The development of the 737 Max has exposed a culture of widespread quality-control lapses in the massive plane making company. Industry and government officials now anticipate that Boeing Co (NYSE: BA) will face even greater legal liability than previously expected as increased criminal and civil scrutiny is applied to their business practices both current and past.
This added scrutiny represents an expansion of a federal grand-jury investigation into the hazardously designed flight control systems created by Boeing, the faulty designs of which led to two crashes in 2018 and 2019 and the deaths of nearly 350 people. Justice Department (DOJ) prosecutors and federal air-safety regulators will be investigating the potentially significant safety problems that developed as a result of missteps in the production of the 737 Max.
As a part of the grand jury probe, Boeing employees told Federal Aviation Administration (FAA) investigators that the two major crashes of the 737 Max were caused by a faulty stall-prevention feature. Officials were aware of this faulty feature for months before the 2019 crash. The global fleet was grounded soon after the second crash.
"Both Boeing and the FAA gambled with the public's safety in the aftermath of the Lion Air crash, resulting in the death of 157 more individuals," the House Transportation and Infrastructure Committee wrote in its report on the second crash.
MarketWatch sources report that DOJ and FAA investigators have also been looking into factory problems and the plane maker's compliance with production rules and safeguards required by federal law. According to a company spokesman, an investigation by Boeing itself found that debris was mistakenly left behind in the fuel tanks and other interior spaces of roughly half of the Max aircraft it has inspected since last November. The objects left by workers in the fuel tanks and other spaces of these crafts included tools, rags, and other debris.
Boeing announced recently that they would be reducing their workforce by 10% across the company amid shrinking demand for jetliners and flights. They also laid out plans to reduce the output of the 787 Dreamliner, 777 and 777X. They intend to carry out a slow ramp-up of 737 Max production as demand returns.
"The demand for commercial airline travel has fallen off a cliff, with U.S. passenger volumes down more than 95% compared to last year. Globally, commercial airline revenue is expected to drop by $314 billion this year," the company wrote in a statement on the company's intentions to reduce its size. "I know this news is a blow during an already challenging time. I regret the impact this will have on many of you. I sincerely wish there were some other way."
The employment reduction will be accomplished through voluntary layoffs, employee turnover, and "involuntary layoffs as necessary," the company said. According to Chicago Business, the majority of layoffs will be in the commercial-jet division, headquarters staff, and services operations, with a 15% drop in employment. Boeing expects to resume deliveries of the Max in the third quarter.