Thursday, June 16, 2005

HARPOONING BOEING

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Moby Dick America

Last month, Boeing was boasting about landing more Chinese contracts. The trade deficit was declared much lower thanks to this and the news was trumpeted far and wide as if the Apocalypse Angels were blowing away. I was more dour and noted that the contracts can be easily cancelled and the problem here is the Chinese will eventually refuse to pay for Americans building what they should be building and the end game will be for them to demand Boeing build factories in China.

Well, as usual, I was right! The campaign to force Boeing to build the factories in China is now commencing!
n the CEO's office at Xiamen Airlines, one of Boeing's most loyal customers sits beside a photo of a 737 cockpit and describes the humiliation he felt trying to enter the United States last year.

Wu Rongnan runs the only domestic carrier in China that still has an all-Boeing fleet. As he takes a long draw on an English 555-brand cigarette, however, the 62-year-old Wu says the affronts he experienced on his way to Seattle in December were "a bitter pill."

To obtain a visa, he spent three hours in line at the American consulate in far-off Guangzhou and was fingerprinted, something he considers suitable only for criminals. Then, at the immigration counter in Los Angeles, he was treated rudely and escorted to a room for questioning, despite the invitation from Boeing in his hand.

"It must be that America is so rich that they don't want our money," he said. Wu's reaction is a symptom of problems that have compounded to erode Boeing's longtime dominance in China, handing the advantage to European rival Airbus in the world's most promising growth market.

Some of the problems are beyond Boeing's control. But others stem from the company's own mistakes, according to interviews with a range of Chinese airline executives, government officials, former Boeing employees and others.

After its longtime China manager left the company unhappily, a revolving door of executives were dispatched for short-term stints in China.
Translation: doing business in America is unpleasant and annoying. Homeland security means disrespecting Chinese businessmen. The lack of courtesy and calm is difficult to live with and besides, the food is terrible and there is a pea under the mattress. Boeing can't please them except one way: to build a factory in China.

This always was the long range plan of both the Central Committee and the businessmen themselves. Their own country pleases them sufficiently that they no longer lust going to America for whatever. All the consumer goods and pleasures can be had at home. So the incentive to travel is relaxing.
Since most were unfamiliar with the language and culture, it was harder for them to build strong relationships. As Boeing management focused on keeping costs down and pushing sales, it missed opportunities suggested by its own employees to foster goodwill. And some customers felt Boeing fell short in training and support after they bought its planes.

One manager at China Southern Airlines, China's largest domestic airline, invokes a Chinese proverb to describe Boeing's behavior: "Pick up a sesame seed, lose sight of a watermelon."

In other words, Boeing lost sight of the big picture.

"They've been rather dense in their dealings with China," said Sidney Rittenberg, a noted China expert and business consultant. "People they've had working with China were not that good at reading cross-cultural issues and dealing with the Chinese. The Airbus people have made a science of it."
The American government wants to sell high powered aircraft to China but keep a tight grip on Boeing which supplies our military. So Boeing can't just move the civilian operations over to China all that easily. Europe has a much less powerful military/industrial machine so they can build the factories in China even as American scream at them to stop doing business with the Chinese yet we are tempted to do the same so, since the Chinese have a noose around our necks, they will reel in Boeing now or destroy Boeing by swamping them with jets made with the Europeans.

Everyone in Asia buys American aircraft as a sop to America so we won't interfere with them flooding us with goods. But China is utterly and totally committed to dominating and controlling the aerospace industry, the very first person they asked for when they opened up relations with America in the seventies was for my dad to come over and revive their training of students in physics and space technology! The American auto industry bellies up and sinks, shot in the hull by the successful Japanese, the Chinese move in to sink the Japanese auto industry but this doesn't interest the Central Committee nearly as much as the aerospace industry which they have had their eyes on for the last thirty years. This is the big kahuna, the whale they want to harpoon.

And to make our trade deficit look good, we have to assist them in this project. We are both Ahab and the Great White Whale. We hunted ourselves down and harpooned our own industry.
Recent evidence suggests Boeing may be pulling itself out of its decade-long downturn in China. It hired a veteran China executive to head its Beijing office and improve relations with government leaders It bounced back strongly this year with the sale of 60 of its new 787 jets to Chinese airlines.

While these are promising signs for Boeing, regaining its dominant role in China may require corporate leadership that is more nimble, humble and ethnically diverse.
Well, just call me Ishmael Wong! So, relations "improved" with the Central Committee when Boeing wised up and hired a Chinese pro to run things. Obviously, his "smoozing" with the leaders landed some plums! Hahahahaha. Way to go, China!

Well, time to return to my Mandarin lessons.
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