Airbus and the trillion dollar engineering error

If you’re trapped in the world of “Web 2.0” and the Internet, the larger face of business might well pass you by, which is too bad. Between ongoing stock options scandals, excessive executive pay for failed performance and the dramatic vacillation of the stock market, the errors are big, the people are larger than life, and the problems are often shocking.
Airbus A380, Image from WikipediaLittle has surprised me more, however, than watching and tracking the ongoing failure of Airbus, the EU-backed competitor to American cornerstone Boeing (NYSE: BA). If you ever get on a plane, odds are good it’s built by one of these firms. Popular Boeing planes include the 737 and 747, and the A320 is the best-selling Airbus craft. (other possibilities include the Lockheed’s L-1011 (NYSE:LMT) and McDonnell Douglas’s DC-10, but that’s another story).
When Airbus announced the A380, the industry was thrilled. A two story, 555-seat jet that had an extraordinary range (8000 miles), lots of long-haul airlines ordered the planes. Then a cargo version of the plane was announced and it too received lots of orders: if you’re FedEx, for example, a plane that’s twice the size is clearly going to be more efficient for transporting packages. Sure you had to build longer, stronger runways and that few airports can handle the monster plane, but that’s just progress, right?
Everything was going well until the different engineering groups inside Airbus forgot to talk with each other and the result has been nothing short of catastrophic…


The core problem is the organizational structure of Airbus itself: funded by the European Union, it wasn’t possible for the company to centralize its design, but instead the process was distributed out to various teams throughout the Union.
Boeing, by contrast, learned about engineering coordination the hard way years ago and its computerization of the entire process is a marvel, with millions of documents and complete, highly-detailed, schematics of everything, including simulations of subsystems, before a single sheet of metal is pressed.
The Airbus A380 wiring system has proven to be the fatal Achilles Heel of the project, and when they first assembled the full airplane, it turned out that the systems wouldn’t connect properly. Even with the best gum and bailing wire, it was a no-go and the A380 has been delayed at least two years. Two years of orders, two years of shamefacedly watching sales move over to crack competitor Boeing.
Airbus has said that the problem was simply that the wiring in the aircraft was too darn complex (and, to be fair, each aircraft has 300 miles of wiring), but the real problem was that the different engineering teams were using incompatible versions of the CATIA design software, which led to all sorts of miniscule, but critical mismatches in connectors.
As with most aircraft, Airbus has always planned on both a commercial passenger and freight version of the A380, and has been taking orders on both. Known orders for the A380F, the freight craft, included multiple planes from UPS (NYSE: UPS), FedEx (NYSE: FDX) and International Lease Finance Corp. The latter two canceled their orders late in 2006 and as of this week, Airbus has announced that they’re postponing further work on the freight plane to focus more attention on finally resolving the engineering challenges with the passenger plane. No surprise, UPS immediately cancelled its 10 aircraft order (an order worth an estimated $3 billion).
Okay, so that’s the history lesson of the A380 aircraft and its design problems. The question is: how is this relevant to smaller businesses, to businesses that aren’t necessarily operating in the realm of billion-dollar decisions?
I suggest to you that, in fact, every business needs to pay close attention to the communication channels between its teams, and how well — and accurately — it communicates specs and details to its partners and suppliers. If I order a new display card for my computer, one that’s incompatible with my system, it’s the exactly same communications issue rearing its ugly head, albeit in a smaller scale.
My question to you then is:
How closely are you ensuring perfect compatibility within your company and throughout your supply chain?
It’s something to think about, alright. Airbus is learning this lesson the hard way. The very, very hard way.

6 comments on “Airbus and the trillion dollar engineering error

  1. Great points, Dave.
    In my work with helping various types of organizations on media and communication issues, I’ve noticed that the silo mentality can be an especially pernicious aspect of internal culture — even in small organizations.
    In my view, it boils down to what individuals within the organization choose to perceive as the basis of their strength and value. You can choose to view hoarding information and defending “turf” as strength, or you can choose to view making clear contributions to best outcomes as strength. The latter, “keep your eye on the ball” perspective always involves robust communication and collaboration.
    The collaborative view of strength is often a hard sell to individuals comfortable within a highly competitive culture. Not that competition is inherently bad; it just has some disadvantages.
    IMHO, of course
    – Amy Gahran

  2. I’m far from an expert on this as I try to completely ignore the big world of planes as much as possible, and only really pay attention where it affects us (such as the recent Airbus restructuring announcement making it possible that we will buy an Airbus site or two) but here goes,
    Airbus is now owned by EADS, whilst you are correct that the partner companies do own EADS I have a feeling that at least some of those are state funded (Germany, Spain & France?). I believe there is an ongoing dispute about funding given to Airbus Industries at aircraft launch by governments/EU , they probably get all kinds of tax breaks and grants, but then so do Boeing. See: http://news.bbc.co.uk/1/hi/business/4481983.stm
    The description of the design process is a nonsense though, the aircraft industry simply doesn’t work in a centralised manner these days, and that includes Boeing. Large chunks of the design, manufacture and assembly are routinely subcontracted to suppliers/partners. Surely you should realise that you don’t need to be sat next to someone to be working in the same design system today? Also different version of Catia would be unlikely to cause the problems you describe and I’m pretty sure that the Catia version used, 4, was standard across the A380 project. I think that the best you can say is that it is a massive over simplification of the issues
    (for example BAe did some Boeing work)
    Also quite amusing that you hold Boeing up as the shining example, the restructuring that Airbus announced last week (as much to do with the dollar exchange rate as the A380 delays) is exactly the same process that Boeing went through about 18 months ago (incidentally culminating in the creation of our parent company when three ex Boeing sites were bought by Onex) as a reaction to the fact that Airbus were outselling them for the first time ever. I would suggest that perhaps you’ve been talking to a Boeing employee to get your information?

  3. Thanks for your note, “anon”, but I have to say that my background information for the CATIA incompatibility, Boeing restructuring, etc, are articles from BusinessWeek, The Wall Street Journal and other business publications. I haven’t talked with any Boeing employees (the only Boeing employees I know are on the space side anyway). And, yes, there’s a lot of outsourcing, of course, but that’s clearly a spot where lack of tight specs can easily cause production-stopping incompatibilities, as we’re seeing with the ill-fated A380 project.
    On the other hand, it sounds like you might have some inside information, so if it isn’t the widely-reported CATIA incompatibility and inability of the engineering divisions to communicate effectively, what *is* the problem with the A380?

  4. Hi Dave.
    I liked this posting. It reminded me of the catastrophe discovered within NASA in 1999 concerning a Mars probe. One scientific team performed its calculations in metric and another team input data in imperial units. The result of incompatible teamwork was the loss of a probe. That was expensive character building exercise at an embarassing loss of a U.S.$125 million. The forces acting on the spacecraft were input in the wrong units and led computers astray. See the longer article: http://www.jamesoberg.com/mars/loss.html

  5. I interned for 5 months in the electrical systems department of Airbus in Hamburg on the A380 team. When I started, MSN 1, the first A380, was nearing the end of its electrical design.
    There were five specific problems in my department the way I saw it. But underlining all five is just one thing: Airbus has never done anything like this before. This was the first time Airbus used DMUs (digital mock-ups). And people in general just aren’t smart enough to pull something off that is novel and massive and aggressively-timed. The delivery timelines were set and promised to customers by top management — and they were very keenly timed because it would have been difficult for them to justify the project if it were to cost more (i.e. take longer). Even with the optimistic projections, it would take years for the project to break even.
    Before I get to the 5 problems, one observation: It wasn’t just the electrical department. We just happened to be at the end stage — the landing gear team was the problem child before us, and delays there, too, were serious.
    Problem 1: Unsophisticated ramp-up. Once MSN 1 was designed by a core team, ramp-up began. The number of designers (nearly all North American contractors) tripled in 4 months. Counterintuitively, productivity took a nose-dive and almost hit zero. Turns out the core team were spending all their time training the newcomers. It took half a year for the newcomers to start producing deliverables, but due to their greenness the drawings were of horrendous quality.
    Problem 2: Calling quality problems as “reworks”. A great deal of the delays and cost were due to having drawings being rejected by the check team. Now quality problems in designs is not a new thing — this is Germany, land of the carmakers. The problem was, nobody knew they were having quality problems, which is routine and solvable. Airbus managers saw themselves as having a problem with “reworks” and that this problem was unique to Airbus. They did not attack their quality problems using common quality tools.
    There was no quality consciousness among the contractors and managers. People generating the initial designs were not those who reworked the drawings, thus denying them the chance to learn from their mistakes. There was an expectation mismatch between the check team and the designers, which was never resolved because nobody saw it as an expectation mismatch (“Those stupid designers! Stupid Americans!” was the explanation).
    Problem 3: Being at the bottom of the totem pole. The A380 was developed in simultaneous engineering, which means the design of a plane was evolving constantly. There is a hierarchy of who gets to change their stuff and who has to follow. Electrics was at the bottom: if air ducts shift positions and cut into our wiring paths, we had to change our wiring paths. A great deal of this went on and CATIA incompatibilities between the various departments exacerbated this.
    Problem 4: Lack of foresight. The downstream teams were wholly unprepared for the deluge of drawings that came once the ramped-up design team started becoming productive. They had no clue what was coming. Drawings stacked up at the checkers and all downstream teams. Ramp-up of the downstream teams began, and it was then that Airbus top management went on a hiring offensive, stating they were looking for but not finding 400 engineers. Hiring lead times were long. Eventually, designers were pushed into service as checkers. Department heads across Airbus were asked to send to Hamburg their excess capacity — I came in one morning and was introduced to a bunch of the most inauspicious-looking people I’ve ever met. Those department heads were glad to have gotten rid of them so easily.
    Problem 5: Managers did too much reporting. In a time of crisis, everybody needs to be problem solvers. This was not a steady state of “business as usual” we had. But my bosses (I had two) did not attack the problems nor exercised the foresight they were paid to do. They did reporting — lots of it. Their bosses, alarmed by the situation — were asking for updates as frequently as stock prices are updated. They spent all their time reporting on a lousy situation, not solving problems. The head count of people who did nothing but track the situation was ridiculous. Too many, far too many. If anything, Airbus’ crisis was immaculately tracked and reported on with high frequency.
    To conclude, the delays were due to rampup and quality issues. Each little mistake adds months to the delay.

  6. yes..i go through with this page..i read out all this content…Everything was going well until the different engineering groups inside Airbus forgot to talk with each other and the result has been nothing short of catastrophic…

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