Douglas pursues billion dollar jet deal with China.

Douglas pursues billion dollar jet deal with China

Douglas Aircraft Co. in Long Beach is competing with Seattle-based Boeing Co. to sell as many as 150 commercial airliners to China, a contract that could conservatively be worth $4.5 billion in new business for the winner.

The contract could be awarded any time during the next few months, ending at least three years of planning and negotiating between the Chinese and the contractors, which are the two largest commercial aircraft manufacturers in the United States.

Douglas, which last fall lost a huge domestic contract to Boeing, would sell 150 MD-90s to the Civil Aviation Administration of China if it wins the competition. The MD-90 has been designed specifically for the Chinese contract and is not yet in production.

Boeing plans to sell its existing 737-300 aircraft to the Chinese, who want to purchase a short- or medium-range commercial airliner for use on domestic routes.

If Douglas wins the contract, the orders would be filled and the aircraft manufactured at the company's existing assembly facility in Shanghai, China. Douglas currently produces some of its MD-80 aircraft, a predecessor and somewhat smaller aircraft, in Shanghai. The bulk of MD-80 aircraft, however, are manufactured in Long Beach, which is Douglas Aircraft's main manufacturing facility.

A spokesman for Boeing, David Jensen, said the company would also build the aircraft in China at one of four facilities there that currently produce parts for Boeing.

The production of such a large number of aircraft outside of Long Beach could be another blow to Douglas workers. Last year, thousands of workers were laid off in Long Beach and the future of at least one current program - the C-17 cargo plane - is in question. The first C-17, a military aircraft, is scheduled to start flight tests later this spring. But the extent of funding for the program, which is way over its original cost estimates and timetable, is in doubt.

Another potential concern for workers in Long Beach is the possibility that another proposed Douglas commercial aircraft, the widebody MD-12X, may not be manufactured in Los Angeles County. Several states have lobbied Douglas, a division of St. Louis-based McDonnell Douglas Inc., for the MD-12X assembly plant.

Douglas has reported that it is considering the proposals and will decide whether to produce the MD-12X and where by the end of July.

Douglas spokesman Don Hanson said the MD-90s sold to customers other than the Chinese would be assembled in Long Beach. He did not say, however, whether Douglas has orders for the aircraft outside of China.

"The Chinese are looking for an aircraft that can be used by its regional governments inside the country. Right now they are evaluating all of the information that has been submitted by us and Boeing and a decision could be made at any time. Right now we are basically just waiting for a decision," said Hanson.

He noted that Douglas has been actively promoting its commercial aircraft in the Soviet Union as well, including its new widebody MD-11. So far, however, the company has been unsuccessful in winning any contracts from the Russians, he said.

Boeing spokesman Jensen said the company believes it has an advantage in the competition because "we have been doing business in China since the 1930s and since 1980, China has been one of our major suppliers. In addition, just last year China placed an order for $4 billion worth of commercial aircraft with us."

Jensen said the Chinese are apparently committed to the transaction. "There are no indications to make us think otherwise," he said.

The competition for the China contract is only the latest between the two manufacturers. Last October Boeing beat out Douglas for the largest airliner order ever, a $22 billion contract from United Airlines for long-range, widebody aircraft.

At the time, industry analysts said Boeing was quickly overwhelming Douglas as a commercial aircraft manufacturer and that the Long Beach company was in need of a major contract.

Industry analysts have mixed predictions for McDonnell Douglas, but note the company still needs a major boost after the cancellation of a military contract earlier this year. The company's credit rating has been lowered three times during the past year.

In other matters related to Los Angeles County defense and aerospace contracts, Calabasas-based Lockheed Corp. said last week that it has received no further word from the Air Force on whether the military is interested in ordering more F-117A aircraft ("stealth fighters").

"The Air Force asked for information on a restart but we have received no further word," said Lockheed spokesman Scott Hallman.

The F-117A has been credited with much of the U.S. success in the Persian Gulf War.

A spokesman at Lockheed's Marietta, Ga., facility said the Air Force has also asked for information on producing more C-5B cargo planes.

"They have not asked for any more information but it is standard procedure for the military to ask for such information," said Doug Oliver.