RPAGF #473 - Be prepared
#473 - Be prepared
The negotiations restarted.
"Mr. Qi, we basically agree with your latest proposal." Elkes, with renewed confidence after receiving the latest authorization, showed none of the meticulous bargaining spirit he had displayed last time.
"We believe we can accept your valuation offer. Regarding equity, we suggest a 49% stake for you and 51% for us. This will facilitate our domestic approval process for joint ventures. This is close to your target, so I believe you should have no objections to this outcome.
Of course, we hope to include your previous proposal for granting voting rights in the cooperation agreement."
Hearing that they might obtain voting rights from Dongda, and facing the imminent surge in the board's power, Robert and his team acted swiftly. They quickly reached a consensus within the board. The concession on equity was immediately agreed upon.
In other words, the initiative in this negotiation was in the other party's hands.
Rolls-Royce, having exhausted domestic financing options, found that there were not many overseas investors willing to provide such a huge amount of capital, and even fewer who would forgo voting rights.
"In principle, we can agree to this shareholding arrangement," Qi Tongsheng said, breathing a sigh of relief. "Our grant of voting rights can be written into the agreement, but we need to ensure corresponding benefits. For example, if the company incurs losses, the management's salaries should not increase. We need to ensure that the entire automotive business is developing healthily before the management's salaries can be appropriately reflected. In the future, the automotive business management's compensation should be linked to the operating results, with a significant portion of the compensation coming from profit sharing of the company's incremental profits, ensuring that the interests of the management are aligned with the interests of the shareholders.
If the automotive business is in a loss-making state for two consecutive years, this authorization agreement will be revoked."
The condition Qi Tongsheng added was very important; otherwise, such a large investment would be like throwing money down the drain. If unscrupulous businessmen were to hollow out the company, it was entirely possible to lose everything.
Therefore, restrictions on operating performance were essential. What was the point of keeping the management if there was no performance growth?
Elkes thought for a moment, feeling that the other party's proposal was reasonable. After all, they had given them a two-year buffer period. A proper management team would not allow the automotive business to suffer long-term losses.
So, after thinking for a while, Elkes slowly nodded in agreement to this additional condition.
Rolls-Royce was already somewhat surprised by Dongda's grant of voting rights to the board of directors. Now that this condition had been added, it confirmed that the other party was not a fool. They now understood that the other party was simply there to share in the big cake of the automotive business's development.
After all, Rolls-Royce's automotive business had always been developing well. As a top brand in the Bright Sword world, it had been profitable year after year. This was why Rolls-Royce, despite being an aerospace high-tech company, still retained the seemingly ordinary conventional industry of the automotive business.
This was a hen that laid golden eggs. If it could be retained, Rolls-Royce hoped to keep it forever.
The high-end cars they built, the production model was completely different from Ford, GM, and VW. Their customer base was also basically unrelated.
People who could buy Rolls-Royce cars in the Bright Sword world needed to undergo qualification checks. They were basically either rich or powerful. The number of cars sold each year was not too large, ranging from a few thousand to over ten thousand, which could maintain a very good profit.
Therefore, in this business, Rolls-Royce did not have too much sales pressure. Their sales were basically driven by a pre-order model.
This was basically consistent with the passenger aircraft production model.
In addition, with a large area of hand-built customized production processes, their management model was similar to passenger aircraft production.
Therefore, in terms of corporate culture, there was no gap between Rolls-Royce's automotive business and the aviation business.
The smooth progress in negotiations with Dongda made the Rolls-Royce board very satisfied.
However, the integration of the domestic aviation industry was not so easy.
Although it was said that equity swaps were used to reorganize the aviation industry, the shareholders' committees of several companies had their own insistence on valuation.
Due to the complexity of the business, and the fact that these companies were not listed for trading, there were obviously many differences in the perception of valuation.
Based on the valuation of a third-party accounting firm, Rolls-Royce hoped to lower the price of the other three companies, on the grounds that Rolls-Royce was now signing an agreement with Dongda, and the value of Rolls-Royce was not only reflected in the current value, but also included a portion of the future value of this agreement being realized.
