The sale of Continental Motors to a Chinese aircraft component maker that is controlled by the government has caused enormous concern, and no shortage of blaming greedy corporations for selling off American iconic companies to make a quick buck. I’m sure those are heartfelt sentiments, but they miss the biggest issue facing Continental – the General Aviation Revitalization Act (GARA).
In 1994 the GARA set an 18-year limit on lawsuits claiming defective design caused the crash of a general aviation aircraft. Overall, GARA has helped reduce the number of lawsuits against general aviation manufacturers and did help revitalize the industry.
But the two companies almost totally left out from under the GARA safety umbrella are Continental and Lycoming. The reason is that under GARA installation of new parts in an aircraft or component starts the 18-year clock over again. It would be almost impossible to operate a piston engine for 18 years without replacing at least some parts, or more likely performing an overhaul. In any case, I’m not sure that I would want to be flying a piston engine that had not had at least some parts replaced in 18 years unless that engine had been pickled in storage.
So Continental and Lycoming have tens of thousands of engines out there in the fleet that are all potential lawsuits if there is an accident, and there is no way to sever that liability tail. Even if the Continental parent, Teledyne, stopped building engines, it would still face liability for those already manufactured. The same would be true for Lycoming’s parent company, Textron.
The only way to get out from under the legal liability of the engines, short of total corporate bankruptcy, is for Teledyne to sell Continental to a new owner with the resources to pay winning plaintiffs, and the Chinese government certainly seems to have those. It would be great if GARA were able to protect engine makers of proven designs, but it really can’t.
I’m sure the Chinese have no desire to defend a continuing stream of lawsuits, but that is the price of entry into the aircraft piston engine business. What I predict will happen is that Continental’s Mobile, Alabama, operations will continue, and even expand and create new engines with Chinese investments. And I also think a parallel operation will be developed in China to build engines for the Chinese domestic market, and perhaps for other developing countries.
What I don’t expect is for Continental’s factory to be moved to China. It is almost impossible to build an FAA-certified product in another country when there are no bilateral certification standards, and none exist now between the U.S. and China.
It is sad that a great old American manufacturer such as Continental Motors is more valuable to a foreign company than to a U.S.-based firm, but those are the realities of the global market, and our legal system makes things even worse. But I’m old enough to remember when Continental Motors was a proud company based in Muskegon, Michigan, building all types of engines, including many thousands for U.S. Army tanks. But eventually it couldn’t survive on its own and ended up being owned by the technology conglomerate Teledyne.
I just saw a talking head on a TV business show forecasting that in 35 years China will catch up with the U.S. to become the world’s biggest overall economy. I don’t expect to be around to see if that prediction comes true, but the Continental sale is another step in that direction, and our legal system gave it the biggest kick.