 1997 bore little
relationship to its business reality. When the company finally
disclosed its problems, "I was stunned," recalls Richard J.
Glasebrook II, managing director of Oppenheimer Capital,
owner of 5% of McDonnell at the time. "I thought that Boeing
had the building of commercial aircraft down cold."
For its part, Boeing insists it never misled shareholders at all —
and that critics and plaintiffs' lawyers are holding the company
up to unreasonable standards. Noting that the construction of
planes is an incredibly complex and expensive endeavor, it says
that managers told the public about the 1997 production
problems as soon as they were legally required to do so. It also
points out that the Securities & Exchange Commission never
filed charges. Boeing defends program accounting as a
legitimate way to report performance and notes that its
accounting decisions were approved by Deloitte-which was not
named in the fraud suit. All of the key players in the drama,
including Condit, Stonecipher, and former Chief Financial
Officer Boyd E. Givan, declined to comment. "Boeing and its
senior management always tried to do the right thing," the
company wrote in a letter to BusinessWeek. "Boeing and its
executives frequently disclosed Boeing's production
difficulties." Deloitte also insists it acted properly.
So why did Boeing spend $92 million to settle fraud claims?
General Counsel Douglas Bain says the company did not want
to risk litigating complex accounting issues in front of a lay
audience. He adds that because the case would have been tried
in Seattle, which felt stung after Boeing moved its headquarters
to Chicago on Sept. 1, 2001, company lawyers feared a
vindictive jury. Instead, it was willing to accept the settlement
6. — which Bain says is totally covered by the company's
insurance policies.
THE ROOTS OF THE PRODUCTIOH CRISIS
If the Boeing lawsuit had gone to trial, jurors would have heard
a story that begins around 19%, when Boeing was facing a
strategic crisis because of shrinking defense business. Condit
had a choice: either acquire a bigger share of the market or drop
out of it. Since defense provided stable income to offset roller-
coaster commercial plane sales, Condit chose to grow, buying
Rockwell Aerospace & Defense in August, then striking the
McDonnell deal just four months later. The ambitious chairman,
always admired more for his strategic shrewdness than his
operational expertise, was hoping to seal his legacy. But this
bold expansion came at a time when the company faced
mounting internal problems.
As the global economy emerged from recession in the early
1990s, aerospace companies enjoyed skyrocketing orders, which
rose worldwide from 15 aircraft in 1993 to 898 in 1996. But
Boeing's antiquated parts-tracking system couldn't keep up with
the increased production volume. And supply problems
prevented it from getting enough seats and electronic gear on
time.
This problem was compounded in late 1994 when Boeing
realized that rival Airbus Industrie, the European consortium,
was undercutting it on price, thanks to lower manufacturing
costs and government subsidies. By that year, Airbus had
grabbed 30% of the global jet-plane market — up from less than
3% two decades earlier. It was a potentially devastating
development, since lost customers in the airliner industry are
hard to win back after they've spent a fortune training pilots and
mechanics on rivals' equipment.
7. Boeing was forced to knock down costs across the board. It
made early-retirement offers to 9,500 workers in 1995, slashing
its staff of veteran mechanics and engineers. Execs also rolled
out a bug-ridden new computer system for tracking parts, known
by the unwieldy name of Define & Control Airplane
Configuration/Manufacturing Resource Management (DCAC).
As a consultant pointed out in a report to factory execs in the
summer of 1997. the prospect of doubling production rates in
the face of such change was like attempting "a four-and-a-half
somersault off a 50-foot board into a pail of water."
By early 1997, warning signs were everywhere that Boeing's
overheated factories were boiling over. On Dec. 2, 1996,
Deloitte & Touche had alerted the board's audit committee "that
production performance metrics began to trend unfavorably —
overtime, parts shortages, rework, defective parts, and out-of-
sequence work increased." About a dozen alarmed managers at
the company's giant Renten (Wash.) facility met in May for a
"reality check" meeting. They calculated that Boeing's
production system was more than $1 billion over initial cost
projections. One manager taking notes at the get-together
concluded that "we have a real financial crisis on our hands"
with "no relief in sight.
While top execs did acknowledge publicly that the company was
having some production problems in the first half of 1997, they
consistently underplayed the issue. In fact, the company
developed a Production Issues Communication Plan on Mar. 27,
1997, to stave off "focusfed] media attention on the issue of our
ability to meet customer commitments." The document, among
other things, coached executives on how they should respond to
reporters' questions, according to plaintiffs' lawyer Steve W.
Berman, who brought the fraud suit against Boeing. Talking to
reporters after the company's annual meeting in April, 1997,
Condit said that the ramp-up in demand "has resulted in a near-
8. term decline in productivity at company faculties and some
supplier locations." With characteristic confidence, he said that
the first quarter's inefficiencies "would not be repeated during
the remaining quarters of the year" and that the company was
not having "systematic" assembly-line malfunctions.
But already many managers were predicting late deliveries-a
catastrophe that aircraft makers avoid at all costs, since it
triggers enormous late fees and wreaks havoc on customers'
business plans. As Boeing's Gary Scott, vice-president for
737/757 production, wrote in a memo on Mar. 20, 1997: "Late
deliveries due to late [engineering] releases are becoming a
significant problem." As the weeks wore on, the delays grew
worse. On June 27, three days before the end of the second
quarter, about a dozen Boeing commercial airplane executives
met in a windowless meeting room in Renton for their second-
quarter financial plan review. They learned that at least 15
aircraft would probably miss their delivery dates, according to
the plaintiffs' complaint.
INSIDE CONCERN. OUTSIDE ASSURANCES
At this point — about a month before the McDonnell merger
vote — Boeing should have started sharing some of the bad
news with investors, according to Smith and other independent
accounting experts. Under special aerospace industry rules that
are part of generally accepted accounting principles (GAAP),
companies are required to accrue reserves for probable late-
delivery penalties and disclose them in the quarter they become
known. Additionally, "abnormal" costs must be recognized in
the quarter in which they are incurred. Expenses stemming from
the company's production problems in the first half of 1997
"should have been booked in the quarters they were incurred
and reflected in the profit numbers for those quarters," says
Eugene A. Imhoff Jr., an independent expert on program
9. accounting at the University of Michigan.
But Boeing never did so. On July 21, 1997, it reported second-
quarter earnings of $334 million — a number that understated
its production costs, the suit charges, by 3292 million. What's
more, investors still had no idea that the company had run up
$253 million in unexpected costs in the first quarter or that it
would soon would be facing more than $200 million in late-
delivery penalties.
Boeing says it would have been a violation of GAAP to
recognize any increased production charges in the first half of
1997. Of the 15 planes viewed as potential late deliveries on
June 27, it says that "nearly all" snipped on time. Noting that
costs always increase sharply during growth periods, lawyer
Bain says the unplanned escalation in expenses that the
company suffered in early 1997 was consistent with historic
patterns. Therefore, he argues, they were not "abnormal"and did
not meet the test, under GAAP, for an immediate write-off.
Boeing argues that nothing "abnormal" happened until it had to
halt its production lines on Oct. 3. The lawsuit was primarily "a
hindsight dispute about the timing of a write-off," says Ronald
W. Stahlschmidt, a program-accounting expert hired to be a
company witness.
But a Deloitte working paper written in the second half of 1997
offers evidence that some members of the auditing team took
the opposite view: that the cost overruns should have been
charged in the first half of the year. In the memo, Deloitte
called the production disruptions in the first and second
quarters "so abnormal as to require treatment as current-period
charges." The auditor then said that Boeing's decrease in third-
quarter earnings was "retroactively applied" to the first and
second quarters of 1997. Boeing says that "the work paper's
reference to "retroactive' does not suggest that Boeing should
have restated its first- or second-quarter 1997 earnings. It
10. means only that, in taking a charge correctly in the third
quarter, Boeing estimated that charge by reference to year-to-
date data."
BAILING OUT THE 777
The 1997 assembly-line meltdown afflicted every type of plane
Boeing made. But it created a particular problem for the
prestigious 777 line, according to former Boeing employees. To
understand why, it's necessary to look closely at the unusual
accounting system used by the aerospace industry. The
program-accounting method was developed by Boeing and
others in the industry in the 1960s to deal with a central
problem: most of the costs of creating a new plane are incurred
in its early years, while revenues roll in during later years.
To smooth out costs and revenues, aerospace companies are
allowed to average them over the entire duration of an airplane
"program" — usually defined as an initial production run of 400
aircraft. They do this by establishing a projected profit margin
up front — say, 10% for the entire line. This number, which is
continuously updated, is based on Boeing's estimates of the
average costs and revenues over the remainder of the program.
Every quarter, the "profit" the company reports is based on
these projected averages, rather than its actual costs or
revenues. The whole system is built on faith that aerospace
companies can come up with accurate long-term forecasts. To a
degree unmatched in nearly any other industry, aerospace
companies' disclosures are based on their own private estimates.
In this way, companies such as Boeing can absorb the ups and
downs that characterize the industry.
But that comes at a considerable price: little transparency for
investors. "The problem with program accounting is that it is
virtually impossible to audit," says Lynn E. Turner, former
11. chief accountant at the SEC and now director of the Center for
Quality Financial Reporting at Colorado State University. "No
one really knows whether the company will produce as many
planes as [are] needed to recover the costs."
To mitigate this problem, the rules require companies to take an
immediate charge as soon as they have evidence that a line's
long-term profit margin will disappear — or, in industry lingo,
that the program will be in a "forward-loss" position. And that's
just what appears to have been happening to the 777 line in
early 1997. Launched with great fanfare in the early 1990s, it
had a development budget of $5 billion to $7 billion for initial
design, production tooling, and flight-testing. By 1995, it had
quietly overrun this budget by nearly 100%, according to two
former high-ranking Boeing managers.
The prospect of a forward loss in the 777 was galling to Boeing,
since it was the newest model — the plane that boasted the most
advanced technology, that was to drive the company's
performance in the next decade, and that carried Condit's
reputation. Downgrading the 777's forecast would have been not
only an embarrassment but also a threat to the merger. So it was
bad news when, in its 1996 audit, Deloitte said the "low gross
margin" projected for the current block of 777 aircraft risked a
decline in "cost performance that would place the program in a
forward-loss position."
To avoid this humiliation, the company allegedly started to shift
monetary reserves from healthier aircraft programs to keep the
777 on budget, according to the complaint and two former high-
ranking executives. These are funds that would accumulate
when Boeing overestimated the costs for some plane lines.
Officers established "management reserves" to pay for, as
current corporate Controller James M. Bell put it, "unknown
unknowns" — unexpected expenses that historically arise
because of the complexity of airplane construction.
12. While the establishment of these management reserves is
perfectly legal, it is a violation of GAAP to shift money from
one program to another. Nevertheless, a handwritten note from a
Boeing employee dating from May or June, 1997, said the
company had borrowed from other divisions to boost the 777.
"Much of the reserve balance used to cover performance was
generated by other divisions and spent on the 777 division," it
ran. Specifically, the company drew on reserves from the
profitable 767 line after the reserve established for the 777 "was
overrun" in early 1997, says one former Boeing manager.
Boeing vehemently denies it shifted reserves. The handwritten
1997 note "did not mean what the plaintiffs' lawyers suggested
it meant," says Douglas Greene, an outside lawyer at Seattle's
Perkins Coie who represented Boeing in the securities-fraud
litigation. Boeing did not, and does not, have any "off-balance-
sheet," "cookie-jar," or "general contingency" reserves, says
Judith Munlberg, vice-president for communications. "All
reserves at Boeing are related to specific items."
QUESTIONABLE EFFICIENCIES
Another method Boeing allegedly used to stave off a 777 write-
off was exaggerating the effectiveness of some of the cost-
savings initiatives it had launched in the mid1990s. Under the
flexible rules of program accounting, plane makers are
permitted to make projections about efficiency efforts and start
tabulating the benefits immediately — even if, as a practical
matter, the initiative isn't yet working.
But this practice can run afoul of the law, Berman claims, if it
is intended to prevent a particular airplane program from getting
into a forward-loss position, which would require the company
to take a current charge against earnings. And that's just what
13. he says was happening in 1997.
According to the plaintiffs' complaint, Boeing "arbitrarily
manipulate[d] cost-savings figures upwards in order to keep the
777 gross profit estimates from falling into a [forward-] loss
position" during the second quarter of 1997. The complaint
quotes a Deloitte working paper that says Boeing's managers
admitted the second-quarter cost-reduction figures were "a
plug" to keep the 777 profit margins on target A plug is a
commonly used accounting term for a number artificially
generated to produce a desired result.
It is unclear which particular savings initiatives were used to
create the alleged plug. As part of its plan to catch up to Airbus,
Boeing had several efficiency programs under way. But former
employees assert that the estimated savings from the DCAC
parts-tracking initiative, for one, were exaggerated. Launched in
1994, the program cost a total of $1 billion, they say. Boeing
estimated it would pay for itself in two years — and cut the
expense of building a plane by at least 25%.
Problem was, the program cost far more than had been
anticipated. Almost from the start, the DCAC software was
riddled with bugs. One exec involved in DCAC estimates that
overruns reached hundreds of millions of dollars. An internal
audit in the third quarter of 1997 revealed that estimated DCAC
cost savings were being "arbitrarily predetermined" to show
more of a savings benefit than actually existed. When
production managers at Boeing's Wichita assembly plant were
shown the estimated savings they were expected to meet in
March, 1997, "no one would sign off on these numbers" because
the savings benefit appeared unrealistic, according to a report
written by internal auditor Susan Parker. Even without the
signatures, the DCAC savings figures were included in that
year's business plan, the report states. Boeing declined to
discuss in detail the allegations that it used bogus cost savings
14. to prop up the 777. "We are limited in the amount of things we
want to say about it for competitive and proprietary reasons,"
says Muhlberg. She added that "Boeing believes that its
DCAC/MRM … cost-savings estimates were reasonable when
made."