Simply put, the value of 1,500 A300 passenger aircraft obviously needed to be discounted to a certain extent by Rolls-Royce.
However, the three companies would obviously not recognize this kind of pie in the sky.
They hoped to value according to the current net assets, operating cash flow, and annual profits of each company, which were tangible indicators.
Discounting future expectations was not in accordance with accounting standards.
Of course, Robert and Elkes expressed strong opposition.
They believed that this would greatly underestimate the value of Rolls-Royce. According to these cooperation agreements and potential market value, Rolls-Royce was worth at least 2 to 3 times the premium valuation.
The huge difference in perception led to a stalemate in the negotiations.
However, with the 200 million pounds injected by Dongda, Rolls-Royce was now fearless. They showed rare high efficiency, and carried out micro-innovation and modifications of new models based on the CAC-120 with Dongda Yandu Aviation Industry Company.
So they were not in a hurry for negotiations.
The time came to June.
One year after the CAC-120 test flight, the CAC-120 obtained Dongda's airworthiness certificate and began the first batch production of 30 domestic orders.
At the same time, the first A300 model was also successfully test-flown in the City of Westminster, and they began to carry out airworthiness certification work in full swing.
This progress and Dongda's order situation stimulated the shareholders of several domestic aviation companies in the Sunset Empire who were still waiting for a good price.
As a major aviation country in the Bright Sword world, the aviation industry of the Sunset Empire was extremely brilliant during World War II, giving birth to more than a dozen aviation companies that could produce various fighter jets, each with its own characteristics.
In the post-World War II 1960s of the main world, the British aviation industry also made unremitting efforts towards civilian airliners. Among them, the most promising for success were the Trident and BAC1-11 airliners. The former was a medium-short range tri-jet airliner developed by de Havilland, with its first flight in January 1962 and entry into service in 1964. The Trident was known for its three engines and unique flight control system. It was mainly sold to European airlines and ceased production in 1975, with a total of 117 aircraft manufactured. The BAC1-11, on the other hand, was a hundred-seat short-range jet airliner developed by the British Aerospace Corporation in the 1960s. It first flew on August 20, 1963, and entered service in 1965. The BAC1-11 was characterized by its two engines and T-tail design, with a total production of 244 aircraft. Its main customers included British airlines such as British Airways and Laker Airways.
Objectively speaking, both models had commendable performance. The initial models were not inferior to the three major aviation giants in North America. However, in terms of further development of subsequent models, these British aviation companies were weak and had a narrow market. After selling out their domestic market, there were almost no subsequent orders.
This made it impossible to continue in terms of subsequent research and development funding and cost amortization, which led to both airliners eventually disappearing under the tide of the market.
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Of course, this was also because the national power of the British Empire declined. They no longer had the strength to maintain the development of the domestic aviation industry and use their national influence to sell airliners to more countries.
In this regard, the development of the aviation industry is closely related to the development of national strength. Weak countries simply do not have the basic conditions to develop their own aviation industry, especially the civil aviation industry.
It should be known that it is not enough to just build them. The Great Bear has also built many models in civil aviation, among which the most influential are the Ilyushin and Tupolev series. However, they were eventually eliminated by the market due to a lack of competitiveness.
Originally, the Great Bear's Ilyushin Il-62 had hoped to compete with the Boeing 707. The Il-62 had a maximum passenger capacity of 186 people.
Another famous Great Bear airliner was the Tupolev Tu-154, a three-engine medium-range airliner developed by the Great Bear. In the North Atlantic Treaty Organization's code name, it was called "Careless." Its competitors were the Rogue Eagle's Boeing 727 and the British Trident. By the time production ceased in 2006, 935 Tu-154s of various types had been produced, including approximately 325 Tu-154Ms. This was almost the peak model of the Great Bear in civil airliners. Unfortunately, the Tu-154 had a relatively poor safety record. However, the accidents were often due to prolonged operation in harsh and extreme weather conditions, frequent flights, low-quality maintenance, and human error.
