For decades the Boeing company has been quietly transferring large tranches of advanced U.S. aeronautical technology to Japan. The deal – which has gone almost entirely overlooked by the American press – is that Boeing engineers teach Japanese companies how to make more and more of each succeeding airplane model, and in return Japan’s state-controlled airlines pay top-dollar for Boeing planes.
It is an arrangement that has long artificially boosted Boeing’s earnings, and has predictably been good for stock options. By no surprise, as Dominic Gates of the Seattle Times has documented, Boeing chief executive James McNerney has been a massive beneficiary in recent years.
Not everyone thinks Boeing has been foolhardy or irresponsible (we’ll get to one of Boeing’s staunchest supporters in a minute) but to say the least the arrangement has its controversial features. After all, whenever the Japanese industrial system has in the past entered into similar technology deals, U.S. corporations have generally ended up with the short straw. (Remember Zenith and RCA or more recently General Motors and Ford.) The Boeing deal moreover is particularly controversial because much of the technology does not seem to be Boeing’s to give away. Rather, because it was accumulated on the U.S. Defense Department’s dime, it is owned by the U.S. taxpayer.
The ultimate manifestation of the trend is the super-advanced Boeing 787, which entered service in 2011, with All Nippon Airways as the launch customer. On Boeing’s own admission fully 35 percent of the plane’s manufactured content is created in Japan. This is probably more than the in-house contribution of Boeing itself. What is known for sure is that the plane’s superstrong, superlight carbon-fiber wings are made by Tokyo-based Mitsubishi Heavy Industries. These are the key to the plane’s almost unheard of fuel efficiency.
To undertake the wing contract, Mitsubishi had first to be given access to much of Boeing’s most carefully guarded aeronautical secrets. In the view of many observers, this deal, which was concluded more than a decade ago (before McNerney’s time), was little short of suicidal. The point is that the biggest single challenge in the airliner business is making wings. Wings have to be not only strong and light but instantly responsive to the pilot’s commands during takeoff and landing. In the 1970s, then Boeing chief executive Thornton Wilson described the company’s wing technology as its crown jewels and suggested that if it this technology ever leaked the company’s entire future would be called into question.
Wilson’s view was more recently echoed by Jim Albaugh, who headed Boeing’s commercial jet division from 2009 to 2012. “We outsourced too much. … We didn’t consider the extent of the risk we’d take on by going outside,” Albaugh told the Seattle Times. “We will make sure the voice of the engineers is much more involved in the decision making as we go forward.” To protect its exclusive technical skills and intellectual property, Boeing would, he said, surround them with ”very high” walls. He went on to list some things that Boeing should never outsource, including airplane flight controls, the wings and the composite fuselage. Albaugh evidently did not win the internal battle with McNerney and went on to take early retirement.
Boeing’s chickens are finally coming home to roost. As I pointed out in a commentary in October, one ominous development is that Mitsubishi has now unveiled a 90-seater regional jet. Although this plane, which is expected to enter commercial service in 2017, will not compete directly with the Boeing range, few observers believe that Mitsubishi will confine its ambitions forever to the little leagues. The fact is that Mitsubishi and its Japanese partners now between them make virtually every component and material needed to built a full size passenger jet. (A little known fact, for instance, is that Japanese electronic companies, most notably Panasonic, now dominate the world avionics industry.)
Does Boeing’s policy make sense? When I last questioned that policy in this space in October, a notably insistent commenter named Jaime Fuchs came forward to challenge me. He has not only declared his outspoken support for Boeing’s policy but, in highly repetitious posts (sometimes as many as three in less than an hour), has suggested that my commentary was full of inaccuracies. In all, he has probably been responsible for more than 60 of the 95 comments on my October analysis. (His activities have been so persistent that I have coined the term “comment bombing,” or “bommenting” for short, to describe them.)
For my part I stand by everything I wrote and I would like to propose an efficient way to resolve this once and for all. I am therefore extending to Mr. Fuchs an unusual offer: I will pay $5,000 to his favorite good cause if he is prepared to meet me for a public discussion in any prominent policy forum. My suggested venues include the Council on Foreign Relations in New York and Chatham House in London, both of which I have addressed in the past.
