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Douglas Expected to Announce China Deal for 40 Planes : Aeronautics: Pact will see 20 jetliners built in Long Beach, 20 in Asia. White House helps secure the $1-billion order.

November 04, 1994|JAMES F. PELTZ | TIMES STAFF WRITER

McDonnell Douglas Corp. is expected to announce today that its Douglas Aircraft division in Long Beach has reached agreement to sell 40 jetliners to China in a deal valued at more than $1 billion, The Times has learned.

Douglas once again got support from White House lobbying, and President Clinton is expected to help make the announcement during a stop today in Southern California, according to sources familiar with the transaction.

The pact, which finalizes three years of negotiations between Douglas and the Chinese, calls for half the planes to be built in Long Beach and half in China with Douglas-supplied components, the sources said.

The planes--MD-80s and MD-90s--are medium-size, twin-engine jetliners that sell for about $30 million apiece. All are believed destined for Chinese airlines, the sources added.

A McDonnell spokesman declined to comment on the reported pact, and White House officials could not be reached late Thursday.

But the sources said the Administration, notably Commerce Secretary Ronald H. Brown, helped Douglas secure the order, just as it helped Douglas and Boeing Co. win a $6-billion airplane order from Saudi Arabia earlier this year. (The Saudis have yet to formally place the order, however, because of disputes over how the planes will be financed.)

The Douglas-China deal--which McDonnell Chairman John F. McDonnell and Chinese authorities are expected to sign today in Washington--is important to Douglas for two reasons: It provides the world's No. 3 commercial aircraft builder with sorely needed new orders, and it helps maintain production for Douglas' 10,000 workers in Long Beach.

"They needed this one," said C. Donald Scales, aerospace manager for EDS Management Consulting Services in Los Angeles. "It helps preserve, at least for the time being, the integrity of the Long Beach plant."

Indeed, the deal will also help McDonnell Douglas absorb some of the criticism it has received recently for its reported plans to have an outside firm build the company's proposed newest jetliner, the smaller MD-95, in Texas.

The company itself has not yet said where it plans to build that airplane.

But sources close to the project said late Thursday that Douglas has already signed an agreement to have Dalfort Aviation assemble the MD-95 at Dallas' Love Field.

They also said Douglas has enlisted enough firm orders from airlines--including Alitalia of Italy and the Dutch carrier KLM--to formally launch production of the 100-seat aircraft, perhaps by year's end.

All of which also marks a victory for McDonnell's new chief executive, Harry C. Stonecipher, who said when he was hired a month ago that one of his priorities is to rejuvenate Douglas Aircraft's commercial business.

The previous dearth of new orders has left Douglas--which also builds the wide-body MD-11 in Long Beach--a distant player in the commercial market, behind Boeing and Europe's Airbus Industrie, which have a broader range of models.

But the Chinese deal also fortifies Douglas' links in Asia, which is one of the most promising markets for new aircraft orders.

Douglas' agreement is an extension of an earlier pact, known as the Trunkliner deal, in which 35 MD-80s were built in China with parts shipped from Douglas. That program was completed earlier this year.

In 1991, Douglas began negotiating an extension of the program, and even announced the following year that China would be buying 40 more planes.

But until today, a formal order had never materialized, and the question of whether the planes would be produced, and where, had remained muddled.

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