Boeing's other big problem: Fixing its space program

Boeing Co.'s engineering failures didn't begin or end with the 737 MAX. Its once-dominant space program, which helped put Americans on the moon five decades ago, has also struggled.

The company's biggest space initiatives have been dogged by faulty designs, software errors and chronic cost overruns. It has lost out on recent contracts with the National Aeronautics and Space Administration to return science experiments and astronauts to the moon, amid low rankings on price and technical merit. Boeing needs revenues from its defense and space arm, which makes everything from military jets to satellites, as a safety net as it navigates through the MAX crisis and slowed demand for new commercial jets in the pandemic.

Its space ambitions will soon face a major test with another attempt to launch a capsule called the Starliner. In the first launch, just over a year ago without astronauts on board, a software error sent the Starliner into the wrong orbit, and then another threatened a catastrophic end to the mission. A successful launch, which could come as soon as March, would help restore the company's reputation for reliability and engineering prowess.

The problems pose a serious challenge for Chief Executive David Calhoun one year into his tenure as he charts a new course in the face of uncertainties wrought by the pandemic.

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After making record profit of $10.5 billion in 2018, Boeing has since lost nearly half that amount as of Sept. 30, largely due to a sharp drop in commercial aircraft deliveries and MAX-related charges. Defense and space revenue of $19.5 billion in the first nine months of last year eclipsed its commercial unit's $11.4 billion in sales. Jefferies analysts estimate Boeing brought in more than $6 billion in space revenue for all of last year.

While the MAX has resumed flying passengers again after a nearly two-year grounding, quality lapses with popular 787 Dreamliners have stalled deliveries as Boeing workers fix production defects of newly finished jetliners. With travel demand still weak, Boeing is likely to remain heavily dependent in coming years on its defense and space business.

Boeing declined to make any executives available for interviews. Mr. Calhoun said in a written statement that the company was "proud of all the products and services our engineers have developed and delivered to our commercial and military customers over these last difficult years, and of the meaningful progress we are making in safety, transparency and quality."

On the Starliner capsule and MAX alike, software and hardware systems weren't working properly together due to inadequate testing, insufficient resources or a combination of the two. Engineers working on different parts of the same program failed to coordinate with each other or to properly integrate software and hardware systems -- and senior managers failed to resolve the disconnects, according to government reviews and people familiar with the matter.

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Boeing's defense operation has seen similar missteps. The division has had long-running problems delivering an aerial-refueling tanker that remains years behind schedule and billions over budget. Air Force brass ultimately took charge of designing fixes last year.

The stumbles coincided with what former and current executives, including Mr. Calhoun, have flagged as another problem: excessive focus on financial performance, a long-term trend Boeing is trying to reverse by empowering its engineers.

Senior Pentagon and NASA officials have privately raised concerns about the range of Boeing's travails, according to several participants in those conversations. They have questioned Boeing's ability to deliver on promises about the performance and reliability of its products.

An Air Force spokesman said the service is "committed to working with Boeing to field critical capabilities for the warfighter." NASA officials have said the agency is looking forward to Boeing's coming uncrewed test and later company missions carrying astronauts.

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Mr. Calhoun, who took over as CEO in January 2020 after spending a decade on Boeing's board, has pledged to get the company's troubled programs back on track and to focus more on improving technical excellence and engineering decision-making.

The company has revamped its internal safety-reporting procedures and the board's monitoring of overall safety issues -- all aimed at easing schedule and cost pressures on engineers and giving senior leaders greater oversight of emerging problems. In November, Boeing hired an engineer who previously worked at Elon Musk's Space Exploration Technologies Corp., or SpaceX, to be its first high-ranking executive overseeing software design across the company. On Wednesday, the company named a longtime senior engineer as its first chief aerospace safety officer.

There are early signs Boeing's troubled Air Force tanker program, initially slated to cost $4.9 billion but later viewed as an albatross by senior Pentagon leaders, is getting on track. Under a deal with Boeing struck last year, the Pentagon wound up taking over the primary design of a revamped visual system essential for allowing aircraft to safely link up with the tankers. Boeing's previous design adjustments proved ineffective, according to the Air Force, often preventing the tanker from performing its primary function.

In exchange for ceding control over the technical details, Boeing got nearly $900 million in withheld payments when it was bleeding cash. In return, it must foot the bill for major design changes, which some people familiar with the matter estimate could add up to at least $3 billion more in costs for Boeing, though a person close to the company disputed that the costs would reach that high.

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Air Force procurement chief Will Roper said the Pentagon is happy with the tanker's new direction, and described it as the result of an "engineering-first" approach under Mr. Calhoun. Mr. Roper said Boeing's shift marked a "complete turnaround on this program."

Since the height of the Cold War, Boeing's name has been synonymous with dependable jetliners, top-notch military aircraft and ambitious U.S. space endeavors -- starting with rockets and lunar rovers the company created for Apollo astronauts in the 1960s and continuing through its ongoing management of the International Space Station.

Some former Boeing engineers and government officials trace the start of Boeing's woes to its 1997 merger with struggling rival McDonnell Douglas, which they blame for infusing the new entity's culture with greater focus on financial management. While veteran engineers have said they never lost sight of safety, some say reorganizations and turnover hampered communication and accountability.

Rep. Peter DeFazio (D., Ore.), who as chairman of the House Transportation Committee investigated the MAX tragedies, blamed Boeing's failure to add initial safeguards to the jet on the company's focus on money and sticking to a development schedule. "That is what ultimately drove Boeing to this tragedy, which is the press for getting this plane out, to compete with Airbus, and they were of course driven by Wall Street," Mr. DeFazio said in September.

