Andrzej Jeziorski/SINGAPORE

Korea Aerospace Industry (KAI) says it has "suspended" talks with the foreign direct investor (FDI) team of BAE Systems and Boeing. The Anglo-American partnership was selected earlier this year as the preferred bidder for a 35% stake in the company.

"They have imposed conditions that we cannot meet," says KAI. "We are trying to do what's necessary for us without the FDI." Talks are understood to have broken down over the degree of management control to be ceded to the FDI - which reportedly wanted three of seven directoral posts and a veto on major decisions - and over restructuring plans.

KAI now plans to raise its capital base to 100 billion won ($90 million) without selling a stake, and wants to offer creditors equity to cover 150 billion won of debt. KAI was formed from the majority of the aerospace capacity of Daewoo Heavy Industries, Hyundai Space and Aircraft and Samsung Aerospace.

Senior Korean industry sources say the Korean military was also concerned that a foreign partner might influence procurement decisions, including that of a new F-X front-line fighter. BAE's Hawk jet trainer also competes with KAI's T-50/A-50 "Golden Eagle" advanced trainer/light fighter venture with Lockheed Martin Aeronautics.

An agreement signed on 10 November will see the trainer marketed under the "T-50 International" banner outside the USA and Korea, with the partnership due to be extended to cover theA-50 combat version. Lockheed Martin says the prototype T-50 should roll out in late 2001, with first flight set for June 2002. The South Korean air force has a requirement for 100 T-50s.

Source: Flight International