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Boeing Terminates Joint Venture Agreement With Brazil’s Embraer
Boeing has ended agreements for joint ventures with Brazil’s Embraer after a deadline for the deal passed, the latest derailment at the aerospace giant. (www.cnbc.com) Más...Sort type: [Top] [Newest]
There is so much liability and uncertainty in this industry. It seems in order to persevere you need be dedicated to 'flight.' Great respect for Boeing CEO Dave Calhoun. His is a job I would not want.
It's a wild market! Simple like that! Boeing is not right or wrong. It's tryng to keep its head out ofthe water. As for Embraer, well maybe it won't make it. I just can't see how...hope it find some way out of China. Anyway, put it on the account of COVID-19!!
Simple economics. Embraer's market capitalization has fallen to $1.1 billion.
So Boeing's supposed to pay $4.2 billion for 80% of $1.1 billion?
No that can't work. Boeing is right to walk away.
So Boeing's supposed to pay $4.2 billion for 80% of $1.1 billion?
No that can't work. Boeing is right to walk away.
So I have seen this canard before: "the market cap is what matters." It isn't.
What Embraer represented to Boeing was several fold and not captured by the market cap measure used by investors:
1. Line production space and profitable planes.
2. Engineering talent in-place.
3. Opportunities to harmonize Boeing cockpits into the regional realm as Airbus has done with the Airbus cockpits and the A220. This translates into sales and the opportunity to make fleets all-Airbus. As Delta transitions away from Boeing products for the long haul fleet, Boeing has made no progress on the NMA that Delta was interested in buying, and Delta stands as a carrier not affected by the MAX grounding, this threat is very much real.
4. A solid foothold in South America.
Lest you believe I am incorrect, I will remind you that Boeing's push for a MAX response to the Airbus A320neo was primarily to mollify investors after having been caught flat-footed. I am sure you are aware of the ramifications of not having a clean sheet redesign of the 737.
More to the point, the talks have dragged with the grounding of the MAX over a year ago. COVID-19 is not a trivial problem for Boeing either. The problem is with Boeing, not Embraer.
What Embraer represented to Boeing was several fold and not captured by the market cap measure used by investors:
1. Line production space and profitable planes.
2. Engineering talent in-place.
3. Opportunities to harmonize Boeing cockpits into the regional realm as Airbus has done with the Airbus cockpits and the A220. This translates into sales and the opportunity to make fleets all-Airbus. As Delta transitions away from Boeing products for the long haul fleet, Boeing has made no progress on the NMA that Delta was interested in buying, and Delta stands as a carrier not affected by the MAX grounding, this threat is very much real.
4. A solid foothold in South America.
Lest you believe I am incorrect, I will remind you that Boeing's push for a MAX response to the Airbus A320neo was primarily to mollify investors after having been caught flat-footed. I am sure you are aware of the ramifications of not having a clean sheet redesign of the 737.
More to the point, the talks have dragged with the grounding of the MAX over a year ago. COVID-19 is not a trivial problem for Boeing either. The problem is with Boeing, not Embraer.
their market cap may be only $1.1bn (only? lemme check the cup holder in my work van...) But, Embraer is not looking at a string of huge financial liabilities (as of yet undetermined) for the 737MAX ongoing saga - which could easily go in to the billions. It's also unlikely Boeing is actually sitting on $4.2bn in liquidity. (doubtful any of the airframers have piles of cash at this point) Airbus' tab for the CS program from Bombardier was on track to be recovered fairly soon prior to this virus hoo-haa screwing everything. It's not entirely the face value, but what can be built from it. Market cap of $1.1bn = 11-12 E series(~ $90m ea.) $1.1bn seems awfully low at that point. Hopefully they both survive intact.
Embraer is in a lot worse shape than Boeing is from a financial standpoint.
Yep, market cap. was $1.1 billion last Friday. It will very likely drop below $1 billion today.
Yep, market cap. was $1.1 billion last Friday. It will very likely drop below $1 billion today.
Oh and btw...Embraer is not in a lot worse shape from a financial standpoint. Actually both companies are almost equal, and yet Boeing should be well ahead of the curve.
Market cap dropped just below 1.1M on news Boeing was terminating the agreement for as yet undisclosed reasons. Embraer had all the T's crossed and i's dotted on the agreement, but Boeing wanted more. Yes it dropped below 1M, but has rebounded back.
Remember Boeing made the offer before the whole MAX fiasco, and then COVID-19 helped push, so I can almost guarantee you that Boeing was looking for a way out, that would make it seem "non-financial" to avoid arbitration...one they would potentially lose.
Remember Boeing made the offer before the whole MAX fiasco, and then COVID-19 helped push, so I can almost guarantee you that Boeing was looking for a way out, that would make it seem "non-financial" to avoid arbitration...one they would potentially lose.
interesting. Brazil has had their share of financial punches to deal with. I wonder what Embraer's debt loading ratio looks like, out of curiosity (and where does it lie)? (mfg. infrastructure vs. sketchy finance deals to end-use customers to make the sale)