The International Association of Machinists and Aerospace Workers (IAM), which represents about 3,500 of Hawker Beechcraft’s nearly 18,000 employees, filed an objection Monday to the bankrupt aerospace company’s proposed exclusive negotiation agreement with Superior Aviation Beijing Co. Ltd.
Wichita, Kansas-based Hawker is scheduled to present its proposal to U.S. Bankruptcy Judge Stuart Bernstein at a 2:00 p.m. hearing this afternoon in Manhattan. Under the agreement, Hawker would give Superior a 45-day exclusivity period to consider whether it will provide a stalking-horse bid for Hawker’s assets based on its $1.79 billion offer (See, “Hawker details terms of $1.79B proposal with Superior Aviation,” LCD News, July 10, 2012). If Superior ultimately agrees to serve as the stalking horse, bidding will be reopened to the public in an auction process expected to be completed by late October.
But IAM President Tom Buffenbarger warned that the sale “has broad implications for the U.S. economy and national security,” and “should not be rushed through without adequate scrutiny by all interested parties, including federal regulators, state officials, and the Wichita community.”
Superior is 60% owned by Beijing Superior Aviation Technology, an entity owned entirely by its chairman, Shenzong Cheng, and his wife, Qin Wang. The remaining 40% is owned by an entity controlled by the Beijing municipal government. In its proposal, Superior said the City of Beijing “has expressed its full financial support for the funding of debt for the acquisition and that the funding of the debt will occur on a timely basis.”
The Chinese company, which said it first contacted Hawker about six years ago to explore strategic opportunities, wrote in its proposal that the acquisition will “lead to opportunities in certain untapped general aviation markets.” In particular, Superior is positioning itself to take advantage of what it calls the growing Chinese market for business jets and “the to-be-developed market for other aircraft.” Superior said it intends to retain key executive personnel and keep the corporate headquarters in Wichita, and has no plan to relocate or terminate any manufacturing facilities or product lines.
IAM worries that the sale could lead to the transfer of “valuable commercial and military-related technology to China, leading to the loss of high-skilled, high-paying aerospace jobs while compromising U.S. national security interests.”
The transaction does not include Hawker Beechcraft Defense Company, which would remain a separate entity, Hawker said, adding that the unit would continue to operate its T-6 trainer program and pursue the final certification of the AT-6 light attack aircraft. But while noting that the defense company “is not part of the proposed transaction,” and that “neither ownership nor control…will transfer to Superior,” Hawker also said if the unit is sold, up to $400 million of the $1.79 billion purchase price would be refundable to Superior.
Meanwhile, in addition to the customary U.S. regulatory reviews and approvals, Hawker said the deal is subject to regulatory approval from the Chinese central government, the U.S. Committee on Foreign Investment in the United States (CFIUS), and the U.S. Bankruptcy Court in Manhattan that is overseeing Hawker’s Chapter 11.
But IAM also objected to the fact that Superior’s current proposal excludes the assumption of Hawker’s three pension plans, which the Pension Benefit Guaranty Corporation estimates to be underfunded by about $751 million.
In spite of a general promise to retain American jobs, IAM says “the fact remains that Superior has not made any commitment to American workers or the Wichita community, and there is no reason to believe that Superior, an entity owned and financed by the Chinese government and the Beijing municipal development corporations, would preserve jobs in the United States rather than eventually transporting the work to China.”
Hawker, which filed for Chapter 11 protection on May 3, has also filed a standalone reorganization plan in case its sale efforts fall through. (See “Hawker files reorganization plan, outlines potential sale,” LCD News, July 3). Under that plan, the company’s senior creditors would receive about 90% of the equity in the reorganized company, with unsecured creditors getting about 10%. – John Bringardner/Alan Zimmerman