Boeing has said its engineers didn't rush what it has described as the MAX's methodical development and didn't take shortcuts at the expense of safety. The company has said it was trying to learn from its mistakes to prevent such crashes from happening again. Boeing reached a $2.5 billion settlement this month with the Justice Department on a criminal charge that two company pilots had deceived regulators about design slip-ups and flight-control hazards. In court documents, prosecutors said the wrongdoing financially benefited Boeing but wasn't widespread throughout the company.

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In Boeing's defense and space businesses, an increased reliance on fixed-price government contracts has squeezed profit margins because the company typically had to pay the bill for mistakes, further heightening cost and schedule pressures. Meanwhile, Boeing's large overhead on top of its multilayered bureaucracy has made it difficult to compete with more nimble rivals such as SpaceX.

The launch of the uncrewed Starliner spacecraft from the Kennedy Space Center in December 2019 was supposed to be a decisive win for Boeing. The company's leaders planned for directors and other VIPs to enjoy space-themed gift bags and cheering from a grandstand during a party after the early-morning liftoff.

Within minutes of the launch, NASA's controllers knew the flight was going wrong. A software error stranded the spacecraft in the wrong orbit. Hours later, ground controllers had difficulty maintaining communication with the vehicle, and later scrambled to fix another major software mistake.

The Starliner, which never made it to the International Space Station as planned, eventually returned and landed safely.

NASA and Boeing experts quickly determined the capsule's thrusters had failed to start at the right time and ended up depleting their fuel supply, due to faulty software testing, according to industry and government officials. NASA's leadership, concerned Boeing had a broader cultural problem in light of the MAX crisis, ordered a sweeping outside review, resulting in dozens of recommendations. Many advocated greater attention to plugging gaps in getting software and hardware to work together properly.

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Two fundamental software problems emerged on the Starliner. One involved a timer on the capsule that hadn't been properly synchronized with the rocket's internal clock. Boeing didn't perform a test to verify various software systems were properly coordinated, which people familiar with the matter estimated would have caught the error, at a cost of about $1 million.

A separate major mistake involved software controlling thrusters that help to angle the craft properly to avoid damaging the heat shield that protects the capsule, and any astronauts inside, during re-entry. Engineers detected and were able to correct that software glitch from the ground in time to ensure that what would be the crew's portion of the capsule safely separated from the rest of the spacecraft before re-entry.

After the botched mission, Boeing's board -- already frustrated by the MAX crisis -- ousted then-CEO Dennis Muilenburg and replaced him with Mr. Calhoun. Mr. Muilenburg had once boasted that Boeing would be first to put humans on Mars. The company booked a $410 million charge to account for the Starliner launch's redo.

Current and former government and industry officials blame the spotty testing on cost-cutting and inadequate staff. Boeing was years late delivering the Starliner under a fixed-price contract that created incentives for managers to keep a lid on testing and personnel costs. In addition, the company was vying with SpaceX to get the first astronauts into orbit on a commercially owned and operated capsule. Mr. Musk's team handily won that race with launches in May and November. Another closely held competitor, run by Amazon.com Inc.'s founder Jeff Bezos, is also taking aim at Boeing's legacy of space leadership.

A NASA spokesman said "deadline pressures and cost cutting were not identified" by a joint NASA-Boeing review team as causes of the Starliner's problems.

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Patricia Sanders, chairwoman of NASA's independent safety-advisory committee, said the signs point to basic lapses in Boeing's engineering discipline. "It's possible that there was some complacency that set in," she said, adding that Boeing leaders now seem to realize they have to change course. "There is a sense that Boeing overall has woken up."

Boeing, under pressure from government officials, has added software engineers to the Starliner team, industry officials said. A newly appointed program manager, John Vollmer, is known for his ability to execute on difficult programs, according to people familiar with the matter, and is prodding Starliner engineers to more thoroughly test software and address problems identified by the flurry of post-failure reviews.

A Boeing spokesman said the company is poised to begin full-mission simulation testing as soon as next month after making software changes recommended by an independent review ordered by NASA.

Kathy Lueders, NASA's head of human space exploration, has singled out the agency's overreliance on Boeing's traditional engineering expertise as the crux of the Starliner's failures. Rather than reflexively trusting Boeing's technical judgment in most matters -- as NASA had long done -- "we do need to change our assumptions as to how we are working together" to ensure Boeing avoids mistakes, she told reporters in July. The upshot was tighter restrictions on Boeing's engineering decisions.

NASA has ramped up its own staffing and oversight of Boeing, acknowledging it probably paid too much attention to keeping tabs on Mr. Musk's company, until recent years viewed by career agency officials as an outsider and upstart.

In addition, government watchdogs have criticized Boeing for persistently missing deadlines and busting budgets as the prime contractor for the nation's premier deep-space rocket, the mammoth Space Launch System. Every major component of the heavy-lift booster has experienced technical challenges and performance issues, according to a March 2020 report from NASA's inspector general, resulting in at least $2 billion in recent cost increases. Additional delays could add another $8 billion.

After nearly a decade of development, it still isn't slated to fly until November at the earliest. A long-awaited test intended to fire up all four main engines for the first time is scheduled for Saturday.

As its engineers work to vet the Starliner's software, the Boeing spokesman said, the company will perform a full end-to-end test of the capsule's mission, from prelaunch to landing. For the next blastoff, people familiar with the matter said, Boeing isn't planning to hold a flashy party.