“Trust, but verify,” Ronald Reagan famously said at every meeting with the Soviet Union’s Mikhail Gorbachev. Emirates is tweaking that saying in its relationship with Boeing: “Verify, then trust.” It’s a reminder that companies are built on this most intangible of assets, and that the road to redemption is long when it’s lost.
In an unprecedented move, Emirates president Tim Clark told the Financial Times this week that Boeing was in the “last chance saloon” after the recent Alaska Airlines incident in which a door plug blew off a Boeing plane mid-flight. He said Emirates would send its engineers to observe the production process of the company’s 777 plane, of which the airline has on outstanding order of 95 units.
Clark left no doubt as to the root cause of his action: a lack of trust in Boeing’s management and processes. “This would not have been sanctioned in the old days,” he told the paper. “You know, we trusted these people implicitly to get it done.”
For Boeing’s leaders, Emirates’ decision should be a turning point. It’s bad enough when regulators step in; it’s yet another thing when clients feel the need to inspect a supplier.
If there’s a silver lining to the latest debacle, it’s that a company’s reliability—and not its quarterly financial performance—is becoming the No. 1 concern for stock- and stakeholders alike.
Several Boeing clients, including Emirates and AerCap, a major airplane leasing company, asked that the company’s short-term financial targets “take a back seat” and management concentrate solely on the quality of its products.
That outlook seems to have gained traction with investors as well. They have not returned Boeing’s share price to a recent March 2021 high despite profits in the first three quarters 2023 totaling more than any full-year profit since 2019.
At Boeing, it falls on a Jack Welch-era GE veteran Dave Calhoun to usher in the new era in which product quality trumps short-term profits.
At least under the current circumstances, he is on board. “Now is not the time for [financial performance forecasts],” he said in a letter to employees last week, reported by Barron’s. “We will simply focus on every next airplane while doing everything possible to support our customers…and ensure the highest standard of safety and quality in all that we do.”
More news below.
Peter Vanham
peter.vanham@fortune.com
@petervanham
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This edition of CEO Daily was curated by Nicholas Gordon.
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