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757 / Making the Decision
June 20, 1983
AN AIRLINER hurtling gown a runway reaches "decision speed" the point at which it's too late to abort the takeoff.
Industrial projects often have decision speeds, too. As a huge venture accelerates, as millions of dollars are invested and manpower and machinery are committed, there comes a point when it would be disastrous to try to turn back.
Boeing's multi-billion-dollar 757 project was moving slowly on its runway when Eastern Airlines and British Airways announced in August 1978 that they would be launch customers for the new single-aisle jetliner. But the runway was long, and enormous managerial, engineering and manufacturing challenges lay ahead before it could fly:
Timetables had to be created, thousands of employees hired, dozens of subcontractors selected and hundreds of millions of dollars of new tooling designed and built.
The airplane's 95,000 part types had to be designed and either manufactured or acquired from what ultimately would be 1,300 outside suppliers and 37 major subcontractors in the U.S. and seven foreign countries. Intricately shaped pieces produced by different manufacturers,, possibly thousands of miles apart, sometimes had to fit within a tolerance of less than two one-thousandths of an inch.
Working from blueprints and other documents, Boeing manufacturing engineers had to create hundreds of thousands of pages of directions, literally instruction books for the assembly of a new airliner.
Additional airplanes had to be sold beyond the combined order of 40 placed by British Airways and Eastern Airlines. Unless a sufficient number of airplanes is sold in the first few years of a program, interest costs and other expenses make it almost impossible for the program ever to make money no matter how many planes are sold in the long run.
Beyond these and other known challenges, for which effort and expense could reasonably be planned, there were unknown variables of known types. These "known unknowns" included such questions as: How much would the design evolve during the course of the project? What would these changes cost?
Finally, there were what Boeing president Malcolm Stamper calls the "unk-unks." These "unknown unknowns" are the booby traps of any new airplane project. They can be terribly expensive, and an airplane manufacturer must be financially prepared for them.
In the case of the 757, the Rolls Royce engines provided a modest example of an unk-unk. The 757 was on the verge of certification when icing conditions unexpectedly caused engine damage. Rolls Royce and Boeing put people on round-the-clock schedules to find a solution quickly. The solution was found, but the expense was great and the delay significant.
Adding to the uncertainty and challenge in the early days of the 757 project was the presence of the 767 program, which had a few months' head start and commanded first call on Boeing's resources.
"There were a lot of rumors that Boeing was never going to build this airplane," said Benjamin Gay, who oversaw construction of the 757 for Eastern Airlines. "we had a contract. I saw metal being cut. But you still heard rumors that Boeing was not going to build the airplane."
FOR A LONG TIME, the 757 didn't have any orders and by some measures, it still doesn't. The modest number of orders fed rumors of cancellation, as did nagging concerns that Boeing had blundered into making the airplane too large at 178 seats, too close in size to the 210- seat 767.
"Some people felt the 757 wasn't the right size for the market, this sort of thing. That the 150-passenger plane was the one," Gay said.
John Lampl, and American who worked in British Airway's London public-relations office in 1979, recalls "there was all this talk because the 767 was also being built. Could Boeing really build and introduce two airplanes at the same time? People were really wondering.
It seemed to be that Boeing was putting more and more emphasis on the 767. And the 757 was sort of getting shoved aside."
Adding to the anxiety, especially later in the program, was the way the airplane kept changing. Never had a Boeing aircraft gone through so many metamorphoses.
"At one point we were concerned that they were trying to do a little too much, biting off a lot late in the program, or later in the program," Gay said. " I think we were kind of amazed at how many changes were going into this thing during 1980 and 1981."
The 757 grew and shrunk and grew again before the airlines said they would buy it. Then, before the contracts were signed, the tail of the airplane was changed radically. Soon after the contracts were signed, Boeing changed the airplane's nose and began altering its electronics in a way which affected the fundamental character of the aircraft.
The transformation effectively linked the 757 technologically with the new 767 rather than with the tried-and-true 727, the Boeing airplane the 757 was intended to replace. The changes were improvements, but they raised eyebrows.
"There was just this talk," Lampl said, "the fact that this late in what was seemingly the production stage there was the redesigning of a major portion of the airplane. If they're doing this so late in the game, is this airplane really going to come off the assembly line in 1983 or whatever?"
