McDonnell’s Deal With Taiwanese Hits New Snag

The results of a study of Taiwan Aerospace’s proposed stake in the commercial aircraft operations of McDonnell Douglas now are not expected until mid-April, Yang Shijian, Taiwan’s economics vice minister, said Tuesday.

State-owned China Steel, which could acquire a big interest in Taiwan Aerospace, is leading a Taiwanese team studying the potential investment.

The two-week postponement of the study’s conclusion is a further blow to the deal, dogged by delays and criticism on both sides of the Pacific.

Denny Ko, Taiwan Aerospace’s president, said the delay was caused by uncertainty over plans for McDonnell’s new wide-bodied jet, the MD-12.

(Contacted by the Los Angeles Times, McDonnell officials said they had no comment on the delay.)

Under an initial agreement reached last November, Taiwan Aerospace, a recently formed company, would buy a maximum of 40% of McDonnell’s Long Beach-based commercial aircraft business for $2 billion.

Taiwan Aerospace has since indicated that the stake acquired could be as low as 25%.

Faced with criticism in the Taiwanese media and parliament, the Taipei government has denied that it will be funding the deal, although it owns a 29% stake in Taiwan Aerospace.

Meanwhile, McDonnell is seeking investors in Southeast Asia or South Korea to make up the potential shortfall in Taiwan’s investment.

The government says the money will come from the private sector, including some of the large firms that already hold a stake in Taiwan Aerospace--Evergreen Marine, Tatung, Yueloong Motor and Formosa Plastics.

Critics in Taiwan fear that taxpayer money will be wasted. Opposition legislators have attacked the proposals, playing recordings of speeches made by Taiwan Aerospace Chairman David Huang in the United States.

He is said to have asserted in the speeches that Taiwan’s government would continue to invest in McDonnell until it was successful.

Analysts said that, without government backing, the companies investing in Taiwan Aerospace would be reluctant to increase their stake in the venture, individually or as part of the consortium.

Another question hanging over the deal is whether Taiwan will gain any transfer of aerospace technology if the deal goes ahead.