I append below (in italics) my latest reply to Mr. Fuchs’s complaints. Further below is the comment by Mr. Fuchs (in bold) to which I am replying.
For Mr. Fuchs, a reply to your seven criticisms:
You have insistently suggested that my October 19 commentary on the new Mitsubishi regional jet (MRJ) contained countless major inaccuracies. For my part I have repeatedly replied (with many illustrations) that none of your allegations is upheld.
Below is my definitive response to your list of seven “incorrect statements.” Dealing with your criticisms has been a Sisyphean task because you keep repeating points I have already disposed of. I hope you will now finally accept that my commentary was entirely free of inaccuracy.
It might be worth putting this in a larger context. In attempting to undermine my central point – that Japan now poses a major challenge to American leadership in aerospace – you seem to be relying on the expressed opinions of various long-term foreigners in Tokyo. Many such foreigners cooperate with a strategy among self-effacing Japanese leaders of understating the significance of Tokyo’s every new industrial “targeting” initiative. It is a pattern that has repeatedly sown complacency in Washington and even among those U.S. corporations directly in the Japanese system’s targeting sights.
This group of foreigners often suggests that the Japanese people lack a certain mysterious something and thus inherently are less capable than Americans of undertaking serious industrial challenges. I remember this view being advanced in 1985 about auto competition: supposedly though the Japanese might be able to made cheap runabouts, they would somehow forever, as a preordained law of nature (was it something to do with genetics?), be incapable of making cars to compete with the Lincoln or Cadillac brands.
As for your specific complaints, several merely challenge my opinions and therefore in no way substantiate a charge of inaccuracy. As I have repeatedly pointed out, my responsibility as a journalist is to get my facts right. I have done so. I am not obligated to express opinions that at all times meet with your approval. Although you are perfectly at liberty to debate my opinions, you cannot in good faith implicitly or explicitly fault my accuracy.
To the extent that any of your complaints turn on facts, they consist of pointless and often obscure hair-splitting. You have, for instance, challenged my use of the word “launch” to describe the October unveiling ceremony in Nagoya in which Mitsubishi introduced its new 90-seater jet to the world’s press and to prospective buyers. You insist that the event should correctly be termed a “rollout” and that my use of “launch” is inaccurate. While you are right that, in airliner argot, the event is generally described as a “rollout,” I am hardly wrong to use “launch.” I am writing for a general audience and thus am required to avoid confusing readers with unnecessary technical jargon. Your rollout is my launch. This is a distinction without a difference and Forbes.com’s busy readers should never have been belabored with it. To say the least, this hair-splitting is a long way from my point that Boeing has been sharing far too much technology with Japan in general and with Mitsubishi in particular.
Let’s take your complaints about “incorrect statements” in sequence:
Point 1. Your first – and presumably most important – allegation of inaccuracy concerns my headline, “Like 1950s Detroit, Boeing Is Underestimating Emerging Japanese Competition.” In condemning this, you have failed to notice it is a statement of opinion, not of fact, and therefore cannot be condemned as “inaccurate.”
You go on to argue that Japan poses no competition in aerospace. In doing so, you make the unstated assumption that the only competition that matters is in the brand-names on final products. Japan takes a different view: it seeks to maximize its manufacturing share. In the aerospace industry, as in many other industries, it has chosen first to hollow out American incumbents rather than challenge them directly. When account is taken of all the advanced components, materials, and machine tools needed to make a modern passenger jet, Japan’s dominance is hard to overlook. For a start avionics – the term of art for electronic components used in aviation – has long been a Japanese fiefdom. Japan also leads – crucially – in carbon fiber, the aerospace material of the future. This helps explain the fact that the Boeing 787, one of the most advanced and fuel-efficient planes ever built, flies on Japanese wings and is, on the Financial Times ’s testimony, about one-third Japanese-made. (Tokyo-based Toray seems to enjoy a global monopoly on aerospace-quality carbon fiber. What is undeniable is that Toray supplies both Boeing and Airbus.)
Point 2. Your second challenge is to this statement of mine, “The 787 is the most sophisticated passenger jet ever flown and its made-in-Japan wings are its unique selling proposition: they are among the world’s strongest and lightest and thus ensure that the plane achieves almost unheard of fuel efficiency.”
In seeking to correct me, you write: “The wings are not a ‘unique selling proposition’. Both Airbus’s A350 and Bombardier’s CSeries also have carbon fiber wings with the same properties.”
You seem to be unaware that neither the Airbus nor the Bombardier planes are yet in commercial service. By contrast the Boeing 787 has been flying commercially since 2011 and already more than 200 787s are believed to be in service around the world. Thus if as of today you want to buy a full-size passenger jet with carbon fiber wings, the 787 is the only game in town. That said, you’ll need luck, because few if any existing 787 operators seem to be selling, and Boeing seems to have a full order book (perhaps because the plane has indeed lived up to its super-advanced billing – thanks in large measure to its superlight, super-strong made-in-Japan wings).
Point 3. You challenge this statement, “This weekend brought further news of Boeing’s folly. Mitsubishi has launched its long awaited regional jet, which is available in both 70- and 90-seater versions.”
In suggesting I am inaccurate here, you state: “The 70-seater is not yet available and there are no orders for it.” Here again we are quibbling over words. The fact is that the 70-seater is available in the sense that Mitsubishi is evidently prepared to build it for any airline that signs on the dotted line. As for the fact that there have been no orders so far, this is still early days, and slow starts are not unusual in the airliner business. Remember that for a terrifying 18 months – between September 1970 and March 1972 – the Boeing company booked only two orders for its new 747. Customer hesitation soon, however, turned to wild enthusiasm, and Boeing eventually sold a further 1,500, making the plane one of the most successful in aviation history.
Point 4. You challenge this statement, “Certainly the new plane poses immediate, potentially lethal competition for existing leaders in regional jets such as Bombardier of Canada and Embraer of Brazil.”
In seeking to contradict this, you state as your first objection that the Mitsubishi plane will not enter commercial service until 2017. Somehow you consider this a crucial weakness. In reality every new plane takes years to develop and the MRJ is no exception. Even at this early stage (just two months after prospective customers got to kick the tires for the first time), the 90-seater has already brought in more than 200 orders. This amounts to a significant dent in the fortunes of Embraer’s similarly-sized 175 (which at last count had fewer than twice as many orders). The MRJ 90-seater is due to make its first flight next year and, assuming no major technical problems, Mitsubishi will then finally be clear to begin selling in earnest.
Embraer’s competitive position is not enhanced by the fact that its planes are full of Japanese-made components and materials. So also for that matter are Bombardier’s planes. Meanwhile Mitsubishi ranks as one of Japan’s leading suppliers of regional jet components.
Point 5. You challenge this statement, “Mitsubishi is claiming a 20 percent advantage in fuel economy.”
Even the most cursory internet search will establish not only that Mitsubishi has made this claim but that the claim has been reported by countless media organizations in much the same way as I reported it. Indeed many media organizations omitted the word “claim,” giving the impression that the plane’s ostensibly amazing fuel performance is an independently attested fact. Here, for instance, is how the New York Times put it: “Mitsubishi’s regional jet boasts about 20 percent in fuel savings compared to similar size Brazilian-built Embraer 190 jets.” Have you challenged the New York Times ? If not, why not?
Point 6. You challenge this, “….its [Mitsubishi’s] planes will also provide passengers with more legroom thanks to better seat design.”
Again your challenge is bafflingly misdirected. Countless other media organizations reported the same point in the same way, yet you seem not to have challenged them. You imply that I reported that Mitsubishi is making the seats in-house. Your implication is false. This is a notable example of a pattern of straw-man argumentation that has characterized your entire effort to discredit my commentary.
Point 7. You challenge this statement, “Longer term it can be assumed that just as the Toyota Lexus emerged to challenge the Cadillac, full-size Mitsubishi jets will emerge to challenge even Boeing’s super-advanced 787.
This is my opinion, and – does this need to be said again? – opinions by definition are not statements of fact, and therefore cannot be challenged on grounds of accuracy.
