Boeing's Vietnam

Financial engineering is an apt description of derivatives and other financial instruments that require a thorough understanding to minimize risk. Boeing, in the realm of physical engineering, is betting heavily on Lithium Ion battery technology that it appears not to thoroughly understand. It is at risk of making incorrect decisions to salvage sunken costs. From a cursory amateur point of view it is understood that a battery that can take such a quick charge and deliver high energy is a very volatile cocktail. Reassurances that software and containment can manage the problem are not. Today's headline in the New York Times business section “Setback to Boeing's Hopes for Longer Range for 787” indicates a lack of understanding of the risks from which they appear to have been blind to since the inception of the Dreamliner project.

A change to a nickle based battery system that is less volatile will require a lengthy period to redesign and certify which will costs billions because the intricate production line will have to stop. It is a gutsy decision that has to be made. The alternative stay the course non decision jeopardizes the plane's 180 minute safe flying distance from an emergency landing airport, much less the 300 minute range it was designed for.  The FAA is a creature of industry so Boeing could push to get the Dreamliner flying again, but the agency will dither on the 180 minutes over unassisted flight zones until millions of hours of restricted use are completed. The plane is unsalable under such a ruling because the competing Airbus 350x is just a few short years away and is learning from Boeing's mistakes by designing out the Lithium Ion Battery.

My favorite movie about the financial crisis is “Margin Call.” The Jeremy Irons character was brilliant when asking the rocket scientist to speak to him as if he were a child. From that elementary description of the problem the boss understood that a big gutsy decision had to be made to save the company from certain disaster. Boeing's CEO has to do the same and quickly.