Taiwan Will Reopen Talks on McDonnell

Talks with McDonnell Douglas Corp. will be resumed in a bid to salvage Taiwan’s troubled plan for a multibillion-dollar link-up with the U.S. airplane maker, the government said Tuesday.

A new negotiating team, which includes officials of Taiwan Aerospace Corp. and leading local industrialists, hopes to restart the talks in early September, Vice Economics Minister Yang Shih-chien told reporters.

He denied an Asian Wall Street Journal report quoting unnamed sources as saying Taiwan was quietly abandoning the tie-up.

“Our desire to cooperate has not changed,” Yang said. “We are proceeding with the McDonnell plan and have not received any indication that McDonnell wants to abandon talks on cooperation.”

Earle Ho, chairman of Taiwan Aerospace, also denied the report and said talks would continue. But he added that there are obstacles to finalizing the deal.

“Conditions proposed by McDonnell are contrary to those proposed by Taiwan Aerospace, and that is why talks have been deadlocked,” Ho told state television. He did not elaborate.

Taiwan Aerospace, 29% owned by the government, signed a preliminary agreement with McDonnell last November to buy up to 40% of its commercial aircraft operations for $2 billion.

The tie-up would give the No. 2 U.S. aircraft maker funds to develop its next-generation MD-12 jumbo jet and would boost Taiwan’s fledgling aerospace industry, which would produce wings and fuselage components for the aircraft.

But Taiwanese legislators and a government-led feasibility study later criticized the deal as too risky.

Last month, Taiwan Aerospace proposed a new model for a tie-up that would not involve a Taiwanese equity stake in the venture.

McDonnell is the biggest U.S. defense contractor.