Boeing-Embraer joint venture blocked by Brazil’s federal court
Five months after Boeing and Embraer signed a memorandum of understanding, a judge of the Brazilian federal court blocked the prospect of a merger on December 7, 2018, after the plans were referred by members of the Brazilian parliament belonging to the left-wing Workers Party.
The order of the court prohibits Embraer’s management from signing the final agreement that would see Boeing take over the civil aviation division of the Brazilian manufacturer. Judge Victorio Giuizio Neto justified the decision stating doubts that the deal would have any positive outcome for Embraer. “The reason is very simple, Boeing is not giving up anything,” he was quoted as saying by Reuters.
The project, as it was described on July 5, 2018, was to create a joint venture (JV) between Embraer and Boeing, in which the U.S. plane maker would hold a 80 percent ownership stake in the joint venture, estimated at around $3.8 billion.
While initially the military division that the government judged too strategic to let go was supposed to be left aside, a second joint venture for defense programs was also announced at the time, mentioning Embraer’s transport plane currently under development, the KC-390.
Judge Victorio Giuizio Neto calls on Brazil’s National Defense Council - an advisory body made up of ministers and commanders of the Armed Forces - to express itself on the merger before it may be enacted to make sure the strategic assets of Brazil would be safeguarded.
Not much has been disclosed since July 2018, as the project was mostly on hold during the presidential elections. However, the newly-elected Jair Bolsanaro that should take office on January 1, 2019, defended the project to protect Embraer against rivaling Airbus-Bombardier alliance.
In a similar way to Airbus and Bombardier partnership that came into effect on July 1, 2018, Boeing was to use Embraer’s models to enrich its catalogue with smaller airplanes, like the new E-Jets series, while Embraer would benefit from Boeing’s commercial power.
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