Boeing
has a lot of problems, but diversity isn’t one of them. You wouldn’t know that, though, listening to
Tesla
CEO Elon Musk, who weighed into the Boeing 737 MAX 9 debate on Wednesday, linking problems with the 737 MAX jet to Boeing’s diversity, equity, and inclusion, or DEI, policies.
“People will die due to DEI,” tweeted Musk.
The problem: Musk is just plain wrong.
On Friday, Jan. 5, an emergency door plug blew out of
Alaska Air
Flight 1282 leaving Portland, Oregon midair, resulting in an emergency landing as well as the grounding of 171 MAX 9 jets by the Federal Aviation Administration.
The MAX 9 jet is one version of the 737 MAX. About 200 of the 1,400 MAX jets in service around the world are MAX 9 variants.
The Alaska Air incident isn’t the first problem for the 737 MAX. The jet was grounded worldwide between March 2019 and November 2020, following two deadly crashes within five months. The crashes were tied back to new flight control software called MCAS, short for Maneuvering Characteristics Augmentation System.
The MCAS failure was historically large in commercial aviation history, destroying tens of billions in market value, badly damaging Boeing’s reputation, and costing former CEO Dennis Muilenburg his job. The door plug failure was another black mark on the company’s ledger.
Amid the recent turmoil, Musk responded to a tweet suggesting Boeing managers were incentivized to hit DEI goals over safety goals. “Do you want to fly in an airplane where they prioritized DEI hiring over your safety?” asked Musk in another tweet. ”That is actually happening.”
Except it isn’t. Vertical Research Partners analyst Rob Stallard points out that MCAS, an enormous safety issue, was designed long before any changes to management incentives, and doesn’t believe that DEI has anything to do with building safe planes. Stallard rates Boeing shares Hold and has a $266 price target for shares.
Similarly, AeroDynamic Advisory managing partner Richard Aboulafia believes that Boeing has a culture issue, but not one associated with diversity. “Not sure what under-resourcing production and inspections and a badly alienated technical workforce have to do with DEI,” he says. “Completely bizarre.”
Aboulafia, an industry consultant who has been hard on Boeing in the past, wants to see more engineers occupying management positions throughout the organization, but doesn’t believe there is a link between hiring and the MAX woes.
What’s more,
Airbus
doesn’t seem to have Boeing’s problems, says ProcureAM co-founder Andrew Chanin, even though Europe’s DEI policies tend to be more strict than American ones. If DEI was at the root of design and manufacturing problems, Airbus would have a similar issue, he says.
Musk’s tweet is also misleading. Safety is still used to determine bonuses. “Sadly, as a key international figure and icon, Musk is being inflammable and taking the DEI out of context,” says Kristin Hull, founder of Nia Impact Capital. “If you look at the bonus incentive, the language is adding DEI as an additional focus criterion, not taking away focus on safety. It’s not either/or.”
Boeing didn’t respond to a request for comment about Musk’s tweet. Neither did Tesla. Musk didn’t respond to a request for clarification about how DEI impacts safety in plane design or manufacturing
Hull has a long history with Tesla. Nia has written group letters to Tesla’s board urging them to improve governance. Nia has also brought shareholder proposals to annual meetings trying to end the practice of forced employee arbitration, which she says can disadvantage people bringing claims of workplace sexual and racial harassment.
For her, Musk’s tweets are another sign of poor governance at his car company. “The [Tesla] board cannot control him,” adds Hull. “It’s not acceptable for any other CEO to do this… he doesn’t answer to anybody.”
Nia owns Tesla stock in an activist portfolio. We like it too. We recommended buying shares in January 2023. This January, we recommended selling half and holding the rest, adding that we don’t like betting against a market leader in a growing industry. We still feel that way, but would feel even better if governance improved.
As for Boeing, it has a lot to do to fix the MAX 9 problem, improve its culture, and win back lost market share in the single-aisle jet market. Musk’s attack on Boeing’s hiring practices isn’t helping—or approaching the root cause of the issue.
As an engineering savant, he should know that.
Write to Al Root at allen.root@dowjones.com
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