smithbs wrote:EMBSPBR wrote:smithbs wrote:https://seekingalpha.com/article/434344 ... -collapses
"there was an argument for low cost engineering resources in Brazil. However, that is not quantified in the article and my suspicion is that while engineering costs may be lower in Brazil, it might not be by much (and could easily be lost through the usual mismanagement foibles of a merger/jv)."
Boeing has more to loose than pay what was previously agreed and that due COVID-19 worth less now.
From the same source, is clear that in long term they will lose more just than the money that could be invest in the JV:
"So, low-cost engineering is not necessarily a bad thing and if we look at Embraer's expertise,
I do think that you can say that Brasil has a very strong competent engineering core that is relatively cheap for a company like Boeing.
It would have helped Boeing in improving the business cases for new jet developments."
"Boeing would have gotten a peek in the kitchen of how Embraer makes their design decisions with insight in flight-control technology,
aerodynamic technology, landing gear technology, and weight management.
Those are all factors that could help Boeing, even though they have a very capable engineering core themselves."
"On top of the engineering resources and technology, we have the product itself. With a stake in the joint-venture, Boeing would have had a product in the sub-150-seat segment to offer, where it had nothing to offer to customers previously. On top of that, Boeing would also reap the rewards of services contracts for the installed base which fits the company's services strategy. So, the strategic importance of the joint venture is more than clear."
However, from my point of view, it was easier for Boeing to "pull the plug" instead of sitting down and trying to renegotiate the JV in the long term and in better conditions for both them and Embraer.
So, in the post-Covid-19 medium term, Boeing will continue to be the same slow, arrogant and lazy pachyderm that once dominated the industry ...
Maybe the points have some validity, but to us spectators they still have not been quantified. Is there really a deal to be had with low cost engineering, or is it mostly illusion? Does Boeing have something to learn from Embraer, or not much worth paying for? I'm not seeing anybody posting numbers, just opinion. The only quantifiable argument is the value of the E2 series, which evidently is worth a fair bit less than $4.2 B.
I suspect that in Feb 19, Embraer looked quite attractive to Boeing, Boeing was flush with profits, had good revenue, the MAX was ramping up, and the C-Series as well as the E2 series both seemed formidable. Fast forward to Jan 20, the MAX was grounded with profits sinking down a black hole, orders were slowing quickly but Embraer still looked quite good, maybe a 10% loss of value, nothing to quibble about. But with the bottom dropping out in March 20 this JV suddenly looked like a disaster of an imvestment, getting any bailout money would look bad, as they were buying. Embraer was not a candidate for bailout with Boeing there, but are now elegible.
Embraer is worth far below $ 2B now, not 4.1B for 80% so it was time to part. Somewhere down the road who knows.