Cessna and AVIC six months on
Joint ventures are difficult. Even agreeing them is hard. Cessna announced a joint venture with China's AVIC in March 2012. Other manufacturers - including Dassault, Bombardier, Hawker Beechcraft and IAI - had also bid.Six months later, Textron's CEO admits things are progressing slowly.
Joint ventures are difficult. Even agreeing them is hard. Cessna announced a joint venture with China’s AVIC in March 2012. Other manufacturers – including Dassault, Bombardier, Hawker Beechcraft and IAI – had also bid.
Six months later, Textron’s CEO admits things are going slowly.
March 23, 2012: Cessna Press Release: “ We are extremely pleased to be entering into these strategic agreements”
Scott Ernest, president and CEO, Cessna: “We are extremely pleased to be entering into these strategic agreements. China’s market potential is tremendous and therefore represents an exciting opportunity for Cessna. China recognizes general aviation offers the foundation to support its national air transportation needs for the future. These agreements will help take the industry to the next level.”
Six months later…
October 10, 2012 : Textron Earning Call: “We signed a sort-of a framework agreement”
Jason Gursky, Citigroup: Can you just describe where we are in China from a market development perspective and just offer up some updated thoughts there?
Scott Donnelly, Chairman, CEO, president, Textron: Sure. So we are actively engaged. As you know, we signed a, sort of a framework agreement with AVIC.
“We are in active discussions on three separate – with – the structure of these is that you’ve got the AVIC and ourselves and then whatever municipal government associated with particular product lines, which are in different regions of China, which was part of the plan, was to have us be in several different operations. All those three negotiations are, I would say, progressing well.
“I think we’re very close to getting the finalized agreement on at least one, perhaps, two here in the fairly near future. And the third, which was sort of on the back burner for a while, has kind of come back to a more active state of negotiations.
“And I think we’ll get that done in due time as well, so they’re all progressing as we expected. And as you can appreciate getting through these negotiations and setting up new operations in – with three parties at the table is not easy. But we’re – been working through that, and I think we’re making good progress.”
Still early days
This is not a criticism of Cessna. But it does illustrate the problems involved in Chinese negotiations – as Hawker Beechcraft’s also discovered. Cessna may still be very successful in China.
As one former senior manager at a competitor says: “Cessna with Scott Ernest’s experience in China and supply chain management, was and is the OEM most equipped to do this partnership. But even with that, it was going to be hard.”
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