One Billion Customers - James McGregor [87]
Suddenly, though, the honeymoon in U.S.-China relations ended with the Tiananmen Massacre. American images of cuddly Chinese pandas gave way overnight to grim views of corrupt and evil Communist dictators with no regard for human rights. President George H. W. Bush froze military technology transfers, weapons sales, and military-to-military contacts with China. Military officials who had long worried about China as a future threat suddenly were getting plenty of ink and airtime. Congress demanded that any advanced technology going to China be thoroughly scrutinized to insure that it wasn’t “dual-use” technology that China might use to improve its military capabilities.
As China’s people hunkered down to avoid the crackdown and Chinese leaders dithered between Marx and open markets, McDonnell Douglas continued to struggle with its commercial airliner business. The company was now a distant third in the global market behind Boeing and Airbus, saddled with $4.8 billion in debt and laying off seventeen thousand workers. Boeing, in contrast, had just delivered a modified 747–200 to the White House to replace the Boeing 707 that had delivered Nixon to China. In 1990, China placed one of the biggest aircraft orders in Boeing’s history, a $9 billion order for thirty-six planes and options on thirty-six more. To win the order, Boeing agreed to produce cargo doors and other non-crucial parts in China.
Nevertheless, in 1991, China selected McDonnell Douglas for negotiations for the Trunkliner project. Only a few months later Deng, who had retired but was still the Communist Party patriarch, publicly upbraided his successors in Beijing for backtracking on economic reforms, reigniting the reformist agenda. China went back to work. In March 1992, McDonnell Douglas signed an initial agreement with the China National Aero-Technology Import & Export Corporation (CATIC) to coproduce forty upgrades of the MD-82 known as the MD-90. The MD-90 would be a transition to building the MD-95, a smaller one-hundred-seat aircraft that China would produce itself with McDonnell Douglas technical assistance under the Trunkliner program. Meantime, China was taking delivery of its hundredth Boeing.
The Trunkliner would be an enormously complex project that would require major technology and manufacturing upgrades to China’s aviation industry. It would utilize four Chinese factories, some of which already were making parts for Boeing or the MD-82. In 1993, as preparations for the MD-90 were under way, Gareth Chang received a phone call from Michael Armstrong, the chief executive officer of Hughes Electronics Corporation. Armstrong had read press clips about Chang’s China success and he wanted him to head up Hughes Electronics International, where he would be responsible for developing DIRECTV in Japan and building the satellite business in Asia. Coincidentally, Chang had just completed a corporate strategy study for McDonnell Douglas that concluded there was little long-term future for the company’s commercial aircraft business. He accepted Armstrong’s offer.
The Big Hitt
With Chang’s departure, the Trunkliner deal landed in the lap of Bob Hitt, a dedicated Douglas production boss. Hitt had joined McDonnell Douglas in 1982 and had progressed steadily with production