Analysis in Merger Boeing-Mcdonnell

In: Business and Management

Submitted By cintytazul
Words 481
Pages 2
TO: Members of Review Board
DATE: March 1st, 2014
SUBJECT: Boeing Merger
This memo reports the findings of the accounting practice methods, business ethics and other production problems that happened around merger process with McDonnell-Douglas.
Based on a comprehensive review, I find reasonable cause to believe that Boeing did not handle its cost overruns, production problems, and the merger with McDonnell-Douglas in a transparent and/or ethical manner. Details that support my findings are as follows:

• Merger with McDonnell-Douglas
Lack of transparency surrounded the merger of Boeing with McDonnell-Douglas. Executives of Boeing were utterly concerned in finalizing merger with reluctant McDonnell-Douglas’ officials that they act on it taking the questionable decision of concealing serious production and financial problems.
• Production Problems
Boeing was not prepared to handle increase in production resulted from the merger with McDonnell-Douglas, which cause serious production problems. Its production methods were not up-to-date to handle increase in production and new products, these problems were compounded even more with high overtime, part shortages and an overall low morale in its productions lines.
• Financial Information
Under special aerospace industry rules that are part of generally accepted accounting principles (GAAP), abnormal costs must be recognized in the quarter in which they are incurred, therefore the expenses incurred from the company's production problems should have been booked in the quarters they were incurred and reflected in the profit numbers for those quarters. Instead Boeing shielded itself with the use of “program accounting method”, which even though is common in the aircraft industry, in this situation did not present a fair picture of the financial situation of the company at that period.
• Ethical…...

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