Re: Boeing and McDonnell Douglas Agree to Collaborate

Date:         12 Dec 96 04:39:34 
From:         tschell@s.psych.uiuc.edu (Terry Schell)
Organization: University of Illinois at Urbana
References:   1 2
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Brian Wiklem <Brian_wiklem@interactive.sony.com> writes:

>Karl Swartz wrote:
>>
>> [Boeing press release]

>snip

>Does this open up the possibility of an acquisition of Douglas by Boeing?
>It seems to lead toward that, testing out whether McDonnell Douglas is
>worth the investment before any major committment.

>And considering Douglas' orders are dwindling, and Boeings orders growing,
>this would be one fully operational factory that could be acquired quickly,
>without the need to build a whole new facility from the ground up.  In
>addition, many books on Boeings history make reference to Boeing constantly
>evaluating California as a major 'political' market to set up shop.

IMHO, I don't think that Boeing is really considering a MD merger; and
I don't think they should.  It really boils down to the cliche, "Why
buy the cow when you can get the milk for free."  They can lease MD
facilities (including production and design) at very comptetitive
rates, without going through the hassles of a merger or ownership.  So
long as MD is having trouble selling planes they are willing to be a
sub-contractor for Boeing without make much profit, just so that they
can stay in business until their fortunes change.

This means that Boeing does not have to worry about anti-trust
problems, labor negotiations, etc.. plus they can expand or reduce
production much more easily if they don't actually own the plants that
get shut down.

If Boeing does aquire MD, I think it is likely to be in pieces
(facility by facility).  This will allow MD to generate cash from it's
under-utilized facilities, allows Boeing to get more control over
production, and largely avoids the anti-trust problems of a full-scale
merger.

Of course I could be wrong...
Terry Schell