China Trade War Risks Engulfing Embraer as Boeing Deal Nears

(Bloomberg) -- For Embraer Commercial, the escalating rift between the U.S. and China is making things difficult.

That’s because the commercial plane-making unit of Embraer SA counts China as its biggest market and is in the process of being taken over by the U.S.’s top exporter, Boeing Co. The unit, which will be renamed Boeing Brasil Commercial, is seeking antitrust approval from China for the deal and waiting for for two plane models to get certified by Beijing to deliver the aircraft to Chinese airlines.

“We are trying as best we can to stay away from the political environment,” John Slattery, head of Embraer Commercial, said in an interview in Seoul on June 1. “There’s very little upside for Embraer to comment on trade disputes between superpowers.”

There’s much to be worried about. What began as a trade dispute between the world’s two biggest economies has morphed into full-blown tensions. China just warned it will establish a blacklist of entities that could harm its local companies, a sweeping order coming on the heels of the U.S. decision to cut off much-needed American supplies from Chinese technology champion Huawei Technologies Co.

So for the soon-to-be American company, it appears the best strategy for now is to lay low, play down the company’s new owner and hope for the best.

"The political relationship between China and Brazil is the only one I can talk to," Slattery said. "That relationship is robust and positive. I’m hopeful that we will see, in the near term, certification of those aircraft,” he said adding that the company still expects to complete all antitrust approvals before the end of this year.

Slattery said the company is expecting its 80-seater E175 regional jet to get certified first, followed by its next-generation E2-195. Embraer currently has about 100 aircraft flying in China, he said.

The market in China, particularly in the West where Embraer sees the strongest potential demand, is big enough for both it and the new plane models being developed locally, the executive said.

“It is the biggest market in the world and we are going to diligently and humbly do everything we can to be a meaningful part of that,” he said.

To contact the reporter on this story: Benjamin Katz in London at bkatz38@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, ;Anthony Palazzo at apalazzo@bloomberg.net, Tony Czuczka

©2019 Bloomberg L.P.