Category: Big Business

So he used uppers? How else could Jim Leyritz have caught a 15-inning playoff game against the Mariners and then belt the walk-off homer?

Neat article in BusinessWeek about problems with the new Boeing 787 Dreamliner. This falls into the “I find this stuff fascinating but recognize that many readers don’t care about how some/most/all industries work.”

The article discusses the new model of production that Boeing’s trying to implement for this plane. The company’s engaged in a variety of outsourcing that it hasn’t really tried before, and that may be tied directly to the technological hurdles that the new plane is facing:

Boeing has undertaken a grand business experiment with the Dreamliner. In a bid to tap the best talent and hold down costs, the aerospace icon has engaged in extreme outsourcing, leaving it highly dependent on a far-flung supply chain that includes 43 “top-tier” suppliers on three continents. It is the first time Boeing has ever outsourced the most critical areas of the plane, the wing and the fuselage. About 80% of the Dreamliner is being fabricated by outside suppliers, vs. 51% for existing Boeing planes.

The Dreamliner’s mounting challenges call into question whether such a radical business model can succeed, and whether the advantages of collaboration on such a scale are outweighed by the loss of logistical and design control.

My day job is editing a magazine about outsourcing in the pharma/biopharma industry, so I wonder about how other industries manage this stuff. It’s not the commodity-level transactions that are interesting (like sourcing your wiring or excipients from a provider), but the question of how you look out-of-house for the more integral aspects of product design and development.

Now, for smaller biopharma companies, that’s a functional necessity, since they don’t tend to have the infrastructure to develop things themselves. But when it comes to aviation, in which there are really only a pair of major players left, it’s gotta be a much dicier proposition.

In this instance, the fuselage cracked.

I’ve been on prednisone for the last 10 days, trying to clear out the ugly ol’ case of poison ivy I picked up from the Memorial Day yard-clearing extravaganza. The pred has left me pasted by heartburn for over a week, which is no fun. I’ve juggled the sleeplessness with some Xanax & gin, which seems to be working okay, but this morning, I finally looked up all the listed side effects of this little corticosteroid and discovered that among of the rarer ones are a “false sense of well-being” and “mistaken feelings of self-importance.”

I don’t even know how you begin to diagnose that. I mean, does the doctor say, “You’re not doing as well as you think! And you’re simply not that important! This is just a side effect!”

Evidently, I may also get them menstrual cramps, real bad.

Most people get those wacky Nigeria e-mails during the workday. What do I get? An open letter to the CEO of GlaxoSmithKline, apparently written by Borat (just out of discretion, I’ve redacted all personal names, except J-P’s):

Jean-Pierre Garnier,
Chief Executive Officer

Sofia, April 29, 2006

Re: GSK in Bulgaria: Lilliputian in One Year

Dear CEO,

Few months ago as the GSK’s chief partner in Bulgaria we’ve revealed the GSK representative was involved in dubious and near corruption practices and have deplored her threatening and intimidating letters in return (all timely & expressly mailed to you). Now, Mrs. XXXX XXXX unilaterally terminated the two GSK cooperation agreements with Commercial League, the largest pharmaceutical company in the territory. Such an illegal act has no material and contractual ground and bears several harmful consequences.

Beyond the severity of the legal and reputationally unavoidable damages I am more concerned about the long term deterioration of CL/ GSK business relations, at the end turning Glaxo to a Lilliputian pharmaceutical company in the fast growing market of Bulgaria, and perhaps other Balkan countries. I am sure you understand, despite systemic anomalies of the representative or any corporate friction by now notwithstanding, as the GSK main contractual partner CL’s unrivaled marketing machine did not compete directly with your product sales. However, this is exactly what your representative, undoubtedly endorsed by Mr. XXXX XXXX, is inviting through the latest hostile and illegal move. Twelve months from now sales of your peers will replace otherwise good portfolio of GSK in all strategic therapeutical arias and only you can take the lead to stop this inevitable down slide, hopefully not too late.

You know, you personally command my enormous respect,
Kindly

[XXXXXXX] Chief Executive Officer

As I wrote, the BIO conference was “a singles bar for CEOs and venture capitalists.” Just add governors.

Last July, I wrote about the nuttiness of the American Jobs Creation Act, a one-time tax break for companies bringing overseas profits back to the U.S. (the tax rate on such earnings drops from about 38% to about 5%). Michelle Leder at Slate just wrote about the subject, calling it an “absurd provision of a law designed to create jobs.”

It’s a good piece, but she makes a “numbers in a vacuum” argument about Pfizer, which leads me to wonder if she’s not being fair toward the other companies, which are in fields that I don’t cover. She writes,

At Pfizer, the pharmaceutical giant that announced the single largest repatriation—$37 billion—the one-time windfall works out to approximately $11 billion. That kind of tax savings buys a lot of $600-an-hour lobbyists, though not, apparently, many scientists and salespeople. In its annual report, Pfizer doesn’t list employees by region. But the company’s total head count dropped to 106,000 at the end of 2005, about 8 percent fewer jobs than at the end of 2004.

Thing is, those layoffs weren’t at all related to Pfizer’s overseas profits. They were a result of Pfizer acquiring Pharmacia and Warner-Lambert, along with a raft of smaller companies. Those acquisitions basically guaranteed layoffs in the thousands; this is what’s known as “generating efficiencies by combining operations.” So those layoffs were in the works long before the AJCA was passed in 2004.

Now, you can argue that the acquisitions were foolhardy or unlucky (especially the Pharmacia one, which pivoted on the Celebrex/Bextra franchise), but complaining that the company should have kept ‘redundant’ employees on because it had this one-time tax refund coming is flat-out stupid.

The first day of the conference was good, but I did a bunch of running around and interviewing, punctuated by a long lunch with a client who revealed that his first marriage ended because his wife was making it with the landscaper. He is not very happy that his second wife enjoys Desperate Housewives so much.

Unfortunately, that lunch ran over into an interview, so I had to reschedule. My subject was only free at 5pm, after the conference ended. We talked till about 5:45, and I headed out from there.

The taxi line was approximately 2 miles long. I took one look at the massive queue and said, “Screw this! I’m goin’ home!”

Unfortunately, the McCormick convention center is pretty remote, so this was not going to be achieved on foot, especially after a full day on a convention center floor.

So I started walking over to the hotel connected to the center. Unfortunately, plenty of people got that idea and were already on line for cabs.

I couldn’t find a shuttle bus, and thought I could be risking things by sneaking onto the bus for the Sanofi reception; after all, that event could’ve been located even further from my hotel. I kept walking.

Then I saw a trolley-bus. The driver was standing outside it, leaning against the door. Three guys in good suits were walking by it. One said, “How much to get us uptown?” His buddies laughed and they walked on.

I said, “I’ll give you twenty dollars right now to get me to the Embassy Suites.”

He said, “Okay!” and jumped into the bus. I ran on and shouted to the three guys to follow me. They did. The trolley took off and started maneuvering through the traffic.

At one point, the driver said, “I hope I don’t get in trouble for this.”

One of the suits (they were all business development/arbitrage guys for biotechs) said, “Don’t you remember? The cops told you to move your bus, because of the safety issues with the protesters! You had to get going, and now you’re stuck in traffic!”

“Man, you guys are smart!” he told us.

Twenty bucks later (about $5-8 more than a cab ride), I was home.

Here’s a pic of the convention center: