Vejam Artigo na imprensa do Canada sobre a Embraer...
Enviado: Qua Mar 30, 2005 22:10
Embraer jettisons its 'jungle jet' roots
Brazil takes flight
Sean Silcoff in
Financial Post
March 26, 2005
Bombardier Inc. may be one of the biggest, best-known and most controversial companies in Canada, but the world's third-largest maker of airplanes has been upstaged recently by rival Embraer. The Brazilian firm has been flying high thanks to the success of a new family of commercial jets, translating into a flurry of orders and worries for its Canadian rival. How did a Third World country like Brazil come to host one of the top aerospace firms in the world? Montreal Bureau chief Sean Silcoff travelled to Embraer's headquarters in Brazil this month for an in-depth look at the company. His three-part report begins today.
- - -
It's a balmy Wednesday night in March in Brazil's industrial heartland, where a group of top U.S. defence industry executives has landed for a secret fact-finding mission. On the other side of the equator, in Montreal, Bombardier Inc. is preparing to launch a new family of airliners, the 110- to 130-seat CSeries. But there is a lot of doubt in the industry about the jets, which has led these executives, who work for a Bombardier supplier, to the Churrascaria Vila d'Aldea, about an hour's drive east of Sao Paulo.
The restaurant is a meat-eaters' paradise where waiters in black ties and vests hurriedly deliver slabs of beef on skewers to diners. Over in a corner, a noisy troupe of entertainers performs capoeira, a Brazilian form of martial arts set to percussion.
The visitors are more than willing to suffer the distractions of this tourist trap, however, because it is the place to come if you want to know what the top minds at Empresa Brasileira de Aeronautica SA, Bombardier's main rival, are thinking.
The Embraer executives the Americans have come to visit -- including Orlando Jose Ferreira Neto, director of market intelligence, and Satoshi Yokota, executive vice-president of development and industry -- are only too happy to share their skeptical views on Bombardier's plans. After all, unlike Bombardier, Embraer's new family of airliner, the 70- to 110-seat E-Jet, is generating the kind of buzz in the airline world Howard Hughes would have died for.
"This is the first time we would say Bombardier is behind us," Mr. Neto says.
Once dismissed as little more than a maker of "jungle jets" -- small aircraft with such colourful monikers as the Tucano (Toucan), Bandeirante (Bandit) and Ipanema (a crop-duster and favourite of Brazilian farmers), Embraer has emerged as one of the globe's hottest aerospace firms.
It's something some industry veterans still have a hard time believing: That a country with a well-earned reputation for instability and economic disaster could be home to one of the world's leading aviation powers.
"You conjure up some factory in the middle of nowhere, with employees banging away at sheets of metal under corrugated roofs," says Robert Milton, chief executive of Air Canada parent ACE Aviation Holdings Inc., a recent Embraer customer.
"But it is a spanking new beautiful modern facility with engaged people," Mr. Milton says. "I was just drawn to that."
Embraer is the result of a legacy that highlights the best and worst of Brazil over the past century, as the country attempted to transform itself from a coffee republic into a military power and a state with a modern industrial economy. Central to that design was a deliberate effort to champion Embraer at all costs -- a plan that has finally delivered some of the international respect Brazil has long coveted.
"It was quite audacious to try to develop an aeronautical industry in a country that had so many difficulties, so many challenges," Embraer chief executive Mauricio Botelho says. "I have pride in taking to the world Embraer as an image of effectiveness, competitiveness, quality, attitude, seriousness and competence. This is what is in this company."
When Alberto Santos-Dumont hung himself in 1932, the shock of his death was enough to stop Brazil's civil war for three days.
It was an era of heroic and daring aviators, and Santos-Dumont was the most famous and sensational of a slew of Brazilians to conquer the skies. Huge crowds had gathered to watch the audacious and showy feats of the impeccably dressed scion of a coffee baron. In October, 1901, his flight around the Eiffel Tower in a dirigible was witnessed by 12 kings and queens, Jules Verne and Gustave Eiffel himself. In 1906, he became renowned as the first man to successfully fly an airplane, getting his 14 Bis a few feet off the ground for a 60-metre stretch in France. That drew out the Wright brothers, who had done the same thing three years earlier in secret, and whose achievement would later relegate Santos-Dumont to the footnotes of history -- at least outside Brazil. To this day, some Brazilians dismiss the Wrights' achievement as a "chicken flight."
Santos-Dumont committed suicide after watching both sides in Brazil's civil war take to the air. Enemies laid down arms and lined up next to each other for miles to file past his coffin. But his pleas to keep planes out of war would be forgotten as Brazilian dreams of air dominance -- which he had inspired -- continued to grow.
A year earlier, in 1931, Casimiro Montenegro Filho had become a hero in his own right as a co-pilot on the inaugural flight of Brazil's air mail system. Brazil was at the dawn of huge transformation: The Depression brought plunging coffee prices and the arrival of Getulio Vargas, the dictator who set the country on an aggressive course of industrialization. Taking to the skies was seen not only as a way to link the country but also to modernize it.
Filho established air routes into the jungle and became a colonel in Brazil's air force when it was formed in 1941.
During the Second World War, he witnessed first-hand the growing importance of air supremacy, when Brazil sent fighter-bombers to Italy to contribute to the Allied effort. Convinced of the need to develop aerospace know-how, the influential Filho pressed for the creation of a centre in Brazil to train aeronautical engineers and develop homegrown know-how to build planes. He convinced Richard Smith, head of aero-astro engineering at the Massachusetts Institute of Technology, to draw up plans for a complex to be located in a valley straddling the Tropic of Capricorn, a place where Filho had once made an emergency landing in a rice field.
