Development bank loan awaits signing of JADC contract with Boeing for 35% workshare
Japan will determine within the next two months how much government funding should be allocated for 7E7 airframe development and whether 7E7 engines should also qualify for national subsidies or loans.
The Development Bank of Japan (DBJ) will decide on a loan application from the Japan Aircraft Development Corporation (JADC) after the JADC signs a master executive contract with Boeing covering its 35% workshare on the 7E7, say industry sources. Officials from the JADC and its main members - Fuji, Kawasaki and Mitsubishi - were in the USA last week trying to conclude the contract.
The JADC had aimed to finish the contract before June and is still hoping talks will wrap up this month. But Japanese sources say the negotiations have been long and hard, especially on price.
Sources say there is also conflict over Boeing's request for Japanese firms to outsource some of their workshare to other companies in Asia. The Japanese prefer to keep all the work in Japan, at least during development and early production, to minimise the risk of potential problems, in particular relating to composite materials.
The JADC's failure to conclude a contract quickly has forced its members to cover early development costs with their own funds. But the programme's schedule has not been affected because each of the companies has already begun their portion of the early development work without a final contract.
The JADC has already begun discussing terms with the DBJ and expects the loans to be issued within several of weeks of the contract signing. The loans will be on commercial terms, but the government will initially cover some of the interest payments.
About $25 million has been allocated in fiscal year 2004 for these payments and the Ministry of Economy, Trade and Industry (METI) will decide by early September how much money should be set aside in FY05, which begins in April.
A government source says the funds are not subsidies and will only be allocated after the contract is finished. "Both METI and DBJ want some contracts," the source says.
METI is also waiting for the result of negotiations between Japan's three major engine companies and the two manufacturers selected by Boeing to offer 7E7 powerplants.
General Electric is negotiating workshare arrangements with Ishikawajima-Harima Heavy Industries and Rolls-Royce is negotiating with Kawasaki.
BRENDAN SOBIE / TOKYO
Source: Flight International