Originating from the Great Bear's extensive maintenance system and even more extensive operation, the Tu-154 had an astonishing accident rate, with a total of 62 crashes. Coupled with the lack of subsequent improvements, this series quickly disappeared under the tide of the times.
Compared to its competitor, the Boeing 727, production of this airliner ended in September 1984, with a total of 1,832 aircraft produced and 51 crashes. In comparison, the Tu series was twice as high.
These examples of past struggles fully illustrate the high threshold of civil aviation. Even among the aviation giants within the Rogue Eagle, only Boeing remained in the end. The remaining giants were either acquired by Boeing. For example, McDonnell Douglas joined Boeing under the name of McDonnell Douglas, but they still couldn't beat them. Lockheed Martin's civil aviation was suppressed by Douglas and Boeing in the early stages.
The European continent in the main world united to form the freak of Airbus to support the second banner of aviation airliners. Otherwise, the main world would only have to accept the monopoly of one aviation airliner company.
These leaders of the British aviation industry naturally also studied the situation of the airliner market. They were very clear about the difficulty of opening up the airliner market. It was not enough to build a fighter that could fight and then sell it to the authorities. The most difficult thing about airliners was not just building them.
But to allow airlines to operate safely and earn back money, which was not easy. The entire large system from design to operation and maintenance had to be rebuilt. The cost of such a system construction was simply not affordable for aviation companies of their size.
In the main world timeline, their response strategy was to spontaneously unite and start merging into a larger company to do this. In the Bright Sword world, now Rolls-Royce obviously had dogshit luck and caught a ride.
They had all figured out the ins and outs of this airliner, and had even visited the prototype coming off the Rolls-Royce production line. To be honest, the completeness of this airliner did not seem like a brand-newly designed aircraft, but rather a mature model optimized after years of operation.
The test flight was completed in one go, with basically no problems.
In the initial test flight, it flew more than a thousand kilometers back and forth, because the prototype of this airliner had already flown tens of thousands of kilometers in test flights in Dongda, and had long been subjected to test flights under various climatic conditions. The Dongda-produced WS-9 turbofan engine also performed stably.
Now, the WS-9 engines are directly produced by Dongda Aero Engine Company. According to the requirements of the agreement, after a certain number of years of cooperation, especially after the successful test flight of the new generation of jointly researched aero engines, Dongda can consider authorizing Rolls-Royce to produce this turbofan engine.
Finally, the goal of completely producing all parts of the A300 in the UK is realized.
Rolls-Royce did not have too many objections to these conditions, after all, this airliner was originally independently developed by Dongda, and all the parts were independently designed by Dongda. Before recovering the research and development costs, Rolls-Royce can also understand, because they themselves have deeply experienced it.
If the maturity of the model is an important factor in attracting these companies, then the indicator of 15% lower operating cost per seat kilometer than competitors directly became the last straw that overwhelmed their arrogant heads!
Because it is a dual turbofan engine, compared to the current mainstream competitors who are turboprop engines, the fuel consumption of the A300 is much lower by more than 10% under the same passenger capacity conditions. In addition, the manufacturing cost of the airliner itself can be greatly reduced due to Dongda's research and development participation, so it is reasonable to earn a profit of 10% to 15% lower than competitors in terms of purchase.
This means that there is a visible opportunity for this airliner to be a big seller.
Originally, everyone thought that a sales volume of 1,500 aircraft was just a pie in the sky, but now it seems that it is very likely that the future sales volume of this airliner will exceed 1,500 aircraft. This is a cake that the British aviation industry cannot imagine. After missing this train, they will have no more opportunities. The UK cannot accommodate the development of two airliners.
Rolls-Royce finally merged several target companies as desired, and after integration, turned them into its own civil airliner business unit to prepare for the final mass production.
Everything is proceeding smoothly as expected. (End of this chapter)