Four Brazilian lawmakers have petitioned the federal court to stop Embraer from forming two proposed joint ventures with Boeing. Embraer dismisses the attempt by the Workers Party members as a "natural" reaction to its proposed transactions – but not a barrier to completing the deals.
The substance of the four politicians' objections to Embraer's moves is inaccurate, bordering on paranoid. But some details of their complaint raise valid issues and highlight the difficulties that lie ahead if the deals are to be approved by year-end.
On 5 July, the companies announced the agreement under which Boeing is to acquire 80% of Embraer's commercial aircraft division for $3.8 billion. They are also discussing a separate joint venture focused on the Brazilian manufacturer's defence products, especially the KC-390 transport/tanker.
Customers seem to have embraced the deal. In an era of increasingly powerful tier-one suppliers, Embraer's ability to lower the costs of producing a new family of re-engined regional jets is limited without the market leverage offered by Boeing. With its only competitor – the former Bombardier CSeries – now being sold as the Airbus A220 family, the upper range of products from Embraer's commercial division faces annihilation.
If those are the most obvious reasons for completing the deal, there remain significant questions about how such a partnership will work. How will Embraer keep its 4,000-strong engineering workforce intact? What is the fate of its executive-jets business, which is excluded from the acquisition proposals? What is the scope of Boeing's role regarding the proposed defence joint venture – and how would it protect the Brazilian government's ability to preserve its sovereignty over homegrown military technology?
The lawmakers are right to demand answers to these questions before allowing either deal to be approved. Embraer, though privatised since 1994, is a creation of the Brazilian government, possessing technology and skills that are of great value to the whole country. Such a transaction should face intense public scrutiny.
In other matters, the opposition is less reasonable. In a video posted on Facebook, politician Carlos Zarattini theorised that the deals were a ploy by Boeing and the US government to appropriate the technology and skills of a rising industrial and strategic competitor. But despite impressive strides over the last two decades, Embraer's annual revenues of less than $6 billion are no threat to Boeing's near-$100 billion sales total.
Source: Flight International