CONTROVERSY OVER PROGRAM ACCOUNTING
Boeing's efforts paid off: The company never declared a
forward loss on the 777 in 1997 — and has not done so at any
time since. Does that mean that the line met the original
profitability targets? Not necessarily. Very quietly, Boeing has
bought itself time to resolve the line's problems by increasing
the number of planes in the 777 program. The initial block of
400 units has been extended twice — first to 500 planes, and
then later to 600.
Under the rules of program accounting, these maneuvers
directly improve the 777's reported profitability by lowering the
percentage of the original development costs that are charged
each quarter. Just extending the block from 500 to 600 aircraft
reduced deferred production costs for the 777 program alone by
$8 million per plane, according to Todd Ernst, a Prudential
Securities Inc. aerospace analyst. He calculated that this saved
Boeing $68 million a quarter and boosted quarterly earnings by
up to 6¢ a share for 2001. "The magnitude of the impact struck
me," he said. "It was a big change in the cost of the airplane."
A neat trick — and one that is perfectly legal under the GAAP
rules governing program accounting. The company didn't have
to announce this important development with a big press
conference. To the contrary, the news was buried in a cryptic
sentence deep in Boeing's 2000 10-K. For its part, Boeing
claims that programs are extended not to defer production costs
but to reflect more sales than originally anticipated. When
15. Boeing has firm sales contracts or high "certainty that the
market is going to absorb more airplanes than we have in the
current [program], we extend it," says Controller Bell.
No doubt other corporations would love to have such financial
flexibility. The wonders of program accounting give Boeing
more ability to paper over any short-term disasters than is
enjoyed in nearly any other industry. As a result of this
situation, investors need to be able to place an unusually high
degree of faith in the company's managers. Boeing says that it
has always earned shareholders' confidence with its rigorous
cost- and sales-estimation process. The business planning
process in 1997, for example, was "methodical and analytic,"
the company wrote to BusinessWeek. "It represented Boeing's
half-century of experience in manufacturing commercial
airplanes. Hundreds of industrial engineers and accountants
worked as separate teams to estimate the thousands of separate
cost items in each program."
That may well be the case. But if there's a moral to this story,
it's that when the stakes are high, the temptations to take
advantage of any flexibility in accounting standards can be
great. "If you can prove that subjective judgments are dead
wrong to the tune that Boeing is willing to cough up $92
million, they must really have been exaggerating their hopes for
the future," according to Imhoff, the University of Michigan
program-accounting expert. The ease with which executives
have the capacity to manipulate program accounting is one
reason why the SEC told the American Institute of Certified
Public Accountants in the early 1980s that it would not permit
the extension of the system to other industries, according to
Turner, the former SEC accounting chief.
After the 1997 meltdown, Condit nearly lost his job and Chief
Financial Officer Givan was replaced in the position by
Deborah C. Hopkins. To regain credibility with the markets, the
16. company took definite steps in an effort to increase its own
financial transparency. Former company officials say that
Hopkins and Stonecipher toyed with the idea of dropping
program accounting altogether. The two Boeing executives
complained that the system confused investors and didn't
provide managers with sufficiently detailed information about
the costs involved in manufacturing an aircraft. "You cannot
reduce the cost of a wing if you don't know where you are
starting," Stonecipher complained in an April, 1999, interview
with CFO magazine.
That idea was abandoned. But in 1999, the company did start
providing investors with supplemental information based on
standard unit accounting. For example, it now supplies a line
item in its reports indicating what the commercial airplane
division's quarterly earnings would be on a traditional unit
basis.
This information, in theory, should make it harder for the
company to mask a production crisis ever again. But analysts
complain that the direct operating income of the commercial
aircraft division is mixed in with earnings from its pension fund
and leasing business. And those items, which are only disclosed
annually, can be significant. In 2001, pension-fund income
accounted for about $785 million, or 18.6% of Boeing's pretax
earnings. "A whole mishmash of other operating items get
thrown into this unit-accounting line item," complains Robert
Friedman, aerospace analyst at Standard & Poor's. "It definitely
clouds the quality of earnings picture."
So while Boeing is not as big a mystery today as it was in 1997,
it is still much harder to evaluate than most companies. Its
accounting methods are none too popular with the professionals
charged with decoding Boeing's books. "You can drive a truck
through what's GAAP in aircraft manufacturing," says Heidi
Wood, an aerospace analyst at Morgan Stanley Dean Witter &
17. Co. "I think everybody has grown weary of program accounting
for a while."
At the moment, though, there are no plans to get rid of the
system. That's not a bad thing for shareholders to keep in mind.
At a time when investors are seeking the maximum in
transparency, Boeing is not even close to that standard.
Boeing still uses controversial program accounting that lets it
offset steep upfront costs with distant payoffs
Boeing insists it never misled shareholders and that it had no
duty to disclose the cost overruns in early 1997
Welcome reform: Since 1999, Boeing provides investors extra
information based on standard unit accounting