As for your suggestion that the auto industry comparison is not relevant, as recently as 1985 – I remember it well – the loudly expressed consensus among putative experts in Tokyo was that the Japanese would never make a car to challenge GM’s Cadillac range. Five years later – in 1989 – Toyota launched the Lexus line.
Few engineering or industrial challenges are impossible if a nation has enough time and money to address them. No nation has demonstrated this more often than Japan. An early example was the shipbuilding industry, which Tokyo targeted in the 1870s. The British – then the world leaders – laughed and happily gave the Japanese the technology. By the 1920s, the Japanese had pretty much caught up and were taking major market share from the British. Over the years it has been a similar story in textiles, motor cycles, sewing machines, transistors, ball bearings, cars, computer chips, super-computers, advanced materials, and countless other industries.
The key point here is that Japan has the money. Japan’s affluent consumers pay for the development of the Japanese aerospace industry through higher airfares. Meanwhile Japan ranks second only to China as the world’s largest creditor nation (if the American public does not know this, the U.S. Treasury certainly does, as the Japanese are the second largest foreign buyers of U.S. bonds after the Chinese).
Japan also has the people. Few nations have a larger corps of talented engineers.
It may be worth remembering that the U.S. aerospace establishment greatly underestimated Airbus, whose first plane went into service in 1974. Now Airbus has a larger order book than Boeing (despite the fact that Boeing subsumes its erstwhile rival McDonnell Douglas, which once was the world’s largest passenger jet maker). As long-time suppliers of the most sophisticated materials and components to Boeing (and as huge beneficiaries of technology transfers from Boeing), the Japanese are relatively much better placed to take on Boeing than the Europeans were in the 1970s.
Jaime Fuchs [42/3+ Member: jaimefuchs]
Submitted on 2014/12/14 at 10:25 am | In reply to Eamonn Fingleton.
Per your request, below is an itemized list of seven inaccurate statements in your article (credit to Joseph for composing the following list). Please be informed that I am done raising new issues and launching ad hominem attacks. Accordingly, please deal fully with each of the following issues:
“Incorrect statement 1.
Quote – “Like 1950s Detroit, Boeing Is Underestimating Emerging Japanese Competition”
This statement is not FACTUAL for several reasons:
First, the auto industry of the 50s is not in any way like the commercial aircraft industry… let alone 60 years on. This shouldn’t even have to be said it is so obvious.
Second, for Boeing to underestimate competition, competition has to actually exist. The MRJ is NOT competition for the following factual reasons:
• The MRJ is a regional jet with limited range that seats 90 passengers maximum. Boeing’s smallest airliner seats 149 passengers and has transcontinental range.
• The MRJ will not even fly until sometime next year and, if flight testing goes as planned, will not even enter service until sometime in 2017 at the earliest.
Third, to not even mention Airbus, with approximately 50% of the airliner market, is a major and obvious error. If Mitsubishi were to compete with Boeing they would obviously be competing with Airbus as well.
Incorrect statement 2.
Quote: – “The 787 is the most sophisticated passenger jet ever flown and its made-in-Japan wings are its unique selling proposition: they are among the world’s strongest and lightest and thus ensure that the plane achieves almost unheard of fuel efficiency.”
First, the wings are not a “unique selling proposition”. Both Airbus’ A350 and Bombardier’s CSeries also have carbon fibre wings with the same properties.
Second, the wings do not achieve “almost unheard of fuel efficiency”. Not only does the competing A350 match the 787 in fuel efficiency but the A330NEO, an updated airframe from 1992, will have only marginally less fuel efficiency than the 787.
Incorrect statement 3.
Quote: – “This weekend brought further news of Boeing’s folly. Mitsubishi has launched its long awaited regional jet, which is available in both 70- and 90-seater versions.”
First off, “folly”? What “folly”… but I’ll get to that in a second.
Second, Mitsubishi did not just “launch its long awaited regional jet”. It was formally launched in March 2008. This event was the official rollout of the first completed aircraft that occurred on October 19. The two are very different events that anyone with aviation knowledge knows.
Third, the 70-seater is not yet available and there are no orders for it. In fact, it may never even be produced as there is no demand for 70-seat aircraft. Even Embraer is dropping the E170 from the E2 lineup.
