You probably haven’t heard of Yaborã Indústria Aeronáutica S.A.. It’s the third largest manufacturer of commercial airplanes in the world. You knew it better by its other name, Embraer Commercial Aviation. Embraer’s commercial division wasn’t Embraer any more, at least not legally. The crown jewel of Brazilian industrial competence had completed its internal split of its business. It had a new headquarters, it had divvied up its staff and factories and reset its IT systems in two distinct pieces. It wasn’t yet Boeing Brasil Commercial, however, that would have to wait for the European Commission to give its eventual blessing.
As the clock hit midnight in Brazil on Saturday, April 25, the joint venture between Boeing and Embraer came to a screeching halt. While we first learned of the talks in December 2017, just two months after Airbus and Bombardier formed its C Series partnership, the flirtation and investigation between the two companies had already been going on for decades.
“I would not like to give this control to just anybody,” former Embraer chief executive Fred Curado mused to the Wall Street Journal in 2015. “It would have to be a true partnership, somebody would have to trust us in all aspects [and] our ability to serve a customer.” And so, the trust was built.
The $4.2 billion partnership was financially impossible for Boeing to shoulder right now, but how it escaped from the deal may end up costing it far more in the long-run. In the way Boeing made its exit, to avoid a short-term fiduciary duty to not pay an estimated $100 million termination fee, the company has triggered an ugly breakup and reverses decades of close cooperation and relationships that go all the way back to the early 1990s and McDonnell Douglas and Embraer’s design of the flap on the MD-11.
In an instant, the trust that had been built was gone.
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