Eastern Airlines president Frank Borman said Boeing was willing to make all the improvements in the 757's design without increasing the cost of the contract. Today's 757 is "enormously" better than the one Eastern ordered, he said.
Boeing had a short timetable for making the 757 project fly, but "fortunately we all pulled together and we were able to make those schedules," said bill Robison, director of manufacturing for the 757 than any other airplane the Boeing Co. has ever tried to make."
Boeing imported a lot of engineers and paid a lot of overtime to get the 757 into commercial service with Eastern Airlines by the end of 1982. A typical Boeing new-airplane schedule, which isn't generous in timing, would have called for deliveries in late summer of 1983.
HOW DID BOEING know back in 1978, that it could get the 757 designed, built, and certified by December 1982?
"I'll give it to you the other way around," Robison said. "How did we know we couldn't?"
Was it really that much of a challenge? Was the timing really that close?
"Yeah, it was that close," Robison said.
If the schedule had called for completions two months earlier, in October instead of December, could Boeing have done it?
"No, we couldn't have done it. It would have been impossible."
E.H. "Tex" Boullioun disagrees.
Boullioun, as president of Boeing's commercial-airplane division, negotiated the 757 contracts with Eastern Airlines and British Airways. He also was the one who decided the airplane could be produced and certified for commercial flight by December 1982.
Boullioun chuckled over Robison's statement that the airplane couldn't have been produced two months earlier. "I know they won't agree, but I think they could have (done it)," he said. "I've seen those guys do things they didn't have any idea they could do."
Boullioun said he even would have committed the company to produce the airplane by September or October of 1982 if that's what the customers had wanted. Boeing's engineering and manufacturing arms would have found a way to do it, he said.
"They always like that little extra in there," Boullioun said. "It's like the grasshopper in the rut. He's hopping along in the rut, but he gets the hell out of there when a wheel comes by."
Boullioun said those charged with producing the airplane "squawked" when he told them he wanted the plane by December 1982 rather than the summer of 1983. "But then they had to come back and show why they couldn't do it," he said. "They couldn't show that positively."
Robison remembers telling Boullioun back in August of 1978 that more time was necessary. "He said, 'Oh, Robbie, you're better than that. You don't know how good you are. You just go put that (schedule) back to December because that's what I'm going to sell airplanes at'."
So the airplane was scheduled for unveiling (called "rollout") in January 1982, with first flight a month later and certification by the Federal Aviation Administration in December 1982.
The schedule was timed about six months behind the other new Boeing jet, the 767, which was to be certified in July of 1982.
The 767 had received formal "go-ahead" by the Boeing board of directors in July 1978, but the company didn't formally commit to the program until the following March.
Boeing executives say the delay did not indicate a lack of resolve about the program. They explained that the size of the 757 had been increased in August 1978 to suit Frank Borman, president of Eastern Airlines. Boeing needed time to refine the general design and clarify particulars before contracts were signed.
Still, a high Boeing official said "there was much soul-searching as the management struggled with the go-ahead decisions on these airplanes...There was concern inside and outside Boeing that the company had bitten off more than it could chew."
Boeing kept careful tabs on its financial exposure in the 757 project. Every month, company management received a report on what it had invested in the 757 project and how much it could lose if the project were aborted.
THE STAKES for Boeing went up after the contracts were signed, but the company's point of no return its "decision speed" may not have been reached until Oct. 11, 1979.
That was the day Boeing signed more than $1 billion in contracts for the 757's fuselage sections with four major subcontractors a record for the civil aviation, and an expensive commitment to the future of the 757 program.
Even after the major subcontracts were let, Boeing kept track of what it would cost to cancel the program at any time. Every subcontractor provided Boeing with a frequently updated "termination dollar curve," said Jack Edwards, director of material on the 757 program.
"If we have to cancel, we know right at the moment the maximum amount that we would have to pay," he said.
Top executives of companies that worked closely with Boeing Eastern Airlines, British Airways and Rolls Royce say they had no doubts the 757 program would go ahead.
"I don't think there ever was a point where it was remotely close to being canceled," said John Hodson, a vice president of Rolls Royce, which made the engines for the Eastern Airlines and British Airways 757s. "I have had my finger on Boeing's pulse pretty closely for the last 3 ‡ years, and it never even missed a beat."
One Boeing engineer says the company could not afford not to go ahead with the 757. The plane was needed to reduce the possibility that airlines might re-engine their huge 727 fleets instead of buying new aircraft.
