AIA is a Washington, D.C. trade association representing 57 aerospace companies.
According to Lorals March 30 financial filing with the Securities and Exchange Commission, the New York-based aerospace company will have to give $134 million in advances back to China Telecommunications Broadcast Satellite (ChinaSat). It would also get hit with a $13 million penalty charge and would incur costs of about $38 million to refurbish the satellite to sell to another company.
"This is not a huge piece of their business," said J.P. Morgan analyst Marc Crossman. "It will have a negative impact but it wont be a widespread one."
Most analysts agree that its not likely that the communications satellite will get shipped to China.
"They will probably end up retrofitting it for another company," said Bear Stearns analyst Vijay Jayant.
Still, the aerospace industry is scrambling.
What went wrong
In February 1998, the State Department put the kibosh on the launching of Lorals ChinaSat 8 communications satellite after Congress stripped the Commerce Department of satellite licensing authority and placed restrictions on Chinese satellite launches. Congress acted on concerns that U.S. satellite companies may have transferred sensitive satellite and missile technology to China.
Now the satellite is sitting in California as Loral waits for the State Department to allow the satellite to be transferred to China so it can be launched.
Members of the aerospace industry have been lobbying for a change in the current export licensing laws saying they have lost business to their European competitors since Congress transferred authority from the Commerce Department to the State Department a year ago.
Meanwhile, Loral and ChinaSat have agreed to extend the date for delivery of the satellite to July 31, 2000. In return for this extension, Loral is providing ChinaSat with three transponders on the Telstar 10 satellite they bought last year, Loral spokesman Mac Jeffery said.
Ambassador involved
Last month, Loral tried to stem further losses in overseas sales by arranging a meeting at the Beijing residence of U.S. Ambassador Joseph Prueher.
The March 16 dinner brought together the Chinese government minister in charge of the state-owned China Aerospace Science & Technology Corp, ChinaSat officials and officials from Loral, Lockheed Martin and Hughes, said Loral spokesman Tom Ross.
Though the diplomatic corps plays a role in promoting trade and business abroad, critics questioned the appropriateness of bringing together three companies under investigation for allegedly providing information to the Chinese that they claim compromises national security.
"The meeting was either politically naïve for the ambassador to have done so, or it was completely calculated," said Larry Wortzel of The Heritage Foundation, a Washington, D.C. public policy think tank.
"If I were the ambassador, I would not have run that meeting," Wortzel said. "And to have it at his residence gives the appearance that he was given the full weight of support from the current administration."
Loral officials deny any impropriety saying that the purpose of the meeting was to simply support U.S business abroad.
"My knowledge of the situation is that we asked for a meeting with the ambassador to discuss the export of the (ChinaSat 8) satellite," Ross said.
But the State Department appears to be backing off the premise of the meeting, denying there was any talk about the future of Lorals ChinaSat 8.
"When one Chinese guest raised the subject (of ChinaSat 8), the U.S. official the question was directed to didnt answer," a State Department official said.
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