Fri, Jul 06, 2007 - Page 12 News List

Ministry may shut down aircraft maker

WIDENING DEFICIT The economics ministry has appointed a new acting chairman who is leading a team to SSAC's headquarters in the US to evaluate its financial viability

By Jessie Ho  /  STAFF REPORTER

After failing to secure investors to take over the money-losing Sino Swearingen Aircraft Corp (SSAC), the Ministry of Economic Affairs is conducting a final evaluation of whether to continue or shut down the operations of the Taiwan-US aircraft maker.

SSAC is a joint venture between Taiwan's Sino Aerospace Investment Corp (華揚航太投資) and Swearingen Aircraft Co of San Antonio, Texas. The ministry is the trustee of Sino Aerospace Investment, which has a stake of nearly 90 percent in SSAC.

The ministry announced on Wednesday that it was removing SSAC chairman Kuo Ching-chiang (郭清江) from the post. Max Lo (羅正方), president of the state-run Aerospace Industrial Development Corp (AIDC, 漢翔航空工業), took over as acting SSAC chairman, the ministry said.

Lo will lead a team of more than 20 AIDC officials to inspect SSAC at its headquarters in San Antonio, Texas, over the next three weeks, AIDC spokesman Frank Hong (洪朝全) said by telephone yesterday.

The ministry has ordered the team to submit an evaluation report on SSAC by the end of this month, Hong said. Based on the report's findings, the ministry will make a final decision on whether to continue investing or shut down the ailing company, he said.

Kuo assumed the SSAC chairmanship in January last year and promised to push the firm's SJ30-2 light business jet -- the first and only product SSAC has developed -- for mass production by October last year, as well as turn around the aircraft maker by the end of last year.

However, SSAC's deficit has widened to US$60 million, Vice Minister of Economic Affairs Shih Yen-hsiang (施顏祥) told reporters.

Despite receiving 305 orders for its SJ30-2 twin-jet model and delivering the first one last November, SSAC is unable to mass produce the aircraft because of financial problems, Hong said.

The ministry considered selling a majority of its holdings to foreign investors last October and again in May this year, but both attempts were unsuccessful.

Hong said SSAC has a chance to get out of debt given rising demand in the aviation sector -- but only if it had superior management and cost control.

Global demand for large commercial planes is strong and has kept the world's two largest aircraft manufacturers -- Boeing Co and Airbus SAS -- busy, Hong said.

The demand for light aircraft is likewise heating up, he said.

"[But] going into the aviation business entails a huge amount of investment, and it takes time to see a return on investment," he said. "[SSAC's] poor management was also an investor concern."

The SJ30-2, a seven-seat aircraft that SSAC claimed to be the world's fastest long-haul light business jet, is priced at about US$6.2 million.

Pricing could become more competitive if AIDC takes over some manufacturing of parts or assembly of the jet in Taiwan, Hong said.

The move can also benefit AIDC and other local downstream aircraft manufacturers, he added.

AIDC generated earnings of NT$31 million (US$945,000) on sales of NT$12.8 billion last year and targets to earn NT$61 million on sales of NT$14.4 billion this year, Hong said.

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