The deal, which is slowly moving toward its anticipated conclusion next year, has implications for Boeing's future work in the Puget Sound area as well as its global competition with Airbus and that planemaker's own regional-jet partner, Bombardier.
Boeing said Monday it has agreed on terms with Embraer to acquire for $4.2 billion control of the Brazilian jetmaker’s commercial aircraft and services operations, a deal first announced in July at the slightly lower purchase price of $3.8 billion.
The acquisition of Embraer’s lineup of small regional airliners, called E-jets, still requires approval by Brazil’s newly elected government and will then be subject to shareholder and regulatory approvals. It’s expected to close toward the end of 2019.
The Embraer E-jets are 76- to 130-seat regional airplanes, a size just below Boeing’s 737 MAX family.
As previously announced, Boeing will install Brazil-based management, including a president and chief executive officer reporting to Boeing chairman Dennis Muilenburg in Chicago, and will own 80 percent of the joint venture to Embraer’s 20 percent.
Most Read Business Stories
- Downtown Seattle's troubles go beyond the pandemic
- Workers protest angrily near Boeing's Everett plant against vaccination mandate
- Oregon company's iron battery breakthrough could eat lithium's lunch
- New apartments are built, but renters can’t get in. Here’s what is causing the logjam in Seattle
- She pulled herself from addiction by learning to code. Now this Kirkland software developer is leading a worker uprising at Apple
One detail revealed in the final terms is that Embraer will retain the right to approve certain strategic decisions, including transfer of any operations from Brazil.
Labor unions in Brazil have expressed concern since the deal was first announced that Boeing might move some E-jet operations to the U.S. The consent clause seems designed to allay those fears so the deal can win approval from the Brazilian government.
From the perspective of Boeing’s U.S. unions, the fear is precisely the opposite: that Boeing will place work in Brazil instead of the U.S.
Boeing said in July that Embraer’s commercial operation near São Paulo will become “one of Boeing’s centers of excellence for end-to-end design, manufacturing, and support of commercial passenger aircraft.”
That implies Embraer’s engineers will move beyond designing the E-jets to do design work for future Boeing airplanes, including potentially the New Midmarket Airplane or 797 that’s expected to launch in 2019. The statement also implies that some Boeing airplane manufacturing work besides the E-jets may be done in Brazil.
If so, that will raise concerns in the Puget Sound region for two reasons: First, that any manufacturing work will be placed outside the U.S. And second, if Boeing does produce subassemblies in Brazil, that may favor final assembly in its manufacturing complex in North Charleston, S.C., over Boeing’s factories in Washington state.
Aviation analyst Scott Hamilton of Leeham.net points out that it would be significantly quicker and cheaper to ship Brazilian-made aircraft parts by sea to North Charleston, S.C., rather than through the Panama Canal to the Pacific Northwest.
The two companies also confirmed details of a separate joint venture to develop new markets for Embraer’s KC-390 military jet, which can be deployed as a troop and cargo transport plane and a refueling tanker. Under the terms of the proposal, Embraer will own a 51 percent stake in the KC-390 joint venture, with Boeing owning the remaining 49 percent.
The Boeing/Embraer tie-up was announced days after Boeing rival Airbus closed a similar deal to acquire the new CSeries commercial jet family of Canada’s Bombardier.
Airbus has integrated those jets into its lineup and is already delivering them to customers, including Delta, rebranded as the A220.
The Airbus/Bombardier and Boeing/Embraer deals are viewed in the industry as long-term strategic moves in the world’s complex aerospace manufacturing chess game.
Boeing quietly explored a joint venture with Embraer twice before over the past two decades before the companies settled in 2012 for a broad collaboration. The Airbus move finally triggered an acquisition.
When the Embraer deal closes, Boeing Brazil will become the jetmaker’s third major commercial airplane design and manufacturing center, after its major centers in the Puget Sound region and in South Carolina.
Read more about Boeing here »