Well due-diligence seems to have been an issue in individual cases. But overall they seem to have missed two fundamental problems.
1. Manufacturing parts and then selling them throughout the life of the aircraft model has a high margin of profit. Assembling an aircraft form parts has the lowest margin of profit.
2. Outsourcing requires more coordination form HQ, not less.
It seems like those two were pretty big and important. Especially #1, what kind of an executive does not understand the value chain of the business he's in?
This is why I don't think CEO are stupid, but I do think they act economically rationally (perhaps not ethically) by increasing their compensation by pumping up the stock price in the short term.
In this case the CEO raised stock prices in the short term by appearing to create cost savings. His compensation goes up, he leaves the company, cost savings turn out to be costs, but the old CEO has already been paid and is gone, this is the new guy's problem.
1. Manufacturing parts and then selling them throughout the life of the aircraft model has a high margin of profit. Assembling an aircraft form parts has the lowest margin of profit.
2. Outsourcing requires more coordination form HQ, not less.
It seems like those two were pretty big and important. Especially #1, what kind of an executive does not understand the value chain of the business he's in?
This is why I don't think CEO are stupid, but I do think they act economically rationally (perhaps not ethically) by increasing their compensation by pumping up the stock price in the short term.
In this case the CEO raised stock prices in the short term by appearing to create cost savings. His compensation goes up, he leaves the company, cost savings turn out to be costs, but the old CEO has already been paid and is gone, this is the new guy's problem.