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FM AMEMBASSY TASHKENT
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RULSDMK/DEPT OF TRANSPORTATION WASHDC
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UNCLAS TASHKENT 001277 
 
SIPDIS 
 
DEPT FOR SCA/CEN 
USDOT FOR STREET AND HATLEY 
USDOC FOR 3004/CS/ADVOCACY/BLOOM 
 
E.O. 12958: N/A 
TAGS: EAIR ECON ETRD PGOV PREL UZ
SUBJECT: UZBEKISTAN:  MAJOR DEALS FOR GM AND BOEING 
 
REF: A. TASHKENT 659 
     ¶B. TASHKENT 803 
 
¶1. (SBU) SUMMARY:  Last week saw the signing of two major 
deals between U.S. corporations and counterparts in 
Uzbekistan.  On October 27 General Motors (GM) informed us 
privately that it had agreed with the Uzbek Government on 
building a new engine and transmission plant near Tashkent. 
Almost simultaneously, Boeing announced it had completed a 
deal to sell four Boeing 767s to Uzbekistan Airways.  Taken 
together, these two announcements are the best news this year 
for U.S. business in Uzbekistan.  In the words of GM Vice 
President Mike Arcamone, "This is big."  END SUMMARY 
 
 
GM SIGNS MAJOR ENGINE PLANT DEAL 
-------------------------------- 
 
¶2. (SBU) General Motors (GM) Powertrain Vice President John 
Buttermore and GM Powertrain Europe Vice President John 
Arcamone met with the Ambassador on October 27 to inform us 
that GM had signed a joint venture that day for construction 
of a greenfield plant which will produce engines and 
transmissions in Uzbekistan.  The GM representatives met with 
President Karimov the same day, and expect the formal launch 
to take place in early December. 
 
¶3. (SBU) As reported previously (ref B), the new plant will 
dwarf GM's assembly operations in Asaka that began earlier 
this year.  (NOTE:  The assembly plant in Asaka was built in 
the mid-1990s by the Korean Daewoo Corporation.  Daewoo was 
acquired by GM in 2005.  END NOTE)  The plant will be located 
20 miles from Tashkent and will employ up to 22 U.S. citizens 
and 1300 Uzbeks.  (NOTE:  Currently only two GM AmCits live 
and work in Uzbekistan.  END NOTE)  The engine plant will 
supply both the Asaka facility and other GM plants outside 
Uzbekistan, primarily Russia, and will produce 150,000 
engines per year. 
 
¶4. (SBU) The Uzbeks will build a new electrical substation to 
power the plant as well as extend a railway line to the 
plant.  They will also guarantee the water supply.  GM 
expects the plant to open in the first half of 2011. 
 
¶5. (SBU)  GM will hold 52 percent ownership in the new plant. 
 In contrast, GM currently owns only 25 percent of the stock 
in its Asaka assembly plant joint venture with Uzavtosanoat. 
Nevertheless, 52 percent ownership is less than the 75 
percent ownership GM had hoped for when its representatives 
first spoke with us in July (ref B).  GM indicated that the 
GOU helped significantly with financing for this joint 
venture. 
 
BOEING COMPLETES SALES AGREEMENT 
-------------------------------- 
 
¶6. (SBU) Boeing also announced last week that it has finally 
signed a deal with Uzbekistan Airlines for the sale of four 
Boeing 767s to make up for a two-year delay in the delivery 
of two 787 Dreamliners, originally scheduled for 2014. 
Negotiations had been in progress since spring (ref A) and 
were completed in mid-September.  At that time Boeing Sales 
Manager Serdar Gurz told us he expected the contract would be 
signed as soon as presidential authorization was received, 
but weeks dragged by without a signed agreement.  Last week's 
signing came immediately on the heels of a letter from State 
SCA DAS George Krol to Deputy Prime Minister Azimov. 
Delivery of the 767s will take place in 2012. 
 
¶7. (SBU) In September Gurz told us Boeing had been taken by 
surprise by Uzbek insistence on negotiating a separate 
memorandum of understanding (MOU) for Boeing assistance to 
the Tashkent Aviation Factory (TAPOiCh).  Describing TAPOiCh 
as a "dead institution" with a "Soviet mentality," he said 
Boeing does not want to become involved at any level deeper 
than training.  Boeing went through two MOU drafts before the 
Uzbek side, including DPM Rustam Azimov, was satisfied that 
it was getting something and Boeing was satisfied it was not 
committing too much.  In particular, Boeing did not want to 
be drawn into a joint venture.  Agreeing on this MOU was a 
difficult process, and Gurz told us that at one point, to his 
amazement, the Uzbeks asked him why he didn't agree to Uzbek 
demands and then, simply, not follow through.  He took this 
as an indication that having an agreed-upon MOU was more 
important to the Uzbeks than its implementation.  This could 
be a sign that the Uzbeks are looking to Boeing as a 
counterweight to Russian attempts to absorb TAPOiCh. 
 
COMMENT 
------- 
 
¶8. (SBU) These two nearly simultaneous signings by GM and 
Boeing are the most important positive development this year 
for American companies doing business in Uzbekistan.  They 
are also another sign of improving U.S.-Uzbek relations, 
since both deals required presidential approval.  As GM Vice 
President Arcamone told us, "This is big." 
NORLAND