Boeing Takes On Bombardier and Airbus With Embraer Deal


Boeing said on Thursday that it planned to take over the commercial jet business of the Brazilian aerospace company Embraer, a move into smaller jetliners that mirrors a deal last fall by rival Airbus to join in a partnership with Bombardier.

Boeing would own 80 percent of Embraer’s commercial aircraft and services arm, which the companies said was worth $4.75 billion. Embraer would own the rest. Under the memorandum of understanding announced by both companies, management will be based in Brazil, but the venture will be controlled by Boeing, which is based in Chicago.

The companies also said that they would form another joint venture focused on “new markets and applications for defense products and services,” such as Embraer’s KC-390 military plane.

The two companies have collaborated on projects for decades and have been in talks since last year on a partnership for planes with 70 to 450 seats. Dennis Muilenburg, Boeing’s chief executive, stressed in a statement on Thursday that the arrangement would benefit both Brazil and the United States.

Boeing and Embraer will spend the next few months negotiating details of the agreement, which is expected to close by the end of 2019 and result in $150 million in pretax cost savings by its third year, the companies said.

In October, Boeing’s main rival, the French jet maker Airbus, announced that it would enter the smaller jet market by partnering with Bombardier, the Canadian company whose CSeries aircraft carry 100 to 150 passengers. That deal closed earlier this week, and could allow Bombardier to sidestep American duties because the planes would be produced, at least in part, in Alabama.

The Boeing-Embraer deal comes at a tense juncture for major players in international trade, as the Trump administration edges toward a trade war with governments in Europe, Canada and Asia.

Boeing has clashed with Bombardier for months over sales of the CSeries planes.

After Delta Air Lines ordered 75 CSeries planes last year, Boeing said that Bombardier was able to sell the small aircraft in the United States at artificially low prices with the help of subsidies from the Canadian government, a practice known as dumping.

The Commerce Department called for taxes of nearly 300 percent on the CSeries, but the United States International Trade Commission, an independent agency, struck down the recommendation.

Prime Minister Justin Trudeau of Canada and Prime Minister Theresa May of Britain, where the wings of CSeries planes are made, pushed Boeing to drop its case. Canada suspended plans to spend billions of dollars on Boeing fighter jets.

In another case, the World Trade Organization ruled in May that Europe had illegally subsidized Airbus, hurting Boeing.


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