Boeing, Cruise Debacles Further Erode Supplier and Passenger Faith

There are many reasons small businesses top polls of which organizations U.S. consumers trust the most. Right now, a big one should be the favorable contrast to stumbling stalwarts of American industry, where scandals, investigations, and allegations that product safety and oversight have been ignored or pushed aside to maximize shareholder profits abound. New reports reinforce those negative perceptions as customers and suppliers of those large firms reassess their commercial and consumer relationships with the main offenders.

Aviation giant Boeing has been a consistent source of negative news since a side panel on one of its 737 Max 9 planes blew off an Alaska Airlines flight. But yesterday, it briefly ceded the spotlight to General Motors’ self-driving car unit, Cruise, which roared into the corporate hall of shame last October when one of its vehicles collided with a pedestrian in San Francisco and dragged her 20 feet. That was bad PR, but a new report on how company leaders sought to mislead regulators about the accident and possibly obscure a damning video of the rogue robotaxi may be worse.

The outside investigation conducted by law firm Quinn Emanuel Urquhart & Sullivan cleared Cruise of suspicions it tried to flat-out cover up the accident. Yet it faulted the GM subsidiary’s leadership for failing to provide authorities with full information about the accident, even as fleets of Cruise cars continued navigating public streets. Cruise in November purged its top leadership ranks and pulled its fleets of self-driving cars from service–which won’t do much for prospective riders’ confidence.

“The reasons for Cruise’s failings in this instance are numerous: poor leadership, mistakes in judgment, lack of coordination, an ‘us versus them’ mentality with regulators, and a fundamental misapprehension of Cruise’s obligations of accountability and transparency to the government and the public,” the investigation said. “As one Cruise employee stated in a text message to another employee about this matter, our ‘leaders have failed us.'”

Those employees may well no longer be with the firm, since Cruise laid off nearly 30 percent of its staff after its cars were pulled from roads. In response to the scolding report, the company–which GM bought in 2016 for $1 billion–evoked the kind of rote remorse and we’ll-do-better-next-time humility that have become standard big company laments after their bad behavior has been called out.

“We know that in order to successfully move forward, Cruise must do so in full partnership with regulators and the communities it serves,” said the company, which remains under investigation by the U.S. Department of Justice and the Securities and Exchange Commission, among others. “We remain committed to Cruise’s vision and know this transformative technology will ultimately save lives.” 

The day before Cruise got its dressing down, Boeing received more face-reddening news of its own arising from the January 5 incident, which led to 737 Max 9 planes across the U.S. being grounded for inspections. 

On Wednesday, the Federal Aviation Agency gave the all-clear for airlines to resume operation of those jets that have been inspected. Yet it also made clear its trust in Boeing had been damaged. The agency found that the company’s prioritizing its financial objectives meant it scrimped on safety verification procedures during aircraft production.

Indeed, the FAA announcement included its decision to limit manufacturing of new 737 Max 9s to the same rate as in 2023, until it was sure sufficient safety verification measures were in place and being respected. 

“We will not agree to any request from Boeing for an expansion in production or approve additional production lines for the 737 MAX until we are satisfied that the quality control issues uncovered during this process are resolved,” FAA Administrator Mike Whitaker said. “The quality assurance issues we have seen are unacceptable.”

That will thwart Boeing’s plans to increase 737 Max 9 production rates from 400 aircraft in 2023 to 500 this year to meet rising demand. The government production curb further aggravated already concerned airline leaders worried about safety issues in their Boeing 737 MAX fleets. On Thursday, Alaska Air Group CEO Ben Minicucci complained about the $150 million in lost revenue from the FAA grounding order and demanded Boeing pay him back-and get its wider act together.

“It’s not acceptable what happened. Minicucci told the Seattle Times. “We’re gonna hold them accountable. And we’re going to raise the bar on quality on Boeing. We’re gonna hold Boeing’s feet to the fire to make sure that we get good airplanes out of that factory.”

But Boeing will be making fewer of them thanks to the FAA’s production limit, and that’s starting to make the plane maker’s partners wonder about their reliance on the beleaguered manufacturer. Those include small companies like Hobart Machined Products, one of what a Reuters story today called “many suppliers that dot Boeing’s home turf around Puget Sound in Washington state.”

Owners Rosemary and Larry Brester run the business in a building behind their home, and may freeze hiring plans amid their main client’s crisis. Hobart had intended to double its staff of four to keep pace with the expected rise in 737 production, for which it delivers components to larger Boeing suppliers. Following the panel blowout and FAA manufacturing limit, however, that work is more up in the air than ever.

“It’s very concerning,” Rosemary Brester told Reuters. “We brought on equipment to support that growth strategy and delivery schedules. There are a number of other companies in our region and probably globally that did exactly the same thing. Now we’re all waiting to find out when we’re going to be able to utilize all of that space and capacity.”

As Boeing continues to run into reputational headwinds, some small businesses that were positioned to become its suppliers are now reconsidering, said Reuters.

“We need to make sure we have a strong foundation underneath the business to grow,” said Aaron Theisen, president of family-owned TNT Aerospace, of his plans of hitching the company’s fate to the 737 program.