Company Seeks McDonnell’s Know-How : Aircraft: Taiwan Aerospace Corp. may provide about $2 billion to McDonnell Douglas for as much as a 40% share in the ailing aviation giant.

The Taiwan Aerospace Corp., which is discussing an investment in McDonnell Douglas, is a new company with few employees and no experience building commercial aircraft.

However, the company has access to lots of cash--and that makes it an attractive potential partner for financially strapped McDonnell Douglas.

Taiwan Aerospace on Friday said it was discussing a deal under which it would provide about $2 billion to the ailing St. Louis-based aviation giant. In exchange, Taiwan Aerospace would receive equity--perhaps as much as a 40% share in McDonnell Douglas.

However, Taiwan Aerospace is seeking more than just potential earnings from aircraft sales. It hopes to reach an agreement that would give it more access to the technology know-how it needs to rapidly build a commercial aviation and aerospace industry, said Michael Ding, a consultant to the Taipei-based Chung Hua Institute, an economic think-tank that serves the Taiwanese government on a contract basis.

“Initially, the goal is not to build complete aircraft,” said Ding, who is also a professor of economics at the National Taiwan Institute of Technology. “The realistic, short-term goal is to develop joint ventures that will lead to the development of major parts manufacturing facilities in Taiwan. When that is done, there are all kinds of possibilities for further high-technology industry development.”

Taiwan Aerospace, a joint public-private venture set up by the Taiwanese government, was officially registered as a corporate entity last September. However, the Taipei government actually unveiled plans for the company last March.

Taiwan Aerospace has said it will concentrate on commercial aviation. A deal involving Taiwan Aerospace would buoy the Long Beach-based commercial airplane operations of McDonnell Douglas and would not involve its defense projects.

The company is the brainchild of the Committee for Aviation and Space Industry Development, a government agency founded in 1988 and made up of about 20 high-level officers.

The Taipei government owns about 30% of Taiwan Aerospace. The balance is owned by about a dozen major local companies with a potential interest in a fledgling aerospace industry. Among the major investors are China Steel Corp., largely controlled by Taiwan’s government; Tatung Group, a major consumer electronics and heavy machinery maker; Formosa Plastics, an industrial conglomerate, and the Evergreen Group, an ocean shipping giant.

The government and its domestic partners have already invested about $400 million in Taiwan Aerospace, Ding said. However, the company has access to much more money. Potential backers include the Industrial Development Fund, a bank with the government’s Ministry of Economic Affairs. The fund has helped subsidize the development of Taiwan’s successful textile and computer industries.

In addition, Taiwan has foreign exchange reserves of more than $75 billion--among the largest in the world.

“Taiwan Aerospace is considered a strategic industry and would have government backing, and that means every private Taiwanese bank and many foreign banks would be willing to provide support because there would be no risk,” Ding said.

Taiwan Aerospace and McDonnell Douglas already have a relationship. McDonnell Douglas agreed in July to help Taiwan Aerospace develop plans for the production of some aircraft components.