Opinion article that author's thesis states stock buybacks and poor leadership led to the breaking of Boeing.

[GON]

Not to long ago Boeing was the envy of the commercial aviation world. Great forward thinking like developing the composite 78x to increase point to point routes, rather than a massive 380 that was designed for hub flights.

Article states Boeing fell and fell hard due to stock buybacks and incompetent leadership. I think many of the author's observations can be applied to many US corporations today, that were at the top of their game just a few decades ago.

(edit - Mod; video link removed)

 

[4WD]

Not to long ago Boeing was the envy of the commercial aviation world. Great forward thinking like developing the composite 78x to increase point to point routes, rather than a massive 380 that was designed for hub flights.

Article states Boeing fell and fell hard due to stock buybacks and incompetent leadership. I think many of the author's observations can be applied to many US corporations today, that were at the top of their game just a few decades ago.

John Oliver Explains How All Of Boeing's Problems Can Be Traced Back To Stock Buybacks And Incompetent Leadership

Once a paragon of quality, Boeing's focus on its stock price has caused hundreds to die.

jalopnik.com

You value his opinion ?

 

[GON]

You value his opinion ?

I think his opinion is worthy of a discussion. Struggling American Airlines is a current example. While having the largest debt per seat of any airline in the world, American went into even more debt buying back it's stock, along with reducing cash reserves to buy back stock, instead of using the cash reserves to reduce debt and associated interest payments.

American airlines currently operates at a loss except for the revenue it's credit card programs generate. While it's peers of Delta and United are generating profits from actual airline operations.

I am quite sure we can list dozens of us publicly traded corporations that have spent their cash, or borrowed money to buy back their stock, instead of using that money for r &d , etc

 

[SC Maintenance]

Really - I am supposed to take this article seriously when it seems all the author can do is publish 4 letter words. I really don't care, but is this supposed to be a scholarly article or reddit? Its really more of a rant. I guess that's all you can expect these days?

It did nothing to tell me how lack of funding from buybacks caused the issues at Boeing, just that they did - in their opinion I guess. I don't know if it did or didn't - but it certainly didn't clear that up either.

 

[GON]

You value his opinion ?

It is also worthy to note Boeing is led by an accountant, Airbus is led by a engineer.

 

[SC Maintenance]

I am quite sure we can list dozens of us publicly traded corporations that have spent their cash, or borrowed money to buy back their stock, instead of using that money for r &d , etc

I am generally not for buybacks, but it seems everyone thinks there evil. There not.

Companies can do 4 things with there profits.
1) They can pay back debt. Not always a great idea, dependent on the yield and current value of that debt.
2) They can pay dividends. Many investors don't want dividends - since its taxed as annual income vs long term gains.
3) They can invest in the company. This is the right thing to do - assuming they have something worth investing in. But if they don't, its just a waste of money then.
4) They can buy back stock.

Not saying there aren't companies that shouldn't be buying back stock but are, but its not evil in all cases. If they have no great use case for the money, better to buy back stock than waste it throwing it at unproductive projects.

 

[dkryan]

There are a number of small, mid, and large cap corporations who have engaged in stock buybacks over the past several years and are doing quite well, both in terms of their financial performance as well as their product quality.

What the idiot in the cited link needs to focus on is the bean counters who have been running (ruining) the Boeing show versus allowing the engineers to design and build quality airplanes.

 

[GON]

I am generally not for buybacks, but it seems everyone thinks there evil. There not.

Companies can do 4 things with there profits.
1) They can pay back debt. Not always a great idea, dependent on the yield and current value of that debt.
2) They can pay dividends. Many investors don't want dividends - since its taxed as annual income vs long term gains.
3) They can invest in the company. This is the right thing to do - assuming they have something worth investing in. But if they don't, its just a waste of money then.
4) They can buy back stock.

Not saying there aren't companies that shouldn't be buying back stock but are, but its not evil in all cases. If they have no great use case for the money, better to buy back stock than waste it throwing it at unproductive projects.

