Date of Taiwan Deal May Slide
An evaluation by a Taiwanese team of the proposed sale of 40% of McDonnell Douglas’ commercial aircraft business to Taiwan Aerospace Co. for $2 billion will not be completed until mid-April, indicating that the final agreement may not occur until July or possibly much later this year, according to Taiwanese government and industry sources.
When McDonnell unveiled the proposed deal late last year, it indicated that a definitive agreement could be reached by Jan. 31. The delay has provided an opportunity for greater scrutiny of the deal, both in Congress and by the Taiwanese legislature.
The increasing opposition is believed to be leading McDonnell and Taiwan to consider changing the preliminary agreement, analysts and industry sources say.
George Liu, senior vice president of Taiwan Aerospace, said Tuesday that the first portion of the evaluation, which examined the partnership’s potential competitive success, was favorable. A second segment will examine financial aspects.
Wolfgang Demisch, analyst with UBS Securities in New York, said opposition in Taiwan appeared to be gaining, leading him to believe that the deal could be reconfigured.
Demisch said the cost of developing the new MD-12 jetliner, which McDonnell would do jointly with Taiwan, is about $8 billion, far higher than the $4 billion that McDonnell has discussed so far.
Demisch said he did not believe that McDonnell could substantially reduce foreign participation, but that possibly other nations could take a larger share.
When McDonnell announced the deal, it said it would sell a 40% stake of its commercial business to Taiwan Aerospace and another 9% to other equity partners, presumed to be from other Asian nations.
Fred Tsay, a member of the Taiwan legislature, said that body could not appropriate any money for the deal until April, when Taiwan’s annual budget is set. Tsay said he remains concerned about the deal’s viability, but believed it still has a good chance of going forward.