Now, back to “folly” statement. Just how exactly is the MRJ “rollout” further news of “Boeing’s folly” when:
• As mentioned earlier, the MRJ doesn’t even remotely compete with any Boeing product.
• The MRJ is made from aluminum (and not even of the latest alloys that are on the CSeries fuselage let alone the CSeries carbon fibre wings).
• The MRJ is not even as advanced as Bombardier’s CS100 or Embraer’s E2.
• The MRJ doesn’t use any Boeing technology, let alone any “key Boeing technology”… so there is NO BOEING FOLLY!
Quote – “Certainly the new plane poses immediate, potentially lethal competition for existing leaders in regional jets such as Bombardier of Canada and Embraer of Brazil.”
The MRJ does not pose potentially lethal competition for the following reasons:
• The MRJ will not enter commercial service until sometime in 2017 (and that is if flight testing goes well. Considering that this is MHI’s first RJ aircraft there are industry doubts that it will EIS per schedule).
• The MRJ “family” is currently only a single aircraft since the 70-seater may never get built. If the 70-seater is built, it will not be available for commercial service until after 2018. There are plans for a larger MRJ but that is even further out. In comparison the Bombardier CRJ family is comprised of the CRJ200, CRJ700, CRJ900 and CRJ1000 plus the CS100 at the very top end; Embraer has the E170, E175, E190 and the E195 that are being followed by the Ejets E2 models of the E175E2, E190E2 and E195E2.
• The MRJ obviously has no track record while the CRJs have over 1800 orders and the Ejets have over 1300 orders and the E2s have a further 270.
• The initial MRJ production rate will be only “1 or 2 per month”.
Incorrect statement 5.
Quote – “Mitsubishi is claiming a 20 percent advantage in fuel economy”
This statement and your next quote are two that any journalist with familiarity with aviation would not blindly parrot from the manufacturer as they are simply not true.
The MRJ for obvious reasons does not have a 20% fuel advantage. Physics is physics. It will have a marginal fuel economy advantage over the competing CRJ900 and, depending upon mission profile, will have similar compared to the Embraer 175E2.
Incorrect statement 6.
Quote – “and its planes will also provide passengers with more legroom thanks to better seat design.”
First off, as everyone in the industry knows, MHI does not make their seats, Zodiac does. Second, airlines pick their seats and configure their aircraft interiors. Third, these seats are not new or even a better design… “slim line seats” are ALREADY in airline service.
Incorrect statement 7.
Quote – “Longer term it can be assumed that just as the Toyota Lexus emerged to challenge the Cadillac, full-size Mitsubishi jets will emerge to challenge even Boeing’s super-advanced 787.”
Mitsubishi is not Lexus and Boeing (or Airbus) is not Cadillac . The car analogy not only has no relevance – it is just plain silly.
And it is absolutely ludicrous to “assume” that “full-size Mitsubishi jets” will challenge Boeing (and Airbus) when it is not even assured that the MRJ will be successful against Bombardier and Embraer.
These are just some of the hurdles that MHI has to leap:
• The MRJ will have a difficult time just competing in the “minors” against Bombardier and Embraer let alone ever moving up against Boeing and Airbus. Success if far from assured even in this market segment
• To compete successfully against Boeing and Airbus and Bombardier in the far more difficult and challenging narrow body segment, Mitsubishi would have to create an all-new family of 3 jets that would have to be superior to Boeing and Airbus next generation of narrow bodies (NOT the current NEO and MAX). Mitsubishi would also be competing against Russian and Chinese narrow bodies outside of the western world.
• So, even if Mitsubishi were to be successful in the regional and narrow body market segments, by the time Mitsubishi might be ready to challenge Boeing and Airbus in the wide body segment it would be +2030 and Boeing and Airbus will have moved on to the next design from the “super-advanced 787” and the A350.
Another reality that you are totally blind to is that MHI knows that Boeing would yank all work packages as soon as MHI would merely hint at competing against Boeing in the narrow body segment. The bottom line IS the bottom line. Embraer, who is not even a supplier to Boeing, made the deliberate decision not to encroach on Boeing and Airbus turf when they decided on the E2 for obvious reasons. For MHI it would be seppuku.”