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Thursday, April 10, 2014

Union protests Hawker Beechcraft’s proposed sale to Chinese firm

By Molly McMillin
The Wichita Eagle

Hawker Beechcraft’s biggest union, the International Association of Machinists and Aerospace Workers, is opposing an attempt by the company to sell its assets to a Chinese company, Superior Aviation Beijing.

The union says it’s concerned that a sale would transfer valuable commercial and military-related technology to China, compromise national security interests and lead to the loss of skilled high-paying U.S. jobs.

It filed papers stating its opposition with the court that is handling Hawker Beechcraft’s Chapter 11 bankruptcy.

Last week, Superior Aviation submitted a proposal to buy the company’s assets, except for its defense business, for $1.79 billion in cash.

The court could decide at a hearing today whether to allow Hawker Beechcraft to enter into an exclusivity agreement with Superior to perform due diligence and negotiate the terms of the contract. If the court affirms the agreement, Superior will pay the company up to $50 million to maintain certain business jet production lines during the 45-day period.

The potential sale is one of several avenues explored by Hawker Beechcraft and its creditors since the company filed for bankruptcy May 3.

Superior’s proposal is non-binding and is subject to ongoing due diligence, regulatory approvals from the U.S. and Chinese governments and other conditions.

“The proposed sale of Hawker Beechcraft to a Chinese government-backed entity has broad implications for the U.S. economy and national security,” Tom Buffenbarger, the IAM’s international president, said in a news release. “The sale should not be rushed through without adequate scrutiny by all interested parties, including federal regulators, state officials and the Wichita community. As the necessary review process has not yet commenced, giving Superior the exclusive right to negotiate the purchase of Hawker at this time is premature.”

Buffenbarger called on members of Congress to give the deal “serious scrutiny.”

“While Superior claims that it does not intend to purchase or control Hawker’s defense-related businesses, Superior would retain an interest in the defense businesses and would be entitled to receive proceeds from the eventual sale of those businesses,” Buffenbarger said. “Such terms and conditions warrant the most serious scrutiny from members of Congress and the appropriate intelligence agencies.”

The union, in its court filing, said that although Hawker Beechcraft will rely heavily on payments from Superior to temporarily preserve its jet business, neither company has described the degree to which the jets business will be maintained or how they will determine what to preserve.

“Given that Superior must agree to the level of preservation, it effectively would be granted the unilateral right to cause the debtors (Hawker Beechcraft) to shut down the jets business, thereby making the potential benefits of the payments and exclusivity agreement illusory,” the union said in the court filing.

Hawker Beechcraft in a statement Monday said the agreement allows the company to preserve jobs as the negotiation and restructuring process progresses.

“Furthermore, our negotiating agreement with Superior has no impact on the timing of regulatory agencies’ reviews,” the statement said. “Any definitive agreement reached with Superior would be subject to approval by the Committee on Foreign Investment in the United States and other regulatory agencies, as well as a further competitive auction process overseen by the U.S. Bankruptcy Court. We look forward to working toward a definitive agreement with Superior and continuing to educate all interested parties on the benefits of this agreement and the various mechanisms that are in place to ensure that it is in the best interests of our stakeholders.”

Superior has said that it intends to maintain Hawker Beechcraft’s headquarters in Wichita and its management team and employees, and that it will continue product development throughout its commercial lines.

In the meantime, Hawker Beechcraft has said that it is reviewing its options for the defense business, which could include operation as a standalone company or sale to a buyer that meets U.S. Department of Defense requirements.

In the proposal struck with Superior, if the defense business is sold, up to $400 million of Superior’s purchase price will be refunded to Superior, the company said in a court filing said.

But, the union said, “neither the motion nor the Superior proposal … explain why Superior would be entitled to such a substantial refund upon the sale of the defense businesses.”

The refund provision suggests that Superior is obtaining at least an equitable interest “in those key and sensitive businesses which possess valuable information and technology that are important to national security,” the union said.

The union also noted that while the company has said the sale could save thousands of American jobs, it is “not supported by concrete factual basis.”

There are no commitments to keep jobs in the U.S. for any period of time, it said.

Given the substantially lower costs in China and the country’s efforts to expand its aerospace industry, “there is good reason to believe … that Superior would eventually transfer work from Wichita to China if it consummated the Superior proposal,” the union said in its court filing.

The union asks the court to deny the motion to enter into an exclusivity agreement “until parties in interest have a fair opportunity to investigate Superior’s intentions and motives.”

Reach Molly McMillin at 316-269-6708 or mmcmillin@wichitaeagle.com.

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