Pontifications: Complacency, arrogance aren't a Boeing exclusive

@Retired TechFellow

Going there. 🙂

Yes, I’m aware of how accounts work. It was kinda Day 1 stuff when I was taking the core courses of my major. Picked up a marketing minor along the way, too (the hot girls were always in marketing and int’l business, geeks were in finance and accounting).

‘Most of your key engineering talent in a technology company are not on the books in any way.’

One can argue that the key talent is reflected in the value in the products they design and produce.

Another argument is that this talent is reflected in goodwill. For instance (and I’m just throwing out numbers here) let's say BA would have bought Embraer for the agreed upon price of $5 billion. At the time, the book value was $1 billion – but the young engineering talent was the prize. They would have booked the $4 billion into goodwill and there it sits, as an intangible asset.

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The ever changing face of human capital;

How would you value it? Take for instance Harry Stonecipher. The CEO is supposed to be the most valuable asset, leading the company. They get paid the most. You book him at a value of $100 million. However Harry sticks his Stonecipher into the payroll "fishing off the company pier" as it was (stealing this from a freind) and gets booted out. You book a $100 million loss on the transaction?

When they let Harry go, BA was trading at $40.93. When they hired Jim Mc to fill the roll, it was up at $43.48 – it had reached $46.21 a few days before and on the day they hired him, it went to $46.53.

Was Harry a drag on the company? A credit in the asset pool?

(HR isn't just about engineering talent, it's about everyone in the corp.)

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Although accounting firms like Deloitte will try to sell Human Capital Balance Sheets to customers, how do you value each asset? Is one engineering planner worth more than the next? Who assigns the value? The supervisor who is an a$$hole and hates the guy's guts because he might be smarter than him?

I suppose you could create a standalone engineering company that would act as a cost center, assigning expenses along activity based costing to each other division that uses their services. You think Boeing would sell it's Engineering Division if it needed to gin up cashola?

You do have engineering companies – SNC Lavalin comes to mind, where the talent is the asset.

But what a slippery slope, trying to place a value on human capital.

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‘If you don't and operate a greed machine for the sole benefit of the shareholders then the employees will respond in kind in terms of their attitudes and performance.’

You are preaching to the choir, here.

But who's to say what is and isn't properly reflected in the b/s? You obviously place a value on the human component – and I happen to agree.

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But let me leave you with a thought;

Imagine a world where the Max crashes didn't happen. No pandemic and no Russia invasion affecting the demand/supply side of things. No huge FAA oversight with a microscope up the you-know-where.

Boeing continues to usher it's experienced and highly paid talent towards the door, continues to wind down R&D, subcontracts stuff out to India and Russia design centers.

On the financial side – buybacks and dividends continue. No added $40 billion debt to the b/s and annual $2.5 billion interest payments.

Where does the value of Boeing go? Up, down, or stays the same? IMO, it is headed to the moon.

Now – an experienced hand like yourself might say, "These idiots can't design a proper mouse trap. The engineering talent pool is way down. The cupboard is bare."

It won't matter until the wall hits, then everyone will clutch their pearls and ask ‘How did this happen?’

It's because nobody really looks, or cares, or could even begin to accurately measure how valuable one work force is, over another.

Labour is a cost pool that is traditionally kept as low as possible. That's how it's viewed. Is it right? No. But you’re asking for a paradigm shift, here.

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So, I’m not saying you’re wrong, with your position on the intangible things that make a company great; like good relations with suppliers, investing in the community, well paid and looked after employees and quality leadership.

What I am asking you, is that BA has over $50 billion in debt. For over 3 years, they haven't delivered a positive margin and the cash to keep the lights on will eventually run out.

What would you put up for sale, that the company has, *that someone is willing to pay good money for*, to pay it down?

(You did mention stuff that is off balance sheet, but at this point in time, what assets, tangible or intangible – could be sold for cold, hard, cash?)