The complex was called the Aeronautical Technical Centre (CTA) and had two research institutes and a university modelled on MIT with a focus on turning out aerospace engineers. Dozens of German aeronautical engineers, including the designer of the Luftwaffe's FW-190 fighter bomber, went to work for the institutes. Smith, meanwhile, became the first dean of the school within the CTA, the Aeronautical Technology Institute (ITA), which started in 1950.
"ITA is the beginning of everything" at Embraer, explains Henrique Rzezinski, senior vice-president of external affairs with the firm, as we drive past the long walls covered with barbed wire that surround the sprawling CTA.
The ITA revolutionized higher education in Brazil, and soon other universities built on a similar model sprung up.
Students found themselves in splendid isolation, living on campus for 10 months a year during the five-year program. Soon, such multinational firms as Kodak, Johnson & Johnson and GM opened plants in the area.
(Brazil's effort to push for excellence in higher education has left an odd legacy. To this day it continues to underfund primary and secondary education relative to its universities, most of which are free. That contributes to Brazil having one of the widest gaps between rich and poor in the world, says Lisa Schineller, who rates Brazil's debt for Standard & Poor's. "All theories and evidence on development show you want to bolster primary and secondary education," in Third World countries, she says. "That's where you want to put your scarce public-sector funding, more than providing free university education.")
Developing aerospace and defence expertise became a higher priority when the military took control of Brazil in 1964. With a steady source of engineers and a hive of research projects, the CTA was ready to build its own planes.
In 1969, Brazil's aeronautics ministry established Embraer next to the CTA. Its first president was an air force officer. Embraer developed commercial and military planes, and was soon selling its 19-seat non-pressurized turbopropeller "Bandeirante" airliner, a jet for the air force, and a crop duster.
But getting airborne wasn't cheap. In addition to its state-trained engineers, Embraer enjoyed unparalleled support as the favoured child of Brazil's military-industrial complex.
Unlike other firms in Brazil's closed economy, Embraer didn't have to buy locally; it was free to order components from anywhere. And the cost to international aerospace suppliers for gaining access to Brazil's market was transferring their know-how to Embraer. The company made Piper planes under licence, which led Cessna -- a longtime aircraft supplier in Brazil -- to lobby U.S. airlines not to buy Bandeirantes. Embraer suppliers agreed to take on its recruits for work terms fresh out of school. Many of Embraer's top executives got their start at the Pratt & Whitney engine plant in Montreal, which supplied its turboprops. Orlando Neto, Embraer's market intelligence head, learned to crosscountry ski during his stint in Montreal in the early 1980s.
Embraer received some of the taxes paid by Brazilian companies, a subsidy worth $500-million in its first 16 years. The company itself was exempt from many taxes, enjoyed government orders, loans and grants, and the support of Brazil's diplomatic missions in international sales. A 2002 World Bank report found the cost to develop Embraer "were enormous."
"We do not know whether the company could have succeeded without substantial government support," the report said. "Moreover, it is not clear that the net present value of the public investments made in Embraer are positive, even considering its recent commercial success."
By the 1980s, Embraer was part of an impressive Brazilian military-industrial juggernaut, with US$2-billion in annual sales and plans to build a battle tank, NATO-standard attack jets and nuclear submarines. Then, disaster struck.
The 1982 Mexico debt crisis spread to highly indebted Brazil. Dictatorship gave way to democracy. The Cold War ended. Defence sales fell as Brazil was unable to support its homegrown industry.
That left Embraer without a safety net when its new CBA123, a 19-seat turbopropeller-powered airliner flamed out. It cost too much and didn't sell as airlines hit hard times after the first Gulf War. "Being a state-owned company, Embraer didn't have the mechanisms and procedures to allow it to be a competitive entity," Mr. Botelho, Embraer's CEO, says. "They couldn't satisfy three basic conditions: to be agile, fast in response, and aggressive." By 1990, the CBA123 program had lost US$280-million.
Embraer cut its staff in half, to 6,100; revenue fell to US$177-million in 1994 from US$700-million in 1989. Privatization seemed the only way to save it.
But Embraer remained a symbol of national pride, and protests delayed its sale to private interests by two years. "We don't have that many Embraers in Brazil, so you can sense the pride, and it has some symbolic value also," Mr. Rzezinski says.
Ever the favoured child, the government wrote off US$700-million of Embraer debt and put US$350-million into the business. It also kept a "golden share" -- a small stake that gives it veto power over some company initiatives, including any change to its name and defence sales, and a seat on the board. The government sold 45% of Embraer in late 1994 to a group led by two public pension funds and a buyout firm headed by one of Brazil's richest men, Julio Bozano.
Even with the bailout, Embraer was in bad shape. It needed more working capital than anticipated. Plane sales fell. It was paying 30% interest on its debt and had to borrow more. By 1995, Brazil's air dreams were in a tailspin.
Walking through Embraer's facilities today, it's hard to imagine its state a decade ago. Thousands of busy workers wearing company golf shirts with small Brazilian flags embroidered on their chests move quickly about a series of giant, cream-coloured buildings adorned with tropical flora. There are now as many workers at Embraer as there were before the layoffs of the 1980s and 1990s, but now they produce four times as much revenue, share in its dividends and produce planes in under one-third the time they took in 1995 in modern facilities. Embraer workers also receive subsidized meals, health care and transportation.
In many ways, Embraer's progress mirrors Brazil's, which has made great strides since 1994 thanks to its relatively stable currency, declining inflation, debt repayment and fiscal prudence. To the surprise of many, left-wing President Luiz Inacio Lula da Silva, elected in 2002, has stuck to the fiscally conservative program. Last year, GDP growth was the best in 10 years, