US securities officials fined Boeing $200 million over the aviation giant’s misleading assurances about the safety of the 737 MAX airplane following two deadly crashes, regulators announced Thursday.
Boeing agreed to the penalty to settle charges it “negligently violated the antifraud provisions” of US securities laws, the Securities and Exchange Commission said in a statement, saying the company and its leader “put profits over people.”
Boeing’s former chief executive, Dennis Muilenburg, also agreed to pay $1 million to settle the same charges in the civil case.
The settlement marks the latest hit to Boeing over the MAX following the Lion Air Crash in Indonesia in October 2018 and the Ethiopian Airlines crash in Ethiopia in March 2019, which together claimed nearly 350 lives.
One month after the first crash, a Boeing press release approved by Muilenburg “selectively highlighted certain facts,” implying pilot error and poor aircraft maintenance contributed to the crash.
The press release also attested to the aircraft’s safety, not disclosing that Boeing knew a key flight handling system, the Maneuvering Characteristics Augmentation System (MCAS), posed safety issues and was being redesigned.
After the second crash, Boeing and Muilenburg assured the public that there was “no surprise or gap” in the federal certification of the MAX despite being aware of contrary information, the SEC said.
– Boeing ‘failed’ –
“In times of crisis and tragedy, it is especially important that public companies and executives provide full, fair, and truthful disclosures to the markets,” said SEC Chair Gary Gensler in a press release.
“The Boeing Company and its former CEO, Dennis Muilenburg, failed in this most basic obligation. They misled investors by providing assurances about the safety of the 737 MAX, despite knowing about serious safety concerns.”
The SEC said both Boeing and Muilenburg, in agreeing to pay the penalties, did not admit or deny the agency’s findings.
Boeing said the agreement “fully resolves” the SEC’s inquiry and is part of the company’s “broader effort to responsibly resolve outstanding legal matters related to the 737 MAX accidents in a manner that serves the best interests of our shareholders, employees, and other stakeholders,” a company spokesman said.
“We will never forget those lost on Lion Air Flight 610 and Ethiopian Airlines Flight 302, and we have made broad and deep changes across our company in response to those accidents.”
US air safety authorities cleared Boeing’s 737 MAX to resume service in November 2020 following a 20-month grounding after the crashes.
A principal cause of the two crashes was identified as the MCAS, which was supposed to keep the plane from stalling as it ascended but instead forced the nose of the plane downward. The Federal Aviation Administration required Boeing to upgrade this system to address the flaw.
In January 2021, Boeing agreed to pay $2.5 billion to settle a US criminal charge over claims the company defrauded regulators overseeing the 737 MAX.
Samsung quarterly profits plunge to 8 year low on demand slump
Samsung Electronics said Tuesday that its fourth-quarter operating profits plunged nearly 70 percent, the biggest drop in more than eight years, as the global economic slowdown dealt a blow to electronics and chips sales.
The South Korean tech giant said operating profits for the October to December period slumped to 4.3 trillion won ($3.4 billion), a 69 percent drop from a year earlier.
The drop is in line with the estimate Samsung released earlier this month and marks the company’s worst decline in quarterly profits since the third quarter of 2014.
“The business environment deteriorated significantly in the fourth quarter due to weak demand amid a global economic slowdown,” Samsung said in a statement.
Sales fell eight percent to 70.46 trillion won from the same period the previous year.
Samsung singled out weak demand for memory chips, saying the sector had been hit hard “as prices fell and customers continued to adjust inventory amid deepening uncertainties in the external environment”.
The firm is the flagship subsidiary of the giant Samsung Group, by far the biggest of the family-controlled conglomerates that dominate business in Asia’s fourth-largest economy.
The fourth-quarter drop is the second consecutive margin squeeze for Samsung, which saw a 31 percent fall in operating profits in the third quarter year-on-year.
For the full year, Samsung reported 43.38 trillion won in operating profit and a record-high annual revenue of 302.23 trillion won.
– ‘Heavy blow’ –
Until the second quarter of 2022, Samsung, along with other tech companies, significantly benefited from strong demand for electronic devices — as well as chips that power them — during the pandemic.
But the global economy is now facing multiple challenges, including soaring inflation, rising interest rates and higher energy costs.
Global memory chip revenue dropped 10 percent last year, as electronic equipment manufacturers “started to deplete memory inventory they had been holding in anticipation of stronger demand,” according to tech research firm Gartner.
“Consumers also began to reduce spending, with PC and smartphone demand suffering, and then enterprises starting to reduce spending in anticipation of a global recession, all of which impacted overall semiconductor growth,” said Andrew Norwood, VP Analyst at Gartner.
The macroeconomic uncertainties are expected to persist in 2023, Samsung said, adding: “the Company anticipates demand to begin recovering in the second half.”
“Samsung was dealt a heavy blow with deteriorating external factors, like weaker demand and rising costs,” Samsung Electronics vice chairman Han Jong-hee said during CES 2023 in Las Vegas earlier this month, according to the Yonhap News Agency.
“I think this difficult business environment will continue this year as a prolonged economic slowdown and risks in supply chains increase uncertainties.”
US Justice Dept investigating Tesla self-driving features
The US Department of Justice has opened an investigation into Tesla’s driver-assistance features, the company said Tuesday in a financial document.
The filing comes amid an ongoing National Highway Traffic Safety Administration (NHTSA) review of the electric carmaker’s “Autopilot” system.
“The company has received requests from the DOJ for documents related to Tesla’s Autopilot and FSD (full self-driving) features,” the Securities and Exchange Commission filing said Tuesday.
Tesla CEO Elon Musk has regularly promised that a fully autonomous vehicle is just around the corner, but his cars still only feature “driving assistance” — which helps drivers change lanes or identify stop signs — and not full autonomy that would allow drivers to look away from the road.
The company did not say what exactly the requests were, but according to media reports, the department is looking into whether Tesla’s claims about the reliability of its driver assistance systems could leave drivers with a false sense of security.
This is not the first time Tesla’s public marketing statements have come under regulatory scrutiny.
On its website, Tesla says its Autopilot and its Full Self Driving Capability options “require a fully attentive driver, who has their hands on the wheel and is prepared to take over at any moment.”
But National Transportation Safety Board (NTSB) Chairwoman Jennifer Homendy in 2021 told CNBC that using the term “full self-driving” is “misleading.”
And the California Department of Motor Vehicles last year filed a complaint against the company for using advertising language that could make its products seem more capable than they are.
According to a report from Bloomberg, the Justice Department investigation has been opened for similar reasons.
The NHTSA’s probe includes investigations into several safety incidents associated with the driver assistance systems.
“To our knowledge no government agency in any ongoing investigation has concluded that any wrongdoing occurred,” Tesla said in its Tuesday filing.
Boeing to deliver last 747, the plane that democratized flying
Boeing is set to officially bid farewell to the original jumbo jet, the 747, as it makes its final commercial delivery of an aircraft that democratized flying and serves US presidents.
Thousands of current and former employees will converge Tuesday afternoon at Boeing’s factory in Everett, Washington, in the Northwestern part of the United States for a final sendoff celebration in parallel with the delivery of a Boeing 747-8 cargo plane to Atlas Air.
The existing fleet of planes are expected to fly for decades more, but in ceasing 747 production more than 50 years after aircraft’s first flight, Boeing is closing a chapter in the history of civil aviation.
The plane’s size, flying range and efficacy “made it possible for the middle class to travel outside Europe or the United States at an affordable price, even during the energy shocks of the 1970s,” said Michel Merluzeau, director of aerospace and defense analysis at AIR consultancy.
“It opened up the world,” Merluzeau said.
Boeing built 1,574 747s in all. But the jet has over time been eclipsed by newer models that fly more efficiently and burn less fuel.
Commercial airlines in the United States have not flown the 747 since 2017.
– Biggest jet for decades –
The 747’s origins date to the 1960s, a period when aviation was on the upswing and airports were becoming increasingly busy.
At the urging of Pan American Airways, Boeing began to plan for a jet that could carry significantly more passengers.
Engineers initially conceived of a plane with two fuselages, but dropped that idea due to concerns about evacuating passengers from a second level.
Instead of making the plane taller, the 747 was made wider, Michael Lombardi, Boeing’s company historian said of a jet that became the first designed with two aisles.
“This airplane will always be recognized as the queen of the sky,” Lombardi said at a recent briefing with journalists.
The 747 runs on four engines and was conceived from the start as a plane that would also carry cargo.
But that imperative required other adjustments, including the need to raise the cockpit above the nose, leading to the 747’s iconic “hump.”
The 747 remained the biggest passenger plane until the arrival in the 2000s of the Airbus 380.
In the 1980s and 1990s, the 747 was “really the industry’s workhorse,” with countless trips between destinations like New York, Paris and London, said Merluzeau.
But the arrival of later generations of long-distance jets such as the Boeing 787 Dreamliner and the Airbus 350, which are more fuel efficient than the 747, have remade intercontinental travel, allowing for direct trips between more places and diminishing the dominance of hubs.
The newer planes “have changed flying to what we want, point to point,” Lombardi said.
– Heavy hauling –
While Boeing has revamped the 747 more than once, “there are limits to what you can do compared with other options,” said Merluzeau.
For the last incarnation of the jet, the 747-8, which was launched in 2005, Boeing sold 48 passenger jets and 107 for cargo.
While Boeing announced in 2020 it would end production of the 747, the legacy fleet is expected to fly for decades more, especially in the cargo sphere.
“The 747 really is unique in its utility for shipping large industrial pieces, like motors for ocean liners and larger oilfield equipment,” said Merluzeau, noting the freighter’s ability to move more than 130 tons.
The plane of US presidents since 1990, the 747 is also expected to keep up its official duties for the White House for the foreseeable future, with two Air Force One aircraft currently being modified to replace jets now working.
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