Embraer and Boeing signed a memorandum of understanding on July 5, 2018, on the long-awaited joint venture between the two manufacturers. Boeing is to hold an 80 percent ownership stake in the joint venture and Embraer will own the remaining 20 percent.
The joint venture is to be led by a Brazilian management team, President and Chief Executive Officer. Meanwhile, Boeing will have operational and management control of the new company. Embraer’s commercial plane production was valued at $4.75 billion. Boeing’s 80 percent ownership stake in the joint venture is estimated at around $3.8 billion.
It was expected that Boeing would absorb Embraer commercial plane production, while the company would keep its military division and potentially business jet department. However, in the statement announcing the collaboration on commercial plane, a second joint venture for defense programs was announced, mentioning Embraer’s transport plane currently under development, the KC-390.
Top executives from Boeing and Embraer marked their proposed joint venture at the Farnborough Airshow with a joint briefing to promote the move and, perhaps more important, send a signal to the aerospace industry of their commitment to complete the deal next year.
Calling the deal to take an 80-percent share in Embraer’s commercial aircraft business and establish a joint venture to support the KC-390 tanker transport a “natural evolution” of the two companies’ 30-year relationship, Boeing CEO Dennis Muilenburg also expressed satisfaction with the opportunity to further align their cultures, engineering expertise, and technical capabilities.
“Boeing has had many defining points in our 100-year history,” said Muilenburg. “I think this is another one of those historic moments in Boeing’s long history in aerospace.”
For his part, Embraer CEO Paulo Cesar de Souza e Silva emphasized the strategic value of the deal for his company and the social value of the growth it will engender for the Brazilian people.
“We believe that this transaction is very strategic, so it’s a partnership that will provide Embraer access to new markets,” said Silva. “Of course, Boeing is a bigger global player. We would have the opportunity to complement Boeing’s products and have much more access to clients around the world. More access to markets means more aircraft that will be manufactured, delivering more jobs in Brazil, more technology going forward, [and] access to more capital.”
Silva explained that Embraer represents “a good fit” for Boeing not only for competitive reasons, but in the Brazilian company’s expertise in areas such as landing gear, pylons, and aircraft interiors.
Muilenburg noted that the two companies have participated in detailed discussions over the last year, working through “in a very disciplined way” the deal’s structure, the associated regulatory approvals, and the shareholder votes that would occur subsequent to reaching a final proposal. “So, we’ve laid out the framework for completing due diligence and all of the final approvals over the next year or so, and we’ve made a lot of strong progress on that to date, which has allowed us to make this partnership announcement.”
He also addressed potential concerns over the competitive implications of the trend toward consolidation in the aerospace industry, insisting that the arrangement would create more choices for customers, not fewer.
“When you take a look at the global aerospace market, clearly there have been very few strong players throughout the world. That’s been the nature of the marketplace,” Muilenburg said. “We have seen some consolidation forces in the marketplace in the supply base as well. We think this move is one that brings together two great companies that don’t overlap today. There’s no overlap in our product lines; rather they’re complementary fits.”