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A. B. Wilson Communications
Going Global: There's Something In It For Everyone

Boeing President Harry C. Stonecipher made this presentation at the East/West Conference in Nashville, Tennessee, on April 14, 1997.

Today I am going to talk about manufacturing for the global market. Since we are in Nashville, I'd like to begin by posing a question for fans of country music. What do these people have in common?

One is a night-club singer in Vegas. The second is a writer of folk songs in the Village. And the third is a "serious composer" out in the valley.

The answer is, they all figure in a hit song, called Gone Country. Each is looking to country music for self-renewal. As the writer of folk songs thinks to himself, all the while disavowing any interest in fame and money, "A man could make himself a killin' / Cause some of this stuff don't sound much different than (Bob) Dylan."

Gone Country celebrates the fact that country music is now accepted by all types of people... everywhere you go. What's more, it is performed by all kinds of musicians ... from all kinds of backgrounds. In the words of the song, "Everybody's gone country (Look at them boots); The whole  world's gone country (Back to their roots)."

Not only has the whole world gone country, but country has gone global.

What's happened in music, and other forms of mass entertainment, has happened in every major business you can think of -- from the old-line businesses of making autos and steel to computers, telecommunications, aerospace and biogenetics. The winners in every field have gone global.

At the same time, the leaders have gone "back to their roots" -- in the sense of discovering, or re-discovering, their core competencies. A company cannot afford to have any weak links in the chain that connects it to its customer. You have to be world class at everything you do, or attempt to do.

Often, that means cooperation, sharing or collaboration. There are two critical points to be considered here. One is efficiency. The other is customer satisfaction.

Without a doubt, advances in technology have facilitated and promoted greater specialization of effort on a global scale. As a result, outsourcing... and various kinds of  cooperative arrangements... are on the rise. For many companies, they are a vital part of achieving the optimal utilization of resources across a range of activities.

But efficiency is not the only driver. There are other considerations including national pride, prestige and a sincere desire, on the part of many overseas customers, to absorb new methods and lessons. From the dawn of the Industrial Revolution to our own time, the purchasers of advanced products have shown a persistent interest in acquiring not just the products themselves, but the underlying know-how or technology that goes into making them. That raises all kinds of alarms. Nevertheless, allowing for legitimate concerns in some areas, I am a strong believer in  helping customers develop their own skills and capabilities, if that's what they want.

My good friend and soon-to-be-partner, Phil Condit, the CEO of The Boeing Company, describes his approach to doing business in the global market as "design anywhere, build anywhere." We have a similar philosophy at McDonnell Douglas. And we are very active in seeking out
long-term relationships in other countries spanning a variety of activities.

Let's look at a few examples of how the combination of automation... and collaboration... is reshaping the global aerospace industry. Consider the Boeing 777, a 400-seat jetliner that entered service in May, 1995.

The 777 is a magnificent achievement technologically -- not just as a flying machine, but also as a complex product that represents the latest advances in design and manufacture. The Triple 7 was the first "paperless" jetliner. That is to say, it was designed in a virtual-reality type of environment -- with computers capable of simulating three-dimensional space. It moved from design to production, without the use of a full-scale mock-up, or development fixture, as a means of testing assumptions and working toward the ultimate goal of getting millions of pieces to fit together in a tight, seamless whole.

The elimination of guesswork -- the ability to design and build to the closest tolerances -- is one of the great advantages of  computerized design and development. Another advantage -- of comparable importance -- is the ability to work far more closely with subcontractors and suppliers...wherever they are located.

By establishing a common data base, and communicating electronically, it is almost as easy to swap information and ideas with someone halfway around the world as it is with someone in the same building. In the case of the Triple 7, subcontractors in half a dozen countries have been important participants in the joint creation of a great product.

At McDonnell Douglas, we are working on a "paperless" jetliner of our own -- the 100-seat MD-95 -- with first delivery scheduled for 1999. It involves substantial sharing of design, development and production tasks with 14 companies in ten countries: Australia, Austria, France, Germany, Israel, Italy, Japan, Korea, the U.K., and the U.S.

In addition, we created the first "paperless" helicopter -- the MD Explorer.

The MD Explorer is equipped with a transmission made by Kawasaki of Japan; engines made by Pratt and Whitney of Canada and Turbomeca of France; seats produced by Israeli Aircraft Industries; a standard interior from Aim Aviation of the U.K.; and hydraulic actuators from France. The airframe itself is being assembled by Hawker de Havilland of Australia.

You can't get any more "global" than that.

So far I have talked about aerospace programs that are part of the commercial as opposed to the military world. As a result of national security concerns, when it comes to overseas sales of military equipment, we do not offer any product, or any technology, without the express prior approval of our own Government

With that proviso, we often think and act in a similar manner.

First, we are strongly committed to expanding our presence in international defense markets. Second, we see offset and other cooperative arrangements as an absolute requirement to achieving international success. Third, we aim to excel in this area. We go out of our way to excel

Over the past several years, McDonnell Douglas has had a string of successes in multi-billion dollar competitions -- in Europe, the Middle East and Asia. That has been a key factor in our ability to keep certain aircraft in production... and maintain a fairly steady level of employment... in the midst of huge reductions in defense spending, both in the U.S. and in other countries.

In 1995, for example, we had back-to-back wins over a European consortium in their own backyard -- winning one large order for attack helicopters from the Netherlands and another from Britain.

We had a great product to offer -- with the AH-64 Apache, one of the stars of Operation Desert Storm. But we were also able to convince our customers that we could do as much, or more, to develop their industries as a consortium of European companies that had already received considerable financial support from governments in neighboring countries. Believe me, that's a pretty tough sell.

In winning the order from Britain, for example, we teamed up with Westland Helicopters, of the U.K. Under license from us, Westland will assemble Apache Longbows in the U.K. from kits produced at our facilities in Mesa, Arizona. In addition, the British Apaches are being equipped with Rolls Royce engines... with an improved power management system for Smith's Industries of Britain... with nacelles and horizontal stabilizers from Shorts in Northern Ireland... and with hundreds of other parts from manufacturers throughout the U.K. and Europe.

To add a little color, and possibly some controversy, let me cite another example of our efforts in offset and international cooperation. A couple of years ago, after placing an order for our F/A-18 jet fighters, the prime minister of Malaysia visited our facilities in St. Louis. When he saw a high-speed machining system that is capable of sculpting large parts of aircraft out of billets of raw aluminum, he was very impressed. He said, and I quote, "I want one of those in our country."

Through our industrial participation agreement with Malaysia, that has already happened. In addition to providing Malaysia with know-how for doing high-speed machining, we are helping them with other advanced technologies as well, including rapid prototyping and composite filament winding.

Now I happen to believe that globalization is good for the American economy... good for the world economy... good for the vast majority of people who inhabit this planet, whether rich or poor.

But there are many people with sharply opposed views. I'd therefore like  to tackle a couple of the main issues head-on. 

What about the critics who complain that companies like my own are "giving away jobs"?... jobs that belong, in some sense, to American workers. What about those who say we are "giving away technology"?... technology that is going to come back and bite us at a later date. Should we be worried that our favorite customers today will be our worst competitors tomorrow?

With regard to jobs, isn't it amazing that the places in the world that are most open to trade -- incoming and outgoing --  are the same ones that excel at job creation! You don't read any stories about the problems of unemployment in places like Hong Kong and Singapore.

Anyone who reads the sports page can tell you that teams that are good at winning on the road tend to be very, very good at winning at home. Common sense and a wealth of evidence... suggest the same is true of business.

If I may return to the previously mentioned international helicopter sales, let's take a closer look at how they affected our U.S. workers. Clearly, they didn't get all of the work called for under our contracts with the British and Dutch. But they did get a substantial portion. More than that, our military helicopter business, which had been in danger of extinction, has gained a whole new lease on life. Combined with a new multi-year order from our government, the two wins in Europe have been instrumental in extending production of the Apache helicopter well into the next century. That is a tremendous plus for all of the people associated with our helicopter business in Mesa, Arizona.

Turning to the other issue, would we really be better off, as critics suggest, if we built a moat around our high-tech industries? We can start with the observation that any such barrier would be counter-productive for U.S. production, trade and employment. It would do a lot more to keep our products out of other countries than it would to keep their products out of ours. A great many U.S. workers would lose their jobs as a result.

You only have to look at the statistics. The U.S. runs a huge balance of payments surplus in high tech industries. In 1995, for example, U.S. aerospace exports totaled $33.1 billion, while U.S. aerospace imports totaled only $11.5 billion. In other words, U.S. exports in this area are nearly three times as great as U.S. imports.

If I may paraphrase Pogo, we have met the primary beneficiary of an open world trading system, and it is us.

At McDonnell Douglas, out of our total 1996 revenues of just under $14 billion, we had more than $5 billion in export sales. That's more than 35%. For Boeing, the percentage is higher still, with more than $10 billion out of their $22 billion in 1996 revenues coming from export sales. We cannot afford to turn our backs on the rest of the world.

There is an even more basic issue involved here, too. What is the point of trying to protect existing technology? For the most part, it is a rapidly-wasting asset, a perishable commodity. As Roger Bateille, of Airbus, has said: "The only way to protect your technology is to move very, very fast."

As you ascend the technological ladder, you may assume that others... perhaps one of your own customers... will occupy a rung that you have left. If everyone is moving up more or less at the same time, that's a good thing. It's the way that business and commerce have always worked to improve living standards.

The big difference today is simply that technological change is taking place at a faster and faster rate.

While the pace of change has quickened, this is clearly a time that favors those who are willing to embrace change and turn it to their favor. To put it another way, the only people who need fear globalization and change are the people who don't want to change themselves.

Just the other day, I read a revealing story in New York Times about a certain European country. For decades, and indeed centuries, this country has lagged behind the rest of Europe in economic development. Ever since the potato famine in the middle of the nineteenth century, it has  been plagued by heavy joblessness and out-migration. As you might have guessed, the name of the country is Ireland. It is a much different place today. An estimated 60% of all business applications software and 40% of all personal computer packaged software sold in Europe is now made in Ireland. The Irish have established a lock on much of  the worldwide teleservicing business. If you are having trouble with a new computer... or a new computer game... your call for help will very likely be answered by someone sitting in Ireland. With the help of one-day air transport service back and across the Atlantic, Irish analysts are now processing a large   part of the volume of automobile and other insurance claims generated in the U.S.

In short, Ireland has hitched its star to the global economy... with spectacular results. Over the past several years, Ireland has led all major European countries with an annual growth rate of 7%. It has passed  Britain in per capita gross domestic product. Last but not least, educated Irish emigrants are returning to the country in droves.

But the Irish story is not as remarkable as it might seem at first glance. In its essentials, the story has been repeated in many other places. It has  happened right here in my home state of Tennessee, which has truly "gone global" in recent years -- attracting auto-makers from Tokyo and Detroit,  tire-makers from Akron and Tokyo, and scores of Asian and European companies. Tennessee has earned a reputation for having a great business climate and an excellent workforce.

That has paid handsome dividends in the form of rising per capita income and one of the best records of job creation of any state in the union.

Something similar has happened in the corporate world -- in the behavior of high-performing companies. There are three critical elements to the story

One is the single-minded pursuit of success in the global arena.

Two is developing a smart, motivated workforce made up of people who regard lifelong learning as the best possible guarantor of a rising living standard and continuing gainful employment.

Three is strong leadership providing an impetus for change and a vision for the future. Leadership creates the right attitude for moving forward.

We in the aerospace industry are proud of our contributions to the development of a more integrated and productive world economy. Our jetliners are directly responsible for the increased physical movement of people and goods around the world. In another part of our business -- the launch of communication satellites -- we have played, and continue to play, a critical role in the increasingly rapid and pervasive movement of information and ideas.

In our own way, we have even assisted in spreading worldwide popularity of country music.

As we speak, satellites in orbit 22,300 miles above the earth are beaming country music to viewers in five continents -- Europe, Asia, Australia, and North and South America. Country Music Television is up and running 24 hours a day, 7 days a week, with more than 10 million subscribers worldwide.

There is no shortage of good examples of how to succeed in today's world. More, perhaps, than anything else, it gets down to having the right attitude: One of being open to others, demanding of oneself, and totally alive to new opportunities.

As a returning Irish emigrant commented to the New York Times, "There is a fantastic buzz in this country." That is the kind of attitude that ought to exist in every business, in every region, of every country, in the world. 


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Andrew B. Wilson

26 Taylor Place Drive
St. Louis, MO 63108
Phone: (314) 361-1195

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