Embraer Lands Chinese Production Deal

 - January 9, 2008, 4:26 AM

Brazil’s Embraer last month signed a long-anticipated agreement to build a production unit in China through a joint venture with AVIC II subsidiaries Harbin Aircraft and Hafei Aviation. The contract creates a new company called Harbin Embraer Aircraft Industry Co., of which Embraer will maintain 51-percent ownership. Under the deal, the companies will build, market and support 37-seat Embraer ERJ-135s, 44-seat ERJ-140s and 50-seat ERJ-145s, the first of which they hope to deliver next December.

Valued at some $25 million, the joint venture’s equity investment will pay for production tooling, setup and employee training for some 220 workers at a 260,000-sq-ft building in Harbin, the capital of China’s Heilongjiang province. Perhaps most significantly for Embraer, the deal will allow the Brazilian company to circumvent cumbersome Chinese import duties and reopen suspended contract negotiations for the sale of 30 jets from China Southern and Wuhan Airlines. The Brazilian manufacturer has sold just five regional jets in China, a market estimated to require between 250 and 300 jets in the 35- to 50-seat range over the next 10 years.