‘Not Backing Off’
CEO Jim McNerney raised eyebrows earlier this year when he said the company should adopt a policy of “no more Moonshots.” McNerney sought to clarify those comments for AW&ST, saying that Boeing is in no way pulling back from investments in research and innovation. In an interview at the company’s headquarters in Chicago with Editor-in-Chief Joseph C. Anselmo and Managing Editor-Technology Graham Warwick, he also expressed enthusiasm about a potential successor to the , had kind words for founder Elon Musk, and was coy about his retirement plans.
McNerney: It’s a change in commercialization strategy, not technical strategy. I want to clear up any misperception that we want to be less innovative. We’re going to invest in and stay ahead on those technologies that will differentiate us in the marketplace. The only question is the timing of deployment. There has been a tendency in our industry to hoard technologies and then deploy them all at once in the pursuit of dramatically better performance—but often ignoring the risks. The 787 is a good example of that.
So you weren’t signaling a pullback in Boeing’s investment in technology?
We should work just as hard on technology and invest just as much in R&D and prototyping. But we should spiral programs with more of an eye toward the risk we’re taking and what our customers really need now, versus what they might need later. So it’s a sharper definition of the product, and a shortening of development timelines.
But the 787 wasn’t Boeing saying, ‘We want to build this.’ Customers were saying, ‘We need this amount of improvement over what we have.’
What I would like to have done is pursued 70 percent of the technology that still would have satisfied 95 percent of [customer desires]. It would have gotten to them quicker, and it would have cost us less. I can think of five or six specific examples of things we did that didn’t add much to the performance or the efficiency of the airplane. We’ve just got to be a little more careful.
Does this philosophy stretch across to military products?
Yes. As more technology becomes available—tools that have promise, on paper, of reducing risks associated with development—the opportunity for self-inflicted wounds is greater. The  and the 787 are examples of maybe too big an appetite at the beginning. The development took too long and cost more than it should have. Examples of where we’ve done it right include the F-18, with its two or three iterations, in which we did something doable at the beginning and spiraled in capability for the next 20 years. The 737 followed a similar path.
So are you saying the 787 was a mistake?
That’s not the point I was trying to make—the 787 is a wild success. We built a very compelling airplane, but we could have gotten it into the field a couple of years earlier. It would have cost us less, and our customers would have had 95 percent of the performance sooner. You get excited about these projects, and things creep into the design and you lose discipline sometimes. We just need to be reminded about that.
How long do you think the 737 has left to run?is saying they don’t see a need for a new narrowbody until 2030.
That’s probably about right. The 737 MAX andrepresent a bigger step forward than each of us anticipated when we embarked on development. We seriously considered the NSA [new single aisle]—we had competing teams and were trying to assess it. But back to this Moonshot versus spiral, we thought our customers couldn’t wait for a long development on the NSA. We could get a significant percentage of benefit more quickly to them. So I don’t think 2030 is a bad call. That’s what the customers are telling us—they’re ordering [MAXes and neos] in droves.
So you see ways of spiraling and further improving the 737?
There are some things we can do, yes. I’m not going to announce them here. The MAX would be the base airplane.
When is the market going to want a replacement for the 757?
You’re right to focus on that. I think it’s a matter of up-gauging the narrowbody family. All I can say is we’re keeping a close eye on that and we agree that it is a market that will strengthen over time. We’re trying to figure out exactly what we do about it. We’re looking at a number of options. I don’t want to discuss a timeframe.
Boeing is a competitor in’s Commercial Crew vehicle program. If you don’t get it, do you just give up? It seems Boeing makes progress in space when the government is paying. SpaceX is getting government money too, but they have this ‘We’re going to do it anyway’ mentality. Can you look at being more aggressive?
It’s a good question. What [SpaceX CEO] Elon Musk is doing is great. We’ve been trying to figure out how to recapture the imagination of the American people, us stodgy old competitors. Musk has done it, and I give him full credit for that. There are four competitors for Commercial Crew. We don’t think we’re going to lose, but if we should we’ll take a hard look [at the commercial prospects]. It’s hard to build a business case without a pretty large chunk of business from, but we would evaluate it.
