Fairchild Industries Inc., the financially troubled aerospace and electronics firm, is discussing a possible exit from its joint venture to build a commuter airplane with Saab-Scania AB of Sweden.
Kai Hammerich, executive vice president of information for Saab, yesterday said talks were scheduled "shortly" between the auto and aerospace group and Chantilly, Va.-based Fairchild Industries about a possible reduction of the American company's role in the venture to produce the 35-seat, twin-engine turboprop plane, called the Saab-Fairchild SF340.
Fairchild spokesman William F. Fulwider yesterday said talks were already ongoing between the two companies. "We are looking at the possibility of restructuring the program," he said. Fairchild declined to elaborate.
But analysts said yesterday that Fairchild is actively looking to sell its half to Saab-Scania or to reduce its participation by becoming a subcontractor to the project.
"Fairchild is considering numerous alternatives to shore up their financial condition and, clearly, one of those is to untangle themselves from the SF340, and SAAB is the most possible obvious buyer," said one analyst.
Analysts said yesterday the move to exit from the project or drastically scale back its interest in the partnership stemmed from serious financial problems in the company's aircraft manufacturing business and a desire to concentrate financial resources on salvaging an Air Force contract for the manufacture of the T46A jet trainer by upgrading its production operations.
Analysts view the trainer as one of the company's most promising long-term investments, but the Air Force has proposed to cancel the contract as a way to reduce its budget. The Air Force made the decision after finding technical problems in the jet and "sloppy management."
At the same time, production problems, higher-than-expected costs and tough competition have plagued the company's effort to capture the growing regional aircraft market. Fairchild has repeatedly revised downward the number of commuter planes it hoped to produce annually.
Both partners so far have suffered operating losses on the venture, and Fairchild was forced to add $106 million to reserves partly to cover losses on the plane. It recently reported a $60 million second-quarter loss on continuing operations. It had reported an overall loss of $82.3 million on sales of $196.8 million.
"For Fairchild, the number-one priority in the aircraft business is to get the T46 on step and to have it work properly, and if this means a cutback on the effort Fairchild must spend on the 340, then it means a cutback," said Wolfgang Demisch, a financial analyst with First Boston.