Self-Imposed Deadline Expires in Taiwan for McDonnell Partnership

Taiwan Aerospace Corp. has failed to meet a self-imposed deadline for announcing which Taiwanese investors would participate in a proposed joint venture with McDonnell Douglas Corp., a Taiwan Aerospace official said Friday.

But the Taiwan company’s failure to meet the Saturday deadline does not signal a lack of interest among Taiwanese investors in playing a role in development of McDonnell’s proposed MD-12 jetliner, said George K. C. Liu, senior vice president of Taiwan Aerospace.

Liu cited other commitments of Taiwan Aerospace Chairman Earle J. S. Ho as the main reason for the delay.

“Chairman Ho has just come back from Southeast Asia after taking care of business there for Tong Ho Steel,” Liu said. Ho is also chairman of Tong Ho Steel.

Earlier this month, Taiwan Aerospace unveiled a toned-down proposal for the McDonnell venture. Originally, Taiwan Aerospace had proposed paying up to $2 billion for a 40% stake in McDonnell’s Long Beach-based commercial airplane business. McDonnell had sought the foreign investment to help pay the estimated $4-billion cost of the MD-12 jumbo jet.

Under the latest proposal, Taiwan Aerospace would organize a group of Taiwanese partners to help it form a $2.5-billion company to build the wings and fuselage of the MD-12. The group would consider ordering 20 MD-12s after McDonnell has secured 27 to 30 MD-12 orders from other customers. The proposal would not include any immediate equity investment in the Long Beach unit, but would include Taiwan’s help in obtaining a letter of credit to help McDonnell borrow about $2.5 billion for the MD-12 development.

Many analysts have speculated that the revised proposal could kill the Taiwan-McDonnell deal. McDonnell officials have said that its partner must take an immediate equity stake in the commercial aircraft business.

Since unveiling its new proposal, Taiwan Aerospace has had what Liu called “low-level” contact with McDonnell officials. “McDonnell Douglas thinks the order for 20 MD-12s is a big help, but it wants more help,” he said.

The terms of the deal may still change during future negotiations with McDonnell, Liu said, adding that Taiwan Aerospace now hopes to announce its Taiwanese investment group in early June.