McDONNELL DOUGLAS/TAIWAN MD-12 VENTURE -- HON. JAMES M. INHOFE (Extension of Remarks - November 26, 1991) --- HON. JAMES M. INHOFE in the House of Representatives TUESDAY, NOVEMBER 26, 1991
- Mr. INHOFE. Mr. Speaker, McDonnell Douglas announced on November 19 that they have signed a memorandum of understanding [MOU] with the Taiwan Aerospace Corp. [TAC] which outlines an equity partnership involving McDonnell Douglas' commercial aircraft business. The military segment of McDonnell Douglas--principally the C-17 program--will remain 100 percent wholly owned and operated by McDonnell Douglas.
- This transaction accomplishes two goals for McDonnell Douglas: First, it provides a foothold in the Pacific Rim market and second, it provides McDonnell Douglas with $2 billion in cash up front for development of the aircraft. The combination of resources located in the United States and Taiwan will give the partnership a competitive edge in the Asian market. It is estimated that over the next 15-20 years there will be approximately 4,000 planes sold in that market and if McDonnell Douglas is to be a serious competitor they need to have an Asian partner.
- There should be no concern with the loss of American technology as a result of this deal because commercial aircraft technology is not unique to the United States. Furthermore, the work done by the Taiwanese is not new technology. It will basically be metal bending. Also, this should not be characterized as giving American jobs away because without the financial backing, McDonnell Douglas will not be a real competitor in commercial aviation. Without a viable commercial side there will be a steady erosion of jobs at McDonnell Douglas. The MD-12 is McDonnell Douglas' chance to once again be a factor in the commercial aviation industry.
- Finally, all three of the world's major aircraft manufacturers utilize some form of strategic alliance with foreign manufacturers. Boeing is working with the Japanese on commercial airliners. General Dynamics is working with Japan and Korea. Also, the auto manufacturing industry makes use of foreign investors and partners. Similar agreements within the auto industry include:
- Chrysler holds a 31.4 percent interest in a joint venture with Beijing Automobile Works on a jeep. Beijing manufactures 4-wheel-drive vehicles in China, Chrysler Corp. supplies axles.
- In buying out Renault's interest in American Motors Corp. in 1987, Chrysler entered into several agreements with Renault. Chrysler assembles the Renault-designed Premier cars, which use some Renault components.
- Ford owns 25 percent of Mazda, relying on it for engineering assistance, components, and knock-down kits for assembly in overseas markets under Ford badges. Also, Ford--34 percent--and Mazda--39 percent--each hold equity in Autorama, Inc., the exclusive marketer of Ford products in Japan.
- Ford owns 30 percent of Malaysia Associated Motor Industries Sdn. Bhd., which assembles Ford, BMW, Rover, Suzuki, and Mercedes-Benz vehicles.
- Through a joint venture called Autolatina, Ford and VW have merged their auto operations in Brazil and Argentina. Ford owns 49 percent and VW owns 51 percent.
- GM owns 50 percent of Daewoo Motor, the other 50 percent held by a South Korean conglomerate, Daewoo Group. GM supplies designs, engineering, and components to Daewoo Motor. The main product is a Opel-derived subcompact exported to GM for sale as Pontiac LeMans in the United States and Optima in Canada.
- GM owns 38.2 percent of Isuzu. Each provides vehicles for the other to distribute and use each other's components.
- In late 1989, GM paid Saab-Scania $600 million for a joint venture which will develop new cars for Saab and GM. Saab dealers are expected to market the cars. Componentry likely will be shared between Saab and GM.
- GM and Toyota have two 50-50 joint ventures: New United Motor Mfg., Inc., and each owns a stake in Budget-Rent-A-Car in Australia.
- GM--24 percent--and Volvo--76 percent--have a joint venture which combines Volvo's North America class 8 truck business.
- As these examples demonstrate, this arrangement is not unique and is in fact increasingly becoming the way business is done within a global economy. If the McDonnell Douglas/Taiwan deal is not made final, we should anticipate some type of Asian consortium, much like the European Airbus which is highly subsidized by European Governments. The facts are that the Taiwanese have the capital to develop an aircraft.
- Naturally, I am prejudiced. Of all the United States operations of McDonnell Douglas, the plant in my district of Tulsa is the most underutilized and has the greatest potential. Their decision will keep them competitive in the global market and produce jobs here at home.
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