Aerospace company Fairchild Industries Inc. said yesterday it will end its joint venture with Saab-Scania AB to make a commuter airplane by turning its half of the project over to the Swedish company.
The Chantilly, Va., company, which will act as a subcontractor on the project for a number of months to ease the transition, said it would take a pretax write-off to reflect $100 million in losses in connection with the restructuring.
About $70 million of the losses was the estimated amount of currency gains the company would have received from monetary exchange rates if the project had continued until the joint venture had manufactured 200 of the aircraft. The rest of the amount, or $30 million, was a reduction in the value of the assets, the company said.
"The principle reason we are restructuring our operations is to avoid a dilution of our resources," said Emanuel Fthenakis, Fairchild's president.
"In our aircraft sector there is, now and in the future, a need for heavy investments. We have decided, however, to concentrate our resources on our fast-growing, non-aircraft sectors, principally communications, electronics and space," he said.
The company will become a subcontractor on the project starting Nov. 1, and hopes to hand its portion of the business over to Saab-Scania starting in early 1987, after it has completed construction of 108 sets of wings and tails.
So far, Fairchild has finished making 48 sets of components. The joint venture has received firm orders for about 80 of the aircraft.
Fairchild is responsible for the construction of the wings and tail assembly at its Fairchild Republic plant in Farmingdale, N.Y. Those parts are shipped to Sweden, where Saab-Scania completes construction. After Fairchild's commitment is completed, the construction of the entire 35-seat, twin-engine turboprop plane, known as the SF340, is expected to shift to Sweden, the company said.
However, Fairchild, which has experienced financial problems in its aircraft businesses, also said two weeks ago that the entire Fairchild Republic Co. division is for sale, along with Fairchild Aircraft Corp. of San Antonio, which makes commuter planes. Fairchild Republic makes the T46A jet trainer for the Air Force.
Any company buying the Republic division before Fairchild's commitment to Saab is over would have to assume it, with Saab's permission, said Fairchild.
The divestiture of its portion in the venture was viewed by analysts as a long-term positive action for the company's cash flow; although in the short run the impact on earnings may be as high as $5 a share in losses, said Joe Campbell, an analyst with Paine Webber Mitchell Hutchins.
"It will be a negative to earnings," said Campbell. "But, I think it's terrific, because the company needed to do it.
"They are generating . . . positive cash flow by this in avoided costs for marketing and interest expenses on the inventory." The company estimates it will receive $70 million in tax refunds and benefit from another $70 million in money it will not have to spend in the future to complete the project.
"Fairchild's interest was to get themselves out from under the financial strain, and this deal has done that very successfully," said another analyst.
Fairchild posted losses of $82.3 million on sales of $196.8 million in the second quarter of 1985 ended June 30. Production problems, higher-than-expected costs and tough competition have plagued the company's effort to capture the growing regional aircraft market.
The company already had covered about $135 million in losses on the project and also has taken a loss of $60 million on the jet trainer.