Also, there was the threat of McDonnell Douglas.
In 1978, McDonnell Douglas competed for the British Airways order that Boeing ultimately won with the 757. McDonnell's 180-seat design was called the Advanced Transport Medium Range (ATMR). Later, as voices in the industry began to wonder aloud whether a 150-sat airplane might sell better than the 757's 178-seat design, McDonnell transformed the ATMR into a 150-seater.
But it never sold or launched the airplane and still hasn't Elaine Bendel, a McDonnell spokeswoman, said the 150-seater is called the D3300 now and may yet be launched.
Paul Johnstone, until recently Eastern's senior vice president for operations, thinks McDonnell was one of three main sources of rumors that the 757 program might be killed.
McDonnell, he says, "was trying to push a 150-seater, the ATMR or whatever it was they were calling it,"
Another source "was probably from Airbus Industrie, who wanted Boeing the hell out of the market. And the third source, amazingly enough, may well have been from some of the 767 people over there (at Boeing) who all of a sudden saw an airplane (the 757) that was better than theirs," he said.
"The 767 has become, I think, the stepchild and stepchildren don't like it. They had the 757 guys in that role, second-class citizens, I think that helped the 757 immeasurably, because I think all the guys got their dander up and said, 'By God, we're not going to be second-class citizens. We'll kick their butts'."
WAS THERE SUCH competition within Boeing itself?
Boeing 757 engineers praise the767 and 767 engineers praise the 757. But, at a part in January celebrating the certification of the 757, a huge cheer went up when a snide comment about the 767 was made over the public address system.
It's the kind of thing Boeing tries to deny, but there is a friendly rivalry between the two programs.
"The 767 got the best of everything," said a rank-and-file engineer on the 757 program, emphasizing the final word of the sentence. "They go the money. They got the appropriations. They go the management. Corporate gave them whatever they wanted. And we got what was left over."
The 757 was to be a derivative of the 727, making it a comparatively low-cost program. The 767, which got an earlier start, was to be the all-new showpiece. It was to be, in the words of the 757 engineer, "Boeing's baby."
It seemed to some of those working on the 757 that their achievements were shrouded in obscurity and they were relegated to "me-too" status: Boeing had this great new airplane it was building, the 767. It was the first new Boeing since the 747 in the mid-1960s. It would be ultra-modern. It would be more fuel-efficient. It would be a great seller. And, oh yes, Boeing was also making this other airplane, the 757.
"We weren't denied anything," said the 757 engineer. "But we certainly did have to try a little harder."
Eastern's Johnstone says that "in a lot of ways, they picked what Boeing thought was the second team to work on the 757. I think those guys are just as happy as clams. They're rapidly becoming the first team."
Although it downplays the existence of rivalry between programs, Boeing frequently uses internal competition to stimulate innovation within a single program.
"That process is extremely important," said Phil Condit, who directed 757 engineering for several years.
For example, sometimes the company creates an A team and a B team to compete on potential designs. The approach often sparks new ideas.
"When people start doing something some way, they sort of get locked in with their thinking. They don't start exploring," said Joe Sutter, the Boeing vie president who oversees new-product design. One way to break up reliance on old ideas, he said, is to "pop in a new team and get a sort of challenge going forth and back."
Sometimes the B team successfully challenges the established thinking of the A team, Sutter said. An example was the 737, a relatively small jetliner which was planned with two engines mounted on the rear of the fuselage until a B team proved that putting them under the wings would allow six extra passenger seats at the same operating costs.
"Boeing has always used sort of a system of checking the doers," Sutter said.
Another check: While all the engineers on the 757 project report to the 757 organization for direction, some of them report administratively to a separate engineering organization. The separate reporting arrangement is meant to insulate them from potential reprisals if they question the decisions of others.
This arrangement, with some people reporting in two different directions, is used widely throughout Boeing, not just in Engineering.
But the reporting arrangements, and everything else that shows up on the organization chart, are only a superficial reflection of the way Boeing workers really relate to each other, Condit said. "There are all sorts of formal relationships, and then millions of informal relations."
If those relationships were somehow dissolved, a fanciful idea, it would add years to the time necessary to create a new jetliner, Condit said. "It would be a monumental task to put it all back together again."
