The Long-Forgotten Flight That Sent Boeing Off Course

A company once driven by engineers became driven by finance.

Boeing 737 landing
Hermes Images / AGF / Universal Images Group / Getty

The flight that put the Boeing Company on course for disaster lifted off a few hours after sunrise. It was good flying weather—temperatures in the mid-40s with a slight breeze out of the southeast—but oddly, no one knew where the 737 jetliner was headed. The crew had prepared three flight plans: one to Denver. One to Dallas. And one to Chicago.

In the plane’s trailing vortices was greater Seattle, where the company’s famed engineering culture had taken root; where the bulk of its 40,000-plus engineers lived and worked; indeed, where the jet itself had been assembled. But it was May 2001. And Boeing’s leaders, CEO Phil Condit and President Harry Stonecipher, had decided it was time to put some distance between themselves and the people actually making the company’s planes. How much distance? This flight—a PR stunt to end the two-month contest for Boeing’s new headquarters—would reveal the answer. Once the plane was airborne, Boeing announced it would be landing at Chicago’s Midway International Airport.

On the tarmac, Condit stepped out of the jet, made a brief speech, then boarded a helicopter for an aerial tour of Boeing’s new corporate home: the Morton Salt building, a skyscraper sitting just out of the Loop in downtown Chicago. Boeing’s top management plus staff—roughly 500 people in all—would work here. They could see the boats plying the Chicago River and the trains rumbling over it. Condit, an opera lover, would have an easy walk to the Lyric Opera building. But the nearest Boeing commercial-airplane assembly facility would be 1,700 miles away.

The isolation was deliberate. “When the headquarters is located in proximity to a principal business—as ours was in Seattle—the corporate center is inevitably drawn into day-to-day business operations,” Condit explained at the time. And that statement, more than anything, captures a cardinal truth about the aerospace giant. The present 737 Max disaster can be traced back two decades—to the moment Boeing’s leadership decided to divorce itself from the firm’s own culture.

For about 80 years, Boeing basically functioned as an association of engineers. Its executives held patents, designed wings, spoke the language of engineering and safety as a mother tongue. Finance wasn’t a primary language. Even Boeing’s bean counters didn’t act the part. As late as the mid-’90s, the company’s chief financial officer had minimal contact with Wall Street and answered colleagues’ requests for basic financial data with a curt “Tell them not to worry.”

By the time I visited the company—for Fortune, in 2000—that had begun to change. In Condit’s office, overlooking Boeing Field, were 54 white roses to celebrate the day’s closing stock price. The shift had started three years earlier, with Boeing’s “reverse takeover” of McDonnell Douglas—so-called because it was McDonnell executives who perversely ended up in charge of the combined entity, and it was McDonnell’s culture that became ascendant. “McDonnell Douglas bought Boeing with Boeing’s money,” went the joke around Seattle. Condit was still in charge, yes, and told me to ignore the talk that somebody had “captured” him and was holding him “hostage” in his own office. But Stonecipher was cutting a Dick Cheney–like figure, blasting the company’s engineers as “arrogant” and spouting Harry Trumanisms (“I don’t give ’em hell; I just tell the truth and they think it’s hell”) when they shot back that he was the problem.

McDonnell’s stock price had risen fourfold under Stonecipher as he went on a cost-cutting tear, but many analysts feared that this came at the cost of the company’s future competitiveness. “There was a little surprise that a guy running a failing company ended up with so much power,” the former Boeing executive vice president Dick Albrecht told me at the time. Post-merger, Stonecipher brought his chain saw to Seattle. “A passion for affordability” became one of the company’s new, unloved slogans, as did “Less family, more team.” It was enough to drive the white-collar engineering union, which had historically functioned as a professional debating society, into acting more like organized labor. “We weren’t fighting against Boeing,” one union leader told me of the 40-day strike that shut down production in 2000. “We were fighting to save Boeing.”

Engineers were all too happy to share such views with executives, which made for plenty of awkward encounters in the still-smallish city that was Seattle in the ’90s. It was, top brass felt, an undue amount of contact for executives of a modern, diversified corporation.

One of the most successful engineering cultures of all time was quickly giving way to the McDonnell mind-set. Another McDonnell executive had recently been elevated to chief financial officer. (“A further indication of who in the hell was controlling this company,” a union leader told me.) That, in turn, contributed to the company’s extraordinary decision to move its headquarters to Chicago, where it strangely remains—in the historical capital of printing, Pullman cars, and meatpacking—to this day.

If Andrew Carnegie’s advice—“Put all your eggs in one basket, and then watch that basket”—had guided Boeing before, these decisions accomplished roughly the opposite. The company would put its eggs in three baskets: military in St. Louis. Space in Long Beach. Passenger jets in Seattle. And it would watch that basket from Chicago. Never mind that the majority of its revenues and real estate were and are in basket three. Or that Boeing’s managers would now have the added challenge of flying all this blind—or by instrument, as it were—relying on remote readouts of the situation in Chicago instead of eyeballing it directly (as good pilots are incidentally trained to do). The goal was to change Boeing’s culture.

And in that, Condit and Stonecipher clearly succeeded. In the next four years, Boeing’s detail-oriented, conservative culture became embroiled in a series of scandals. Its rocket division was found to be in possession of 25,000 pages of stolen Lockheed Martin documents. Its CFO (ex-McDonnell) was caught violating government procurement laws and went to jail. With ethics now front and center, Condit was forced out and replaced with Stonecipher, who promptly affirmed: “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.” A General Electric alum, he built a virtual replica of GE’s famed Crotonville leadership center for Boeing managers to cycle through. And when Stonecipher had his own career-ending scandal (an affair with an employee), it was another GE alum—James McNerney—who came in from the outside to replace him.

As the aerospace analyst Richard Aboulafia recently told me, “You had this weird combination of a distant building with a few hundred people in it and a non-engineer with no technical skills whatsoever at the helm.” Even that might have worked—had the commercial-jet business stayed in the hands of an experienced engineer steeped in STEM disciplines. Instead McNerney installed an M.B.A. with a varied background in sales, marketing, and supply-chain management. Said Aboulafia, “We were like, ‘What?’’’

The company that once didn’t speak finance was now, at the top, losing its ability to converse in engineering.

It wasn’t just technical knowledge that was lost, Aboulafia said. “It was the ability to comfortably interact with an engineer who in turn feels comfortable telling you their reservations, versus calling a manager [more than] 1,500 miles away who you know has a reputation for wanting to take your pension away. It’s a very different dynamic. As a recipe for disempowering engineers in particular, you couldn’t come up with a better format.”

And in some of the internal exchanges now coming to light, you can see the level of estrangement among engineers, operators, and executives that resulted. A Boeing vice president, Mike Sinnett, told American Airlines pilots that the MCAS software system implicated in the 737 Max crashes didn’t have “a single-point failure,” as reported—asserting that the pilots themselves constituted a second point of backup—showing both a misunderstanding of the term and a sharp break from Boeing’s long-standing practice of having multiple backups for every flight system. Meanwhile, experienced Boeing engineers rolled their eyes as some software-development tasks (not specific to MCAS) were outsourced to recent college grads earning as little as $9 an hour, who were employed by an Indian subcontractor set up across from Seattle’s Boeing Field.

The current Boeing CEO, Dennis Muilenburg, is being pilloried for his handling of the disaster, and accused of harming the company by prioritizing profit. But the criticism misses the point, Aboulafia told me. “The difference between doing MCAS right and MCAS wrong was not an economic thing. It’s a culture thing.”

Some errors you see only with the magnifier of hindsight. Others are visible at the time, in plain sight. “If in fact there’s a reverse takeover, with the McDonnell ethos permeating Boeing, then Boeing is doomed to mediocrity,” the business scholar Jim Collins told me back in 2000. “There’s one thing that made Boeing really great all the way along. They always understood that they were an engineering-driven company, not a financially driven company . If they’re no longer honoring that as their central mission, then over time they’ll just become another company.”

It’s now clear that long before the software lost track of its planes’ true bearings, Boeing lost track of its own.