Totally concur that buying back stock for some companies is not evil. Berkshire Hathaway has done it, and I think it likely was a prudent move.

For companies with deep debt borrowed at low interest rates, more likely than not the stock buybay were a short term benefit. What happens to these corporations that borrowed monies at two percent to buy back stock, and that debt now needs to be refinanced at seven percent.

 

[SC Maintenance]

Totally concur that buying back stock for some companies is not evil. Berkshire Hathaway has done it, and I think it likely was a prudent move.

For companies with deep debt borrowed at low interest rates, more likely than not the stock buybay were a short term benefit. What happens to these corporations that borrowed monies at two percent to buy back stock, and that debt now needs to be refinanced at seven percent.

Yes, borrowing money specifically to buy back stock likely is a poor plan. Is that what Boeing did? The article didn't mention it either way?

 

[dishdude]

You value his opinion ?

John Oliver does some great and entertaining reporting. One of 3 shows that keeps me subscribed to Max. Curb Your Enthusiasm is amazing.

 

[Pelican]

I am generally not for buybacks, but it seems everyone thinks there evil. There not.

Companies can do 4 things with there profits.
1) They can pay back debt. Not always a great idea, dependent on the yield and current value of that debt.
2) They can pay dividends. Many investors don't want dividends - since its taxed as annual income vs long term gains.
3) They can invest in the company. This is the right thing to do - assuming they have something worth investing in. But if they don't, its just a waste of money then.
4) They can buy back stock.

Not saying there aren't companies that shouldn't be buying back stock but are, but its not evil in all cases. If they have no great use case for the money, better to buy back stock than waste it throwing it at unproductive projects.

Stock buyback is ultimately the goal of any corporation in order to regain control.
Those that do are mainly Family Owned, this allows the corporation to control direction and longterm investment, the latter not welcome by stockholders in general.

 

[GON]

Stock buyback is ultimately the goal of any corporation in order to regain control.
Those that do are mainly Family Owned, this allows the corporation to control direction and longterm investment, the latter not welcome by stockholders in general.

Like Comcast with 88 billion in debt and buying back 11 billion of stock this year?

Comcast could do zero dollars in buybacks, reduce it's debt to 77 billion, and reduce interest expense on 11 billion dollars.....

 

[cptbarkey]

John Oliver does some great and entertaining reporting. One of 3 shows that keeps me subscribed to Max. Curb Your Enthusiasm is amazing.

Every now and again I torture my 14 year old daughter with a few episodes of Curb Your Enthusiasm. Hilarious show.

John Oliver is also an excellent reporter who brings to light things that folks gloss over.

I remember watching a few documentaries about Boeing, and John O. rehashes most of it and shows what is wrong with corporate america today. Buybacks are as old as railroad companies, while they shouldnt be illegal in themselves, blatantly sacrificing headcount in exchange should be. Also, I dont fully understand the FAA collusion, but it feels like not enough heads have rolled for that one.

 

[goingplacesanddoingstuff]

There’s a great documentary out there on how Boeing and McDonnell Douglas merged that gets into it. The issues run deep.

 

[BMWTurboDzl]

Not to long ago Boeing was the envy of the commercial aviation world. Great forward thinking like developing the composite 78x to increase point to point routes, rather than a massive 380 that was designed for hub flights.

Article states Boeing fell and fell hard due to stock buybacks and incompetent leadership. I think many of the author's observations can be applied to many US corporations today, that were at the top of their game just a few decades ago.

John Oliver Explains How All Of Boeing's Problems Can Be Traced Back To Stock Buybacks And Incompetent Leadership

Once a paragon of quality, Boeing's focus on its stock price has caused hundreds to die.

jalopnik.com

Stock buybacks can indicate that the company doesn't have a need to invest excess capital. Also, with interest rates at historic lows for over a decade many companies took advantage of them to buyback stock.

 

[goingplacesanddoingstuff]

 

[SC Maintenance]

Stock buyback is ultimately the goal of any corporation in order to regain control.
Those that do are mainly Family Owned, this allows the corporation to control direction and longterm investment, the latter not welcome by stockholders in general.

