It’s been a bad week for Microsoft. I can’t say I’m not pleased.
On Nov. 5, the Justice Department ruled that Microsoft violated antitrust law by bundling its Internet browser with Windows and pressuring computer makers to buy the combined package. Pundits are calling this an overwhelming defeat for Microsoft, and talking about the beak up of the company along the lines of the break up of AT&T. In reality, the final ruling won’t come until February, and Microsoft has the option of either settling (which would halt the antitrust case in its tracks) or pursuing a long appeals process, which could take at least a year–if not three or four–before any sanctions could be imposed on the company. And the penalties will be small–a few so-called “conduct guarantees” or rules that Microsoft would have to follow in its business dealings.
Conduct guarantees formed the core of Microsoft’s consent decree with the Justice Department in 1995; that consent decree headed off a full-blown antitrust investigation. The core of the decree was Microsoft’s promise to keep its applications software unit completely separate from its operating systems unit in all ways. Anyone who works at Microsoft can tell you that this division was never seriously implemented by the company.
Even now, the likeliest scenario for a “break-up” of Microsoft would follow the same lines as the 1995 consent decree–it would involve a separation of the company into three units: an applications software unit (Word, Excel, Office, etc.), an operating systems unit (Windows), and an Internet browser unit (Internet Explorer). But enforcing and monitoring the separation would be impossible, and both Microsoft and its shareholders know it. Immediately after the ruling was announced, Microsoft’s stock price took a small dip, and then continued to climb.
Nevertheless, it’s fun to watch Microsoft being grilled by the Justice Department, and it’s instructive to read the internal company memos, e-mail, and the testimony of Microsoft’s sorely abused customers and competitors.
Just as entertaining has been the flurry of bad press for Boeing. You have to be reading the Business section of the local papers very closely to find all these tidbits, but it’s well worth it.
While everyone waits for details on what caused the recent crash of the EgyptAir 767, more and more evidence is surfacing about Boeing’s shoddy assembly-line practices.
A $5 billion lawsuit filed by two whistle-blowers paints an interesting picture of the Boeing work ethic. According to the suit, when Boeing decided to speed up its production lines starting in the late 1970s, Boeing employees were forced to work under tight production schedules with little or no training. As a result, throughout the 1980s and early 1990s, workers on the 767 line routinely performed shoddy work and even sabotaged some of the planes. They overtightened bolts, knowingly used flawed materials, and purposefully damaged planes destined for customers in Asia, out of frustration at their supervisors and their work environment. According to the suit, Boeing workers were also pressured to falsify safety inspections. And when inspectors rejected damaged or corroded parts, supervisors ordered them to approve the parts for use anyway. Of particular interest is Boeing’s “Best Fit” policy, which meant employees were to use hammers, pry bars, uncalibrated tools–in short, any means necessary–to make non-standard parts fit.
This could account for why the Army grounded all 743 of its Boeing-built Apache helicopters last week. The reason: a faulty tail rotor assembly will have to be replaced on 400 of the helicopters, which will cost taxpayers about $13.5 million.
This could also account for Boeing’s most current production headache: a near shut-down of the 767 and 747 production lines at the Everett plant. To save time and speed up production, Boeing workers at a Spokane factory took a short-cut that violates FAA safety regulations. They used an unapproved, highly flammable, spray-on glue on the air ducts systems installed in Boeing’s 747, 767, 757-200, and classic 737 planes. To comply with FAA regulations, the ducts on all of these planes will have to be inspected and coated with non-flammable materials, which means taking each plane apart and looking at up to 155 separate ventilation ducts on each plane. Not that they’ll do it–short cuts can occur anywhere.
… Like with the bolts that attach the tail fin of the jet to the fuselage. Last week, Boeing admitted that tail bolts on a number of its 767s were under-torqued (i.e., loose). The problem stems from machinists using two separate machines together to torque the bolts, without having the two machines calibrated together. Only one of the tools had been recalibrated recently (in 1992). Evidently, there’s no way to know how many loose bolts–or tail fins–are rattling around in the friendly skies.
The company is still reporting FOD problems with new Boeing jets. FOD–short for “foreign object debris”–can include hammers, rivet guns, screwdrivers, T-bars, bolts, pry bars, rags, and any other loose material found sealed up and banging around inside the airplane, its engines, or its wings. One Boeing worker was quoted recently in an Everett Herald article: “For almost every plane that goes to the flight line, we get a kitchen-sized garbage bag back full of FOD.”
Then there’s the thrust reverser problem. Thrust reversers deploy when a plane is landing, and they help slow it down on the runway … unless that plane is a Boeing 767–in which case the thrust reversers may deploy while the plane is still in the air. This caused the crash of a Lauda Air 767 eight years ago in Thailand, killing all 223 passengers and crew. The EgyptAir 767 had one of its thrust reversers deactivated just prior to its fatal flight.
Which brings us to the central fuel tank controversy. The 1996 crash of TWA Flight 800 off Long Island, NY, has proved to be a nightmare for Boeing. After years of insisting that a “missile” hit the plane, Boeing was recently forced to release a 16-year-old internal report that detailed problems with the flammability of center fuel tanks on its airplanes–the very problem the National Transportation Safety Board is investigating as the cause of the TWA crash. If the NTSB rules that faulty design or construction of the central fuel tank was the cause of the crash, Boeing stands to lose a lawsuit filed by the family members of those who died in the TWA crash. Of course, if Boeing had released the report 16 years ago or altered the fuel tank design, the TWA 800 crash might never have happened.
So far, speculation about the cause of the EgyptAir crash has centered on two theories: sabotage (involving a sudden decompression of the cabin) or mechanical failure, particularly of the electrical system. Of course, decompression might have happened as a result of “mechanical failure,” too. The whistle-blowers’ lawsuit mentions that 767s were assembled with a floor assembly jig that was obsolete and uncalibrated; allegedly the jig was used to jam fuselage panels into place, often resulting in “improper alignment of major sections of the fuselage.” This conjures up the vision of panels simply twisting off the plane after years of flight stress–without the helping hand of a terrorist’s bomb. Boeing, of course, likes to point out that the 767 line has an excellent safety record; perhaps that’s about to change.
It almost seems cruel to mention that Boeing recently lost two major sales to Airbus, but it’s no mystery why. And for the first time ever, Airbus’ order backlog is larger than Boeing’s.
As much fun as it is to watch Boeing twist in the wind, it’s even more fun to see Nordstrom sweating. Immediately after the recent elections, Steve Eugster, a new city council member in Spokane, WA, requested a copy of a secret lease agreement between Nordstrom and the developers who built the controversial River Park Square mall in downtown Spokane…with HUD money. Folks who remember the parking garage debacle here in Seattle may recall that Nordstrom worked out an even sweeter deal with the city of Spokane–instead of receiving a few stalls in a parking garage, they got the prime location in a federally funded shopping mall. So far, Nordstrom and the mall developers, Citizens Realty and Lincoln Investment, have been able to keep the lease secret under the excuse that it contains “proprietary business information,” but Eugster, who ran on a platform opposing the mall, will now have legal access to the lease documents. Hopefully, he’ll make them public soon.
My holidays haven’t been this fun in a long time. Do I dare hope there’ll be more trouble in the wings for Microsoft, Boeing, & Nordstrom?