Skip to content
Subscriber Only

Boeing's Secret

Did the aircraft giant exploit accounting rules to conceal a huge factory snafu?

On Dec. 11, 1996, Boeing (BA ) Chairman Philip M. Condit closed the deal of his career. After a relentless three-year courtship, he persuaded the initially reluctant directors of defense giant McDonnell Douglas Corp. to agree to a merger. The combination would create the world's largest aerospace company--the first manufacturer ever with the ability to build everything that flies, from helicopters and fighter jets to space stations. "This is, I believe, a historic moment in aviation," Condit proclaimed at a Dec. 15 press conference.

But far from the glare of TV cameras, a disaster was quietly unfolding inside Boeing Co.'s sprawling factories--one that would ultimately wind up costing billions of dollars, cause several executives to lose their jobs, and lead to claims of accounting fraud. Facing an unprecedented surge in orders because of a booming economy, workers were toiling around the clock, pushing the assembly line to the breaking point. At the same time, the company was struggling to overhaul outdated production methods.