labels: Boeing, News reports, Government / regulatory, Airbus
USTR to scan 60 million UK govt. loan to GKN for purchase of Airbus plant news
16 September 2008

London/Paris: The United States said Monday it would scrutinise the sanction of a British government loan intended to help launch a new aerospace venture that will be taken out of UK Airbus and sold to engineering firm GKN. The 60 million reimbursable loan was announced on Monday by the UK government alongside a deal through which GKN will buy part of the historic Airbus plant at Filton in England for 136 million.

In Washington, the US Trade Representative's office said it would analyse the funding of the deal between Airbus and GKN.

Under terms of the agreement, GKN has also agreed to invest another 125 million pounds in the plant over five years. This investment will help pay for lightweight materials needed for the A350XWB, Airbus's futuristic model that competes with Boeing's 787 Dreamliner.

The Filton sale is part of a broader Airbus plan which aimed to sell up to seven European manufacturing plants in order to raise investments which would be deployed to make the A350XWB a lighter and more fuel-efficient aircraft, matching Boeing's hot-selling 787 Dreamliner.

For the UK, this is an important deal as the Filton plant employs 1,500 workers. This is critical as warnings have already been sounded that the UK economy may be close to slipping into a recession by the end of the  year.

The historic Filton site, located near Bristol, partly developed and produced the Anglo-French supersonic passenger jetliner Concorde in the 1960s. It will continue to design wings for EADS unit Airbus.

UK minister for business, enterprise and regulatory reform, John Hutton, announced the government would make a 60 million "repayable launch investment" into the venture aimed at developing parts of the A350's new all-composite wings.

Such state loans have been attacked by the United States as an example of hidden subsidies. So far Airbus has held off from seeking such loans from governments in order to avoid disputes at the WTO.

In turn, the Toulouse, France-based aircraft manufacturer has been pursuing rival Boeing for alleged US government subsidies.

Meanwhile, in Washington, the US Trade Representative's office said, "We have taken note of the programs announced by the government of the United Kingdom, particularly in the context of our ongoing dispute with the European Communities over subsidies to large civil aircraft."

"We will carefully evaluate the program and its implications for trade in large civil aircraft," she said by email.

As for GKN, it aid its Filton acquisition should generate revenues of some 375 million euros (297 million)  in 2009.

The Filton sale comes even as Boeing workers in the United States remain on strike over a contract dispute which has halted all Boeing airplane production and almost certainly will result in further delay of the maiden flight of the new 787 Dreamliner.

The strike entered its tenth day on Monday.

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USTR to scan 60 million UK govt. loan to GKN for purchase of Airbus plant