Boeing to pay Embraer $150 million for withdrawal from tie-up talks
Posted by Durian_Queef@reddit | aviation | View on Reddit | 23 comments
Posted by Durian_Queef@reddit | aviation | View on Reddit | 23 comments
Mountain_Fig_9253@reddit
The wins keep on rolling for Boeing. /s
Adjutant_Reflex_@reddit
Considering some of the chatter about the demands that Brazil was placing on the JV, and the massive impact COVID had on businsss, a $150m penalty is a win. The article even notes that this was less than half of what was being anticipated.
MachKeinDramaLlama@reddit
The whole thing was a massive blunder, though. Boeing really should have just accepted Bombadier's offer to buy out the C-series. This owuld also have allowed them to not do the 737 Max and go with the NSA/NMA or whatever it would have been, which would have given them the advantage over the 320 family and would have pushed Airbus into doing a new single-aisle aiiplane as well. Instead Boeing fucked it all up.
Boeing's lobbying pushed Bombardier to hand the C-series to Airbus on a silver plater. This gave Airbus the ideal product line-up to defeat the 737 Max both on the cost and the performance end of the spectrum. The Embraer JV was a kneejerk reaction to that. It might even have been the right move in the untenable situation Boeing had maneuvered itself into. By all accounts Embraer has a very good R&D department that could have taken over the duty of developing small single aisle aircraft for Boeing. However to me it seems more like a desperate move to reassure shareholders that Boeing had an answer to Airbus, a solution that would halt the trend of Airbus always having the initiative and Boeing always losing ground.
Only having to pay the comparatively low sum of $150 million to get out of the deal is better than what Boeing probably expected at this point, but it's still not a good event in absolute terms. Boeing lost a lot of time and money that should have been invested to help them with any of the myriad issues they are facing. E.g. the moment Airbus decides that there is more value in stretching the A220 than in keeping the 319neo around, the 737 is fucked. Boeing does not have an answer to this and now they have neither the time nor ressources to come up with one.
SSMEX@reddit
I'd object to some elements of this alternate history. The CSeries is not a viable competitor to the A320neo family. The larger CS300 is comparable to the A319neo, but there is just no way a 5-abreast plane can compete with a 6-abreast plane, especially on the larger A321, which is where Airbus is really pulling away from Boeing. There was also no credible way that this could have happened in time to compete against the A320neo as it entered service in 2016 and the CSeries wasn't sold to Airbus until 2017. The 737 MAX was launched in 2011 and was substantially complete by the time Bombardier sold the CSeries. Even if the CSeries were a perfect drop-in replacement for the 737, there is still no way Boeing could have scaled production quickly enough to meet the 60-75 per month volume of the A320 family.
Further, had Boeing started work on the NSA/NMA instead of the 737 MAX, they'd be in a horrible position even if they had the CSeries (which IIRC was never even offered to them). I guess MCAS might not have happened, but Boeing repeatedly tried to close the business case for investing in the NMA and could never make the numbers work—the market was just too small and the A321neo/XLR were close enough substitutes.
In retrospect, MCAS was not implemented well. The form it's in now is what they should have initially implemented, but the 737 MAX was absolutely the correct product to launch in 2011. If the 787 hadn't been delayed, maybe there would've been enough time to launch a clean sheet new small airplane to compete against the A320neo, but even if that were possible, it's not clear that would've been an ideal outcome in the long term. Most of the efficiency gains from single-aisle aircraft have come from engine improvements, as fuselage and wing improvements matter much less on shorter flights. It's not clear to me that either a NSA or NMA would have sold that well given what we know now, especially with technologies like TBW and open fan engines on the horizon.
MachKeinDramaLlama@reddit
I skimmed this comment and the alarm number of claims that go against what the people who used to be in controlling positions at Boeing at the time have said in interviews has convinced me that I have no interest in discussing this matter with you.
thedennisinator@reddit
The c-series is a good plane but it's worth noting that it's been plagued by serious profitability issues. You're making it sound like it was a no-brainer to buy the program when doing so would have brought in losses and debt.
a_sneaky_hippo@reddit
I wonder if most shareholders feel like this is a win. I certainly wouldn’t appreciate it if I held the stock.
Adjutant_Reflex_@reddit
Well if you thought the fine was going to be $300m or $400m, and it’s “only” $150m, and the company is more focused on union negotiations which will cost something like $1bn a week, this is probably a nothing burger in the grand scheme of things.
a_sneaky_hippo@reddit
I do see your point. Relatively better than anticipated.
My main issue is that it is 150M down the drain for basically no good reason, whereas the billion a week would be in return for the labor of their employees, which generates the revenues.
bringmemorechicken@reddit
Boeing was so stupid for backing out of this. Could’ve been a real money maker for them and all they had to do was throw $ at it. Instead they pissed away money on defense contracts and stock buybacks.
Adjutant_Reflex_@reddit
They would've been on the hook for spending close to $5bn on the JV at literally the height of the pandemic at the same time they were preparing to shut down lines and furlough tens of thousands of employees.
It would've been economic and political suicide.
bringmemorechicken@reddit
Gotta spend money to make money.
This was an opportunity for Boeing to follow their one proven business strategy… buying someone else’s success and slapping a Boeing logo on it.
Adjutant_Reflex_@reddit
You don’t spend $4.5bn in April 2020 as you’re watching the aviation industry go through the single worst downturn in history. A downturn that, at the time, no one knew how long it would last and when, or even if, the industry would ever fully recover.
UWTF@reddit
They simply didn’t have the money for it due to COVID and the 737 grounding
Acceptable_Tie_3927@reddit
It's wise not to do business with Brazil. That country is politically, societally and economically very unstable, like they replaced the national currency 5 times in 20 years, 50-70% of population is unemployed, their cities are 90% favella slums and 10% walled luxury villa clusters. Such a highly divided situation is impossible to maintain for long, a revolution or civil war will come and then Embraer planes won't have spare parts. Furhermore, they are way too cozy with the russkies and P.R.C. to trust!
Civvie aviation is one thing, no flights no profit, no problem, but I can't graps those countries, including my Hungary, who buy Embraer KC-390 military transport / refuel / airdrop planes. There no spares - no flight could mean the enemy marches through your capital...
aitorbk@reddit
So you played far cry 6 and convinced yourself that is Brazil? It makes no sense, I suggest you go there and get your own ideas, or just research it a bit. While not ideal, no country in the world could be as you describe and lasT more than a few weeks.
cvl37@reddit
‘Tie-up talks’. I worked at Boeing (Global Services) at the time and there were already Boeing people integrating with the Embraer business and allegedly having sales meetings with potential customers for Embraer products.. Teams at Embraer were already being disbanded and let go. It was such a shock when they pulled out.. it seemed a done deal
formation@reddit
Well that's awkward
FishingRelative3517@reddit
Looks like the C-390 is now doomed, to recoup the development costs of that plane it would take like 20 yrs of orders.
CDninja@reddit
I don't get it. The C390 is selling well
SortOfWanted@reddit
Care to elaborate?
The decision was already taken 4 years ago, this is only the conclusion of the legal battle since then.
CDninja@reddit
Boeing got away with it for cheap
Charming_Cry9822@reddit
Well, looks like Boeing is cutting a fat check to Embraer for backing out of their little partnership dance.