Boeing Terminates Joint Venture Agreement With Brazil Embraer
On December 22, 2017, Brazilian President Michel Temer said the sale of Embraer to Boeing was “not an option,” adding that the government was in favor of other companies, such as Boeing, being able to forge partnerships with the company, while warning that there would be no veto on any change in stock control.  On 28 December, defence Minister Raul Jungmann refused to transfer control of the parent company Embraer S.A. because he believed that Embraer`s defence activity could not be separated from its business activities, but that it would support an agreement by maintaining local control of the company.  On 2 January 2018, the Brazilian financial daily Valor Econémico announced that the companies were now aiming to create a joint venture to avoid changing Embraer`s control to soften Brazilian regulators.  This morning in the United States, it was learned that Boeing had terminated its joint venture agreement with Embraer. According to the manufacturer, Embraer did not meet some of the terms of the agreement, which led to Boeing`s termination of the plan. “We believe Boeing is in a systematic pattern of delays and repeated violations of the MTA because it is unwilling to close the transaction in light of its own financial situation and 737 MAX and other business and reputational issues,” Embraer said Saturday. “Embraer believes that it fully meets its obligations under the MTA and has met all the conditions that must be met by April 24, 2020. Embraer will take all action against Boing over damages to Embraer as a result of Boeing`s unlawful termination and violation of the MTA. Unions representing Embraer employees filed a class action on December 20, 2018 to block the agreement, and Judge Victor Giuizo Neto again filed an injunction, saying: “The brutal asymmetry in the company`s shareholder structure prevents the company from being executed without compromising the survival of national interests.” The order of reference was challenged by Embraer and overturned two days later with the President of the Federal Court of Justice Therezinha Cazerta, the case being outside the jurisdiction of the Tribunal.    The volatility of the current aviation market should not be ignored. Both manufacturers understand that it may take some time for orders to be placed.
This could have been part of the reasons for the termination of this agreement. Boeing could have worked with Embraer to extend the deadline. However, the American producer decided not to do so. Leeham News, the aviation industry publication, noted that the agreement would be good for both companies, given that Boeing needed Embraer`s small jets and needed The marketing power of Embraer Boeing, given that the E-Jet E2 family was selling slowly, partly due to the fact that customers were waiting for the joint venture agreement and that the E175-E2 was too heavy to sell to U.S. airlines due to restrictions imposed by the scope clause.  Boeing Brasil-Commercial was a planned but failed joint venture between Boeing and Embraer to design, build and sell commercial aircraft worldwide. The partnership was created in February 2019, after Boeing agreed to acquire an 80% stake in Embraer`s commercial aircraft division.