Boeing ends JV agreement with Embraer, sparking acrimony

28th April 2020

By: Rebecca Campbell

Creamer Media Senior Deputy Editor

     

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US aerospace giant Boeing announced on April 25 that it had terminated its Master Transaction Agreement (MTA) with Brazilian aerospace group Embraer. Under this, the two groups would have created two joint ventures (JVs). The first JV would have embraced Embraer’s commercial airline business and the second one would have covered the development of new markets for Embraer’s military airlifter, the C-390 Millenium.

The initial termination date for the deal was April 24. Boeing asserted that it had “exercised its rights” because Embraer had not satisfied “the necessary conditions”. However, the agreement to jointly market and support the C-390 remained in effect.

“Boeing has worked diligently over more than two years to finalise its transaction with Embraer,” stated (Boeing’s) Embraer Partnership and Group Operations president Marc Allen. “Over the past several months, we have had productive but ultimately unsuccessful negotiations about unsatisfied MTA conditions. We all aimed to resolve those by the initial termination date, but it didn’t happen. It is deeply disappointing. But we have reached a point where continued negotiation within the framework of the MTA is not going to resolve the outstanding issues.”

Embraer vehemently rejected Boeing’s claims, asserting that it had fully complied with the requirements of the MTA. The Brazilian group further affirmed that it had satisfied all the conditions that had had to be met by April 24.

“Embraer believes strongly that Boeing has wrongfully terminated the MTA, that it has manufactured false claims as a pretext to seek to avoid its commitments to close the transaction and pay Embraer the $4.2-billion purchase price,” stated the Brazilian enterprise in its press release (also issued on April 25). “We believe Boeing has engaged in a systematic pattern of delay and repeated violations of the MTA, because of its unwillingness to complete the transaction in light of its own financial condition and 737 MAX and other business and reputational problems.”

(The Boeing 737 MAX was the latest generation of the company’s 737 single-aisle airliner family. The 737 MAX has been grounded by regulatory authorities around the world for more than a year, following the second of two fatal accidents which killed a total of 346 people.)

“Embraer will pursue all remedies against Boeing for the damages incurred by Embraer as a result of Boeing’s wrongful termination and violation of the MTA,” asserted the company. “Embraer remains today a successful, efficient, diversified and vertically integrated company, with a history of serving customers with highly successful products and services built on a strong foundation of engineering and industrial capabilities. … Our history of over 50 years is lined with many victories but also some difficult moments. All of them were overcome. And that’s exactly what we are going to do again. Overcome these challenges with strength and determination.”

 

Edited by Creamer Media Reporter

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