The Navajo Nation withdrew its previously announced financial support of the Utilicraft twin turboprop cargo plane in mid-February.
The Navajo Economic Development Committee made the decision on the advice of two New Mexico state agencies, one of which, the state’s Economic Development Department, had brought the two parties together in the first place. However, according to Department Secretary Rick Homans, “the state never vouched for the company.” Homans says that he told Allan Begay, executive director of the Navajo economic development office, that investments in companies with no history can be “very risky.”
The Navajo Nation and Utilicraft Aerospace Co. struck a deal early in January for the tribe to invest $34 million in the aircraft company, which would move from Georgia to New Mexico. Shortly thereafter, a New Mexico Finance Authority review uncovered problems with the deal and the agency warned the tribe to “proceed with extreme caution before putting any money into the project.” Utilicraft is a startup whose airplane has yet to be flown.
The tribe’s Economic Development Committee voted unanimously to back out of the investment Feb. 16, saying that it appeared “too risky because of the length of time before the Navajo Nation could see a financial return.”
Utilicraft had said it would build an assembly factory on the west side of Albuquerque and had proposed building some components on tribal land. The tribe had hoped the deal would bring hundreds of jobs to the Navajo Nation, where unemployment runs around 58%.
The $34 million investment would have bought the Navajo only 25% ownership of Utilicraft, despite a total company valuation of $8 million to $10 million, the state’s review revealed. It also found a high likelihood that two key Utilicraft sales contracts would not materialize, due to a history of bankruptcies accompanying the CEO of one would-be purchaser and lack of information about the other.
According to the state Finance Authority report, Utilicraft corporate rules allow CEO John Dupont to take a severance package of nearly $100 million should there be problems with the Navajo deal. Dupont could initiate the severance package by terminating his own job if his responsibilities changed, his pay was cut, or his job was moved more than 20 miles from the company’s headquarters, the report said.
Utilicraft Aerospace is a privately held spinoff of American Utilicraft Corp.
