Manufacturing mergers and corporate consolidations have been dominating the aerospace industry in the USA and, belatedly in Europe, for several years. The amalgamation of Lockheed and Martin Marietta, Boeing and McDonnell Douglas and the continuing debate about an Airbus Industrie single corporate entity had been observed from Asia with apparent indifference. Until now, that is.
Regional manufacturers from Beijing to Bandung have been cocooned for years from outside competition. Buoyed by economic growth and high-level aspirations of aerospace greatness, there is little wonder that no-one in Asia could have imagined this seemingly Utopian state of affairs would come crashing down.
But crash it has, dragged down by a cataclysmic meltdown of Asian currencies and stock markets. Repeated criticism of over-ambitious state funded aerospace endeavours by the likes of the World Bank was for a long time shrugged off dismissively as misinformed Western meddling. The Asian economic crash and subsequent billion dollar bailouts by the International Monetary Fund have resulted in those warnings now coming home to roost.
This has been most keenly felt in Indonesia, where even the appointment of the country's pre-eminent aerospace architect - Bacharuddin Habibie - to the position of head of state has not prevented the purse strings being cut to IPTN, setting the company off on a worldwide search for new backers, be they merchant bankers in Germany or industrial heavyweights.
China, once the bastion of centrally planned economies and grand nation-building schemes, is also being forced to look at reforming its bloated and outdated aerospace industry. The collapse of the Sino-European AE3IX project, and the MD-90 TrunkLiner programme's final coup de grace, has left Beijing-based bureaucracy Aviation Industries of China searching for a raison d'être.
Chinese aerospace complexes in Xian and Shanghai, like their Indonesian counterpart, are being left increasingly to fend for themselves. There is a growing realisation that China's state-supported enterprises can no longer subsist on the piecemeal production of antiquated Y-7 turboprops and supplementary produce such as buses and bicycles. Without Western-style reform and modernisation, China's aerospace sector is in danger of being marginalised to the tertiary position of subcontractor and supplier.
Where this message has begun finally to hit home is in South Korea. The country's corporate conglomerates, or chaebals, have been forced for once to put aside their traditional arch rivalry and come to an accommodation. The so-called "big deal" has heralded the biggest post-war industrial shake-up in Asia. It arguably offers a reform model for other big business-type economies, such as that of Japan.
South Korea's industrial giants have agreed to restructure and rationalise their overlapping and money-losing interests. For the aerospace sector, this will take the form of a single amalgamated entity in the place of three. Many would argue that, having got an agreement in principle to merge, the most daunting hurdle has already been overcome.
This is not to underestimate the task still before Daewoo Heavy Industries, Hyundai Space & Aircraft and Samsung Aerospace. Difficult decisions lie ahead, not the least of which is the formulation of an agreed business plan that takes into full consideration the question of the companies' huge levels of debt.
There is then the politically tricky problem of reducing what is potentially an increasingly idle workforce in a heavily unionised country where just a sniff of redundancies has workers manning the barricades.
South Korea's demonstrated willingness to reform and change has caught the interest of potential Western investors. Companies such as Boeing, British Aerospace and Lockheed Martin, having been through the pain of consolidation themselves, are in no hurry to rush in before local industry has been through the same process of restructuring. For Daewoo, Hyundai and Samsung there is now nothing for which to go back and every incentive to press on.
Source: Flight International