You talk about trying to recapture imagination in space. Doesn’t ‘no more Moonshots’ send the wrong message?
That’s why I tried to differentiate between technical and commercial strategies in my previous answer. We’re investing in IR&D [independent R&D], we’re still trying to make innovative leaps. We are not backing off for a minute. The question is deploying them as they mature, not before, and against clear customer requirements. We’re in a more-for-less world now, and must be smarter [with] aggressive investment in technology and timely spiraling.
If you spiral faster, the innovations are fielded faster.
There’s some tension about the cost of the platform, but you’re right. There’s a case to be made that you can get into the marketplace faster this way. I should use a different terminology than ‘Moonshot.’ It’s the ‘hoard-and-build’ strategy, you know?
Boeing is uniquely positioned as a defense prime because you also have a robust commercial airplanes business. Is it time to leverage that to increase your IR&D investment in defense and build a commanding lead while the market is down?
We want our Defense, Space & Security business to stand on its own. But the financial strength ofallows us to make rational decisions. If defense and space were just on its own, we might be tempted to make irrational decisions because it’s a tough time right now in defense. And the rational thing to do now in defense and space is to take down cost structure in the short- and medium-term, while maintaining or increasing the seed corn investment. We do not want to back off high levels of IR&D spending and we’re not. We think it will make us more competitive.
Boeing is partnering on many defense bids—the U.S. Air Force’s Long-Range Strike bomber with Lockheed Martin, the T-X trainer withand the Army-led Future Vertical Lift with . Does the fact that you haven’t done new programs for a while and want to spread the risk drive this strategy?
I suppose there would be some cases in a very robust defense and space environment—with growth rates that remind you of the 1980s—where you would be tempted to go on your own. But in environments where the timing and numbers associated with that are less sure, you take a harder look at partnering. Partnering [can be tough]. There has to be a true complement of capability and a shared view of how the money gets split. And you have to be convinced you’re going to build something better than you would on your own. If you don’t have those three elements you shouldn’t do it, even in a difficult environment.
What’s the plan beyond the, and F-18? Will you be able to retain the ability to design and build next-generation aircraft as these platforms wind down?
Our strategy is twofold. One is to extend the life of the F-15 and F-18. We have a good shot with the Growler requirement—electronic suppression [attack], even in an F-35 world—and with sales opportunities outside the U.S. to keep those lines going for a number of years. Ultimately there will be a question [about the future] and I think our engineers and production workers are a pretty good match with Uclass [the U.S. Navy’s Unmanned Carrier-Launched Airborne Surveillance and Strike program], Long-Range Strike and even T-X. I am highly confident we’re going to win enough of those to keep it going. That’s the long-range plan.
Some see Boeing’s Partnering for Success effort with its suppliers as a one-way street where you derive the majority of the benefit.
In many cases, they are getting more business from us. But they are going through what we experienced—we’ve had to make our factories dramatically more productive and our management structure much leaner. And so we are asking our supply base to do the same, particularly when we take a lot of risks as the systems integrator. Some of our suppliers have dramatically higher margins than we do. We’re not targeting them, we’re just saying that partnering with us means a competitive supply chain from top to bottom. We don’t think what we’re doing injects significantly more risk into the supply chain. We’re asking people to steadily improve their productivity and efficiency over reasonable timeframes.
How serious was Boeing when you threatened to putproduction outside of Washington state?
Very. We have moved production before. We put out requests for proposals, we risked our reputation. We evaluated about 23 sites, and it was great that it ended up in the Puget Sound area. We were able to restructure our arrangement with some of the best aerospace workers in the world. But would we have moved it if we had not been able to achieve that? Absolutely.
Is Farnborough going to be your last major air show as CEO? Boeing has elevated Dennis Muilenburg to president and it’s pretty clear he’s being groomed to succeed you.
We haven’t made any decision yet. There’s no plan. I’ll be 65 this year but I am going strong. Dennis is being given an opportunity to work in a new job. But, you know, Ray Conner is also a vice chairman of this company. So we’ve got a broad capability around here.