Boeing Doesn’t Know That "Profit = Price – Cost" ?


Arizona Republic:

For the thousandth time, the Toyota principle is that prices are set by the market, therefore Profit = Price – Cost. The old industrial mindset was a “cost plus” approach where Price = Cost + Profit. This quote below makes it sound like Boeing, for all their lean work, is still thinking the old way.

“Boeing spokesman Todd Blecher said cost savings from a renewed focus on lean manufacturing has given the company some pricing flexibility. ‘We will not, however, do any deal that we consider irresponsible or a bad business deal simply to grab market share,' he said.”

I would say the cost reductions have given them “profit flexibility”, mainly in the upward direction. The price is set by the market (as a factor of demand for planes, fuel costs, and competition from Airbus, right?) Or do I not understand this, that aerospace is different?

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