BAe keeps trying on Taiwan deal

TALKS this week between British Aerospace and Taiwan Aerospace Corporation have failed to resolve the problems surrounding their pounds 250m regional jet joint venture, writes Mary Fagan.

Further meetings will be held today between BAe's chairman, John Cahill, and TAC. However, a BAe source said that all the company hoped for was an understanding of where the problems lie.

Negotiations over the joint venture, Avro, have dragged on for months amid rumours that the deal is on the verge of collapse. BAe is now in contact with Indonesia concerning regional aircraft, but these talks focus more on turboprop commuter aircraft than on jets. Last week BAe said it would cut 630 jobs at the loss-making turboprop operation at Prestwick in Scotland.

Meanwhile, it is considering a range of options for its regional jet operations should attempts to salvage Avro fail. Athough the deal with Taiwan was seen a year ago as key to reviving the regional jet business, BAe now regards Avro as desirable but not essential.

A spokesman for BAe said costs at the jet division had been heavily cut in recent months and that the company was more confident about prospects. BAe has begun to deliver the new RJ jet and has enough orders to last a year. The company would consider using that period of trading to seek new partnerships but has not ruled out keeping the jet business entirely within BAe.

The jet activities employ 3,000 people near Manchester. The aim of Avro was to cut costs and expand market share, gradually moving some manufacturing to Taiwan.

One of the problems with TAC is the extent to which technology should be transferred to Taiwan. Nor could the partners agree on Taiwan's demands concerning the development of future generations of aircraft. A decision on whether to persist with the TAC negotiations may be taken at a BAe board meeting at the end of this month.