THE SCHEDULE for creating the 757 took shape in the fall of 1978 on huge sheets of paper covering one wall of Bill Robison's office.
Long horizontal lines were drawn across the sheets, and on those lines Robison and a few others charted the gestation period of the airplane. Industrial engineers picked hypothetical go-ahead and completion dates, then filled in reasonable dates for intermediate landmarks.
"We spent a considerable amount of effort pre-planning," Robison said. "Nothing was left to chance."
The paper on Robison's wall evolved gradually into the 757's "master phasing plan" a comprehensive set of deadlines for key achievements in finance, engineering, customer introduction, hardware development, engines, procurement, facilities, manufacturing, flight test and deliveries.
The deadlines all were interrelated. For example, once a deadline for completion of 90 percent of the airplane's engineering had been established, a corresponding deadline for finishing a mockup of the airplane could be set. Knowing when the mockup must be finished made it possible to set a date to begin mockup fabrication. All of it was based on Boeing's past experience in creating new airplanes.
When Robison and his colleagues laid out those first schedules, he kept in mind an industrial-management technique used by Boeing the idea that parts should arrive when needed, and virtually no sooner. The Japanese, who use the technique widely, call it "just-in-time" scheduling and inventory control.
Storing parts in warehouses is expensive. So is the interest cost on capital tied up in inventory. The just-in-time approach reduces both of those costs, and provides quality control because faulty parts and assemblies are discovered almost immediately, when Boeing attempts to use them.
The approach is central to Boeing's method of operation. It does not want major assemblies from subcontractors to arrive more than five days before needed.
"If you're buying something that's costing you over $100,000 apiece and you have to keep it sitting here for six months, why, that's pretty expensive," said Edwards, the 757 director of materiel.
Added Jack Traynor, a procurement manager: "Not only is it expensive to bring it in early, but if you have it there for any length of time you might have changes that have to be incorporated in it. So the closer you work to the line, the more up-to-date the configuration is and the less work we have to do here in our assembly line."
On the other hand, there are real problems when something arrives late, creating a parts shortage.
"Let's say the example is a shortage way up in the wing somewhere," Boullioun said. "Holy crimeny, you can't put it together! You do put it together, and you've got to take it apart. And then everything piles up. And so it's a real mess."
BY LATE DECEMBER 1978, Robison had finished his master-phasing chart. It told management how long it would take to build the 757. With the basic timing established, Boeing entered a "cost-definition phase."
Normally, Boeing completes cost estimates before formally committing to a new program. But in the case of the 757, both initial customers were eager to get the program under way and there was a threat that orders could be lost to competing airplanes.
So Boeing took a gamble. It made a rough estimate of its costs and signed contracts on the basis of that estimate.
Officially, Boeing won't reveal the cost of creating the 757, but Wall Street analysts put it at $1.5 billion to $2.5 billion. One high-level Boeing executive put the figure at $3 billion for the 757 and 767 combined. Another said the combination cost $4 billion, plus $2 billion in tooling costs.
Boeing contends it saved no money by building the two airplanes simultaneously, even though they share a large percentage of identical parts. Any savings achieved by commonality of parts apparently was lost to the higher costs associated with the rushed development of the 757, one executive said.
Overtime expenses soared. More than 1,000 employees worked overtime during the last Christmas holidays, when the first two airplanes were delivered to Eastern Airlines.
"What we did to compress the 757 schedule was to put this thing on a six- and seven-day week," Robison said.
Now, ironically, it appears the hurry may not have been necessary. Other "unk-unks" intruded: Airline deregulation, world-wide recession and the air-traffic controllers' strike cut sharply into passenger traffic and airline revenues.
As a result, an industry which was making hundreds of millions of dollars profit annually in the late 1970s now is losing similar amounts. Braniff Airlines and Laker Airways have gone out of business and other major carriers may follow. New orders for expensive jets have all but disappeared.
Today, the 757's first customers, Eastern Airlines and British Airways, are in weak financial shape. British Airways has reduced its 757 order by two airplanes and Eastern is working on schemes to pay for its new planes. Eastern may delay acceptance of its 757s due in 1984 and 1985.
If they could have known what the future would hold, the airlines probably would have welcomed a stretched-out delivery schedule.
But back when the decisions were made, it made sense to turn out the fuel-efficient 757 as quickly as possible. So Boeing's management accelerated the project down the runway until the 757 was reality.
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