Enigmatic D’Long in race to fund flight of relaunched 728

 - October 4, 2007, 10:05 AM

When China’s D’Long Group announced last year it would buy the Fairchild Dornier 728 development program from bankruptcy administrators, many questioned the little known company’s ability to attract the estimated $1 billion investment needed for certification and series production. Nearly a year later, the sketchy information the company has so far released has engendered no more confidence that it commands the resources to carry out Fairchild Dornier 728 development, much less organize an adequate support structure.

As part of the estimated $10 million purchase, the Chinese group acquired both prototypes and all the program’s fabrication and assembly tooling and established a new subsidiary called Fairchild Dornier AeroIndustries at Dornier’s original manufacturing facility near Munich, Germany. Following last year’s static tests, D’Long personnel carried out a series of power-on tests in February, and proclaimed the first prototype would fly by late this year. According to D’Long’s stated schedules, certification and the start of production would happen in 2006.

However, the new owners continue their search for partners–a difficult task given the previous Fairchild Dornier drained the seemingly ample investment of Clayton Dubilier and Rice before it got the chance to fly the first prototype. Runaway development costs ultimately doomed the program during its previous incarnation.
However, with much of the work already done, D’Long expects to avoid the kind
of costly development disruptions that plagued the 728 throughout its last go-around, while maintaining low production costs with more extensive use of Chinese-built parts. To proceed as a joint German-Chinese venture, the program would theoretically combine low components costs with German technical know-how and European marketing expertise.

Headquartered in Shanghai, D’Long Strategic Investment Co. is a large and widely diversified group aiming in its words “to create new values for China’s traditional industries.” Founded in 1986, it started organizing distribution of locally produced apparel, food processing and importing computers. In the following years, the group entered into automotive and machine manufacturing, real estate, agricultural development, mining, tourism and other fields, taking over previously state-owned facilities. One of its more exotic activities is the Minsk project, a military theme park built around the former Soviet aircraft carrier Minsk, moored near Shenzhen City on the South China Sea.

Although it defines itself as a fully private enterprise, D’Long claims to enjoy “solid support in party committees and government.” Creating new values for China’s traditional industries includes, for instance, helping local farmers participate in establishing large enterprises for fruit, vegetable and meat production with all the necessary infrastructure for storage, transport and export. However, the government’s alleged support for an airplane in the same category as the indigenous ARJ21 appears highly dubious given China’s hopes to market its product in Southeast Asia. In any case, it almost certainly will not allow any foreign-built airplanes to compete for Chinese airline business.

A multinational corporation, D’Long opened offices in Detroit and Munich in the mid-1990s to foster technology exchange with foreign industries. In the manufacturing field, the group works with Eaton in the U.S., Daewoo in Korea and with truck and machine manufacturer MAN in Germany. Collaboration includes license production of trucks and components, as well as export of labor-intensive components at prices much lower than those available in the West. The German office in Munich, to which FD Aero Industries reports, takes its direction from Jonathan Chu, a Chinese national living in Germany for more than 10 years.

D’Long does not publish full financial results and projects a typically guarded Chinese attitude toward sales figures. However, the group has registered share capital of 500 million yuan ($60 million), and reported total assets of 13.6 billion yuan ($1.6 billion) at the end of 2002. Its structure includes six “group companies” and participation in various other ventures.

One of the six, Xiang Torch Investment Co., builds trucks and produces automotive parts, machinery, electrical equipment and industrial gases. Xiang Torch claims that in 2002 it built 30,000 trucks, 100,000 heavy-duty gearboxes under license from Eaton and 50,000 gearboxes under license from ZF, Germany. The company also exports automobile breaking systems to the U.S. worth several million dollars a year. Sales reported in that segment in 2002 reached nearly four billion yuan ($480 million).

If D’Long expects to approach that level of income from Fairchild Dornier, it will likely need to reestablish relationships with former 728 launch customers Lufthansa and GECAS. Lufthansa has reportedly shown receptiveness in early talks, but D’Long’s need to convince potential partners of the program’s commercial promise has raised skepticism about the real level of interest. According to preliminary figures published at the time of the program suspension, the 728 could hold 68 to 78 passengers with five-abreast seating in a 128-inch-wide cabin. With 70 passengers and four crew, the 728 would fly as far as 1,800 nm. It would reach a top speed of Mach 0.82, fly to an altitude of 41,000 feet and take off from runways as short as 5,050 feet. For the powerplant, Fairchild Dornier had chosen a pair of General Electric CF34-8D3s, each capable of producing 13,575 pounds of thrust. GE repossessed the engines shortly after Fairchild Dornier fell into bankruptcy, further complicating D’Long’s quest to fly the first prototype by the end of the year.