Embraer Has Begun Arbitration Process Over Boeing's Cancellation of Deal
April 27 2020 - 9:47AM
Dow Jones News
By Jeffrey T. Lewis
SAO PAULO--Brazilian aircraft maker Embraer SA said Monday it
has started an arbitration process over the decision by U.S.
aerospace giant Boeing Co. to cancel a plan to buy control of the
Brazilian company's commercial jet business.
Embraer declined to give further details on the arbitration.
Boeing, which will save about $4 billion in cash from the
decision, said Saturday the companies had failed to agree on final
terms by the deal's initial termination date and that it instead
chose to abandon the plan to buy 80% of the commercial plane
business, along with another joint venture in a unit producing
Embraer's new military cargo plane.
Embraer told Boeing earlier this month that the Brazilian
company wanted to extend the negotiation process, but the U.S.
company instead chose to terminate the agreement and used false
claims as a pretext to avoid its commitments to close the
transaction, according to Embraer executives on a conference call
Monday morning.
Boeing had pursued Embraer to acquire access to smaller
jetliners seating around 100 passengers and engineering expertise,
but the Brazilian company's market value has fallen by two-thirds
since the start of the year as the coronavirus upended air travel
and led to the grounding of much of the global airline fleet.
The Brazilian company said it intends to use all remedies
available regarding the damages incurred by Embraer because of
Boeing's decision, without providing more details. The cost to
Embraer of ending the process will be substantial, but the company
said it hasn't finished calculating the figure.
The deal was first announced in 2018, and Embraer had already
begun the process of separating the commercial jet business from
the rest of the company.
Embraer's business remains attractive, and the commercial jet
unit should benefit when the sector recovers from the coronavirus
crisis, the company said. Embraer executives said they're reviewing
their strategy for the unit, but declined to comment on other
possible partners.
Embraer doesn't expect its business jet unit to feel much impact
from the coronavirus crisis, though some orders are likely to be
deferred, the company said. Its cash position is solid and the
company has enough working capital to get through the year,
executives said.
-Doug Cameron contributed to this article
Write to Jeffrey T. Lewis at jeffrey.lewis@wsj.com
(END) Dow Jones Newswires
April 27, 2020 09:32 ET (13:32 GMT)
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