Boeing’s Big Bad Month
It isn’t getting any better for America’s planemaker. Last week, 30,000 machinists walked off the job, angling for something better than a 25% wage hike. On Thursday Boeing confirmed its 737 production line was shut down, and the company has been losing money on several of its fixed-cost development contracts with the Defense Department. Oh, and did we mention that those two astronauts Suni Williams and Butch Wilmore are still stuck on the International Space Station? It’s just like Lost, but, you know, in space. If only there were a TV show that sufficiently conveyed that idea…
New CEO Kelly Ortberg has a lot of work to do: He needs to end the strike and, analysts say, rebuild Boeing’s culture of innovation. That means moving headquarters back to the factory floor in Seattle from Washington, and working with airlines, regulators and staff to rebuild America’s faith in Boeing after two fatal crashes of the 737 Max (in 2018 and 2019) and a January 2024 incident where an unsecured fuselage panel blew off in mid-flight.
Boeing’s problems are really an issue of corporate culture, says Usha Haley, a business professor at Wichita State University. (Boeing’s fuselage builder, Spirit Aerospace, is also in Wichita.) A series of CEOs at Boeing in the past couple decades shifted the emphasis from building great planes to posting quarterly profits.
“The cultural issue was a shift from quality and innovation to cost cutting, and it began about 20 years ago with spinning off Spirit,” said Haley. “When you outsource manufacturing, you lose control over quality.”
Quality was Boeing’s hallmark for over a century, and until the beginning of the 21st century, it built all its airplanes in Seattle and manufactured many of its own parts. Rebuilding the culture of quality, and the safety assurance that comes with it, will be the key to increasing production. (The FAA now limits Boeing to 34 planes a month, when it could turn out 84.) “It’s very difficult to change your culture: You can hire people. You can fix problems in the supply chain, but to change a culture, the problem is the soft stuff is the hard stuff.”
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The Usual Suspects
- Elon’s World: X issued its first transparency report since Musk’s 2022 takeover, noting that in the first half of 2024, it received nearly 224 million reports, including 67 million reports of “hateful conduct,” removed 10.7 million posts and suspended 5.3 million accounts. In all, just 0.123% of all posts were found to violate X’s posted rules. • Is Elon a national security threat? That’s what former U.S. labor secretary Robert Reich argued in The Guardian this week: Musk has access to many national security secrets, controls Starlink, and uses illegal drugs, including marijuana and ketamine. • SpaceX will send a handful of unmanned ships to Mars in two years, the next time the two planets are aligned, in what Musk called the “Earth–Mars transfer window.” If those go well, the first manned flights would be in four years. Ultimately, it’s all about the benjamins: “Making life multiplanetary is fundamentally a cost per ton to Mars problem,” Musk tweeted. • Musk and Bernie Sanders agree on one thing: Semaglutides are too expensive, and the government needs to bring the price down. • A photo posted by Elon’s mom shows her boy and Italian prime minister Giorgia Meloni gazing into each other’s eyes at a dinner in New York. Introducing her at the event, Musk said Meloni “is even more beautiful on the inside than she is on the outside,” while she called him “a precious genius.” Both are effectively single, and as the New York Post reports, “They have discussed their shared interest in the West’s declining birth rates and expressed their optimism for the future of artificial intelligence.” There’s been no comment from either camp. • There’s no ambiguity about Mark Cuban’s relationship with Musk: “I just like to f**k with him,” Cuban said on the podcast This Past Weekend. He said it’s remarkably easy to wind up Musk, adding that the billionaires’ feud “almost seems romantic a little bit.” • Adult party game Cards Against Humanity bought a small chunk of land on the U.S.-Mexico border to mess with Donald Trump’s border wall. Now it’s suing SpaceX for allegedly trespassing on that lot. • Thousands of former Twitter employees could gain significant severance payments, after one of their crowd won an arbitration victory with Musk.
- Damn, We’re Good: The pandemic recovery was even faster than early data showed, according to new information from the Commerce Department. Standard updates to GDP data showed that, adjusted for inflation, the economy grew faster in 2021, 2022 and early 2023 than initially believed.
- Sky Wars: The Airline Fights Back: Embattled number-four carrier Southwest says it will start selling assigned seats next year, but continue to allow two free bags per passenger, as it fights back against activist investor Elliott Investment Management. Southwest’s own reservation system let it win passengers when rivals were hobbled by the CrowdStrike computer outage in July. Elliott owns 10% of Southwest and says it wants to change the board, oust the CEO, and make the airline more profitable.
- Fed Up: The Fed’s rate cut last week boosted small business investment, The Wall Street Journal reports. A fourth of small-business owners surveyed earlier this month said a half-percentage-point reduction in rates would be enough to boost their prospects, the Journal reported, citing a survey by Vistage Worldwide in early September. The rest said they still need more rate cuts before they feel comfortable investing again (or feel a significant reprieve from high interest payments).
The Trouble With OpenAI
Sam Altman seems to have a problem keeping people from getting mad at him. He was famously fired last November by the board of OpenAI over issues including allegedly abusive behavior. He was rehired a week later. Now he’s facing a wave of departures at OpenAI as he simultaneously plans to turn the nonprofit foundation into a for-profit company in which he’d own a significant 7% stake. First, Mina Murati, his chief technical officer, announced she’s leaving after six years. No reason was given, but Altman said in a blog post that he understood her reasons for packing it in. Within hours, the chief research officer, Bob McGrew, and vice president of research Barret Zoph said they’re leaving, too.
Then the New York Times reported on Altman’s hush-hush plan for a series of global computing hubs to build ever more powerful AI. According to the Times, which cited nine people close to the program, Altman got investors from the United Arab Emirates, chipmakers in Asia and U.S. regulators talking together to build his network.
The transformation to a for-profit company comes as Altman says he’s talking to investors who could value the company at $150 billion. Names floating around include Microsoft, Nvidia, Apple and Tiger Global.
It’s hard to see how OpenAI can make that transformation. U.S. tax laws would put a heavy burden on the transformation, and might not permit the full transfer of its IP to a private firm. Then there’s Altman’s nemesis, Elon Musk, who is still smarting over his own investment into OpenAI.
“You can’t just convert a non-profit into a for-profit. That is illegal,” Musk posted on X. “Sam Altman is Little Finger,” he added.
The Short Stack
- Walmart’s Children: Walmart’s rising share price, up 50% this year, has made Sam Walton’s three kids, Alice, Jim and Rob centi-billionaires.
- Googled! AI engineer Noam Shazeer quit Google when the search company refused to introduce a chatbot he’d developed. Now Google wants Shazeer and his AI smarts back in-house as it battles Apple, Microsoft and OpenAi for the artificial intelligence market. So it agreed to pay his Character.ai company $2.7 billion to license the chatbot technology. With one condition: Shazeer come back to work for Google.
- Port Ills: Dockworkers on the East and Gulf coasts are threatening a walkout October 1, forcing businesses to rush imports into the country before the ports close. Other ships are being diverted through the Panama Canal or around the tip of South America to West Coast ports, where longshoremen have already agreed to a new labor pact. JP Morgan says a strike could cost the economy $5 billion a day, or 6% of GDP, The New York Times reported.
- Visa Charged: The Justice Department took a swipe at Visa this week, accusing it of stifling competition in the credit card market. For more than a decade, Visa allegedly forced merchants and banks to put the bulk of their payments through the card company’s payment network. It allegedly used its dominant market position to threaten higher fees for merchants who use other payment networks—like MasterCard’s—to process debit transactions. No word on whether the government will take on those 30% interest rates for late payment. “Visa’s unlawful conduct affects not just the price of one thing, but the price of nearly everything,” said attorney general Merrick Garland.
Regulating Elon
It’s been a bad week for Elon Musk and the various regulators who scrutinize his businesses around the world. First, Brazil got Elon to cry uncle, and now the month-long showdown with Brazil’s highest court appears to be ending with Musk agreeing to appoint a new country representative, a key step to restoring X’s access in Brazil. But it also leaves the door open to sanctions for not moderating extremist local content on the site. To get back online, X will have to pay a $1 million fine, and provide proof all the inflammatory accounts identified by the court have been shut. No word on whether Musk has to take down the Alexandre Files account, devoted to shaming his Brazilian nemesis, Supreme Court justice Alexandre de Moraes, whom Musk has called Brazil’s Voldemort. Then, across the Atlantic in Europe, regulators are mulling a probe into X breaking the Digital Services Act, a new set of content moderation rules. The European Commission accused X in July of misleading users with its blue checkmarks for certified accounts, insufficient advertising transparency and failing to give researchers access to the platform’s data. Fines could reach into the billions of dollars, and as its owner, Musk could be held personally liable. Back across the ocean, Musk is in hot water with two sets of U.S. regulators: The Federal Aviation Administration has been delaying the approval of Musk’s next Starliner launch, part of his ambitious—and likely unfeasible—program of getting humans to Mars this decade. Musk is now calling for FAA chief Michael Whitaker to resign. Maybe that’s because unless Musk is on a rocketship to Mars, he will have to face an interrogation by the Securities and Exchange Commission over his 2022 purchase of Twitter for $44 billion. A federal judge ordered him to cooperate with regulators looking at whether Musk made misleading statements about his purchases of Twitter stock, but when they showed up in California to meet him on September 10, Musk ghosted them.
Peter S. Green is a veteran reporter and editor who has spent more than two decades covering business and finance from Eastern Europe to New York City, and has worked for Bloomberg News, The New York Post, The New York Times and The Messenger. He lives in New York City and is always looking for the next big story.
