CHICAGO/SAO PAULO, Jul 07 (Gulf News): Boeing Co is forming a $4.75 billion (Dh17.45 billion) venture with long-time industrial partner Embraer SA.
It's a move to expand the US planemaker's manufacturing base abroad while extending its reach into the market for small jetliners.
Under a preliminary deal, Boeing will own 80 per cent of a partnership controlling Embraer's commercial aeroplane and services business while the Brazilian manufacturer holds 20 per cent, the companies said in a statement recently.
The tie-up caps years of talks between the two, while extending the duopoly held by Boeing and Airbus SE as competitive threats emerge from rivals in Russia, Japan and China.
By adding Embraer's E-Jet family to its portfolio, Boeing bolsters its arsenal in the newest battlefront with Airbus: the market for 100-seat planes.
The European aerospace giant took control of Bombardier Inc.'s C Series jet on July 1, through a joint venture it forged with no out-of-pocket cost.
Boeing was left without a comparable offering, while Embraer, Bombardier's main rival, faced a tough new competitor in Airbus's global marketing organisation.
Embraer, a jewel of Brazilian industry, will remain a separate company that makes military and private jets while reaping a revenue stream from the new partnership.
The structure, along with the company's flagging sales and an increasingly challenging market, helped win the support of the Brazilian government.
Boeing was little changed at $332.90 in early trading in New York. Finalisation of the deal is expected to continue in the coming months, the companies said.
Assuming the pact wins regulatory approval, the transaction is expected to close by the end of next year. The partnership is expected to add to Boeing's earnings beginning in 2020.
For years, Boeing and Airbus focused on larger, more-profitable jetliners and shifted away from the smaller planes, which have similar development costs but sell for lower prices.
Airbus's deal with Bombardier, and Boeing's pact with Embraer, signal that the big planemakers intend to deny a foothold in the lucrative narrow-body market to ambitious newcomers, such as Commercial Aircraft Corp. of China.
Embraer brings engineering talent that Boeing could tap for the new midrange jet on its drawing board, dubbed the 797 by analysts. Embraer also has lower-cost production capabilities that the Chicago-based planemaker could use to build components such as actuators and landing gear as it brings more supplier work in-house, said Canaccord Genuity analyst Ken Herbert.
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