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MCDONNELL DOUGLAS ANNOUNCES UNDERSTANDING WITH TAIWAN AEROSPACE CORPORATION

                     MCDONNELL DOUGLAS ANNOUNCES
           UNDERSTANDING WITH TAIWAN AEROSPACE CORPORATION
    ST. LOUIS, Nov. 19 /PRNewswire/ -- McDonnell Douglas Corp. (NYSE: MD) and Taiwan Aerospace Corp. (TAC) announced today that they have signed a Memorandum of Understanding (MOU) which outlines a mutually beneficial relationship involving McDonnell Douglas' commercial aircraft business.  The parties have agreed that discussions have progressed to the point where it is appropriate to enter into detailed negotiations for a definitive agreement on a long-term commercial air transport relationship.  Any final definitive agreement will be subject to requisite government approvals in both the United States and the Republic of China.
    The MOU provides for the formation of a new aerospace company which will be jointly owned by McDonnell Douglas and investors in the Republic of China.  Under the MOU, Republic of China investors could acquire a 40 percent interest for US$2 billion in what is now McDonnell Douglas' commercial transport business.  McDonnell Douglas will retain the majority interest and management control of the new company.  The parties intend to conclude a definitive agreement by Jan. 31, 1992.
    The combination of resources located in the United States and Taiwan will give the new company globally competitive production capability, financial strength and a major presence in Asia, the fastest growing region in air traffic.
    Key to the relationship will be the building of state-of-the- art facilities in the United States and Taiwan for production of the new long-range widebody MD-12 airliner.  Significant parts fabrication and major sub-assembly work will be done in Taiwan, with final assembly at a yet-to-be determined new site in the United States.
    John F. McDonnell, chairman and chief executive officer of McDonnell Douglas, in a message to employees said, "This strategic international alliance is an important step toward our future success and growth in commercial aerospace.  Expanding on the proud heritage of Douglas, we will now have the overall capability to build airliners like the MD-12 that will lead the industry. The result will be more efficient and comfortable travel for the flying public and lower operating costs for our airline customers."
    Dr. David H. Huang, chairman and chief executive officer of Taiwan Aerospace, said, "TAC is pleased to have the opportunity to join with McDonnell Douglas in this exciting new venture.  This combination recognizes the advantages of a global alliance in aerospace and is consistent with TAC's role as the government- designated company to spearhead the further development of the commercial aviation industry in the Republic of China."
    Before any final agreement is consummated, McDonnell Douglas will separate its Douglas Aircraft Co.'s commercial transport aircraft activities from its government programs to form the core of the new company.  Currently Douglas commercial products comprise the MD-80 and MD-90 families of standard-bodied twin- jets, and the recently introduced series of MD-11 widebody trijets.  The planned long-range, fuel efficient MD-12 will expand the market for the company's wide-bodied commercial airliners.
    -- The following is an employee message from John McDonnell, chairman and chief executive officer of McDonnell Douglas, regarding the Memorandum of Understanding with Taiwan Aerospace Corporation.
    A NEW BEGINNING
    To All Teammates: Nov. 19, 1991
    In my last all teammate message I said that in order for us to support the launch of new commercial aircraft, MDC would be actively considering strategic alliances with partners in other parts of the world, principally in the Asia/Pacific region. Today, I am pleased to announce that we have signed a memorandum of understanding with the Taiwan Aerospace Corporation that begins negotiations that can lead to investors in the Republic of China purchasing up to 40 percent of our commercial aircraft operations for up to $2 billion.
    To ensure that U.S. military technology is preserved and that the accounting for our commercial and military businesses is separate, we will create a new commercial transport company, the core of which is now the commercial side of Douglas Aircraft Company.  McDonnell Douglas will retain majority interest and management control of the new company.
    Key to this relationship will be the building of state-of- the-art facilities in the United States and Taiwan for the production of the new long-range widebody MD-12.  Significant parts fabrication and major subassembly work will be done in Taiwan, with final assembly at a yet to be selected new site in the United States.  The Long Beach headquarters for the new company will provide overall program direction, design leadership, systems integration, and will continue to be the center for marketing and product support.
    This strategic international alliance is an important step toward our future success and growth in commercial aerospace. Expanding on the proud heritage of Douglas, we will now have the overall capability to build airliners like the MD-12 that will lead the industry.  The result will be more efficient and comfortable travel for the flying public and lower operating costs for our airline customers.
    I'm sure you are all concerned about how this new company will affect your future.  For those assigned to the C-17, you will remain part of the core of MDC.  Those of you who work at Douglas on our commercial programs will also remain in place, but you will be assigned to the new international company.  The intent is to keep current pay, benefits, seniority, and retirement programs. Exactly who is assigned to which company will be worked out in the coming weeks.  The precise structure of the new company will be part of the negotiation process.  Teammates involved in intercomponent work for Douglas will remain with their current components.
    The net effect can be the preservation of jobs at MDC. Without this alliance and international risk-sharing partners, we will be unable to grow as a commercial airplane company.  This alliance means that we can take a bold step beyond our current MD- 80/90 and MD-11 markets to challenge our competitors with aircraft like the MD-12.
    In today's world, the United States does not have a lock on commercial aviation technology and manufacturing.  The Airbus consortium in Europe already builds technologically advanced airliners.  Their new and modern facilities, coupled with the crutch of government subsidies, have taken market share from both MDC and Boeing.
    In summary, we think that this strategic alliance will substantially strengthen our commercial aviation business and will increase our ability to build premier airliners.  It is a dynamic alliance that embraces the global marketplace of the future and is another step toward our becoming a company of leaders.
     John F. McDonnell
     Chairman and Chief Executive Officer
    -0-                         11/19/91
    /CONTACT:  Mike Burch, 703-553-3822, or Pete Sloan 314-232-2300, both of McDonnell Douglas Corporation/
    (MD) CO:  McDonnell Douglas Corp., Taiwan Aerospace Corp. ST:  Missouri IN:  ARO SU: SE -- LA034 -- 5189 11/19/91 22:11 EST
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Date:Nov 19, 1991
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