That is not what were talking about here though. There not taking control back of anything, there retiring the buy back making the outstanding shares worth more. If a company has 100 shares outstanding, and I own 1 share, then I own 1/100 of the company. If they buy back 1 share and retire it I now own 1/99th of the company - in theory 1% more valuable.

What your talking about is taking majority control, or even taking something private - like Elon did when he bought Twitter outright and the shares went away.

 

[Astro14]

Stock buybacks can indicate that the company doesn't have a need to invest excess capital. Also, with interest rates at historic lows for over a decade many companies took advantage of them to buyback stock.

Investment of “excess capital” is precisely what Boeing needed to do.

Boeing had a chance, to invest the “excess capital” in the business of designing and building airplanes. The New Midsize Airplane would’ve taken about $10 billion to develop.

Customers were asking for it. Customers wanted it.

Instead, the management at Boeing (not leadership, leadership implies vision, management implies extraction of profit) decided to buyback stock, line their own pockets with bonuses, and “manage” the product line.

They failed, spectacularly, when they decided to build and push the 737 MAX. Look how well that airplane has worked out for them.

Boeing is the poster child for bad decisions, for poor management, for a company that has lost their way.

Boeing New Midsize Airplane - Wikipedia

en.wikipedia.org

 

[Jackson_Slugger]

Not to long ago Boeing was the envy of the commercial aviation world. Great forward thinking like developing the composite 78x to increase point to point routes, rather than a massive 380 that was designed for hub flights.

Article states Boeing fell and fell hard due to stock buybacks and incompetent leadership. I think many of the author's observations can be applied to many US corporations today, that were at the top of their game just a few decades ago.

John Oliver Explains How All Of Boeing's Problems Can Be Traced Back To Stock Buybacks And Incompetent Leadership

Once a paragon of quality, Boeing's focus on its stock price has caused hundreds to die.

jalopnik.com

Part of his argument is that the merger with McDonnell-Douglas ruined Boeings quality control that had been legendary. Boeing did a lot of civil aviation making just good aircraft that were safe and Mc-D was mostly known for military aircraft and cutting corners to be the lowest bidder, and well, the DC-10. A horrible POC up until the 1980's where its safety record improved:

List of accidents and incidents involving the McDonnell Douglas DC-10 - Wikipedia

en.wikipedia.org

 

[SC Maintenance]

Investment of “excess capital” is precisely what Boeing needed to do.

Boeing had a chance, to invest the “excess capital” in the business of designing and building airplanes. The New Midsize Airplane would’ve taken about $10 billion to develop.

Customers were asking for it. Customers wanted it.

Instead, the management at Boeing (not leadership, leadership implies vision, management implies extraction of profit) decided to buyback stock, line their own pockets with bonuses, and “manage” the product line.

They failed, spectacularly, when they decided to build and push the 737 MAX. Look how well that airplane has worked out for them.

Boeing is the poster child for bad decisions, for poor management, for a company that has lost their way.

Boeing New Midsize Airplane - Wikipedia

en.wikipedia.org

Again, I don't know Boeing at all, or the Aerospace business - so I am playing devil's advocate to ask a question.

Who is the competition in this mid-size plane business, and can Boeing compete there?

BMW and Mercedes have both tried to foray into the economy car market. Its much bigger than there traditional market. Both have failed. GM tried it with Saturn, but legacy management and the Unions got but hurt over their success and sabotaged it.

As an investor in a blue chip, I want them to either invest in the business there good in, or give me back the money. Maybe Boeing should give investors back their money, and those investors can fund a startup for a mid-size airplane? Best way to do that would be with stock buy backs. If the investors don't start the new company - then its on them not Boeing.

We bash Elon around here a lot - and in many ways he deserves it - but he took his Paypal and Tesla money and funded SpaceX. He owns it, and runs it how he wants. He did the same with Tesla originally. Maybe your issue isn't with Boeing management, but with the US investor class, who are no longer titans of industry but 3rd generation spoiled rich kids?

Again, I am only looking at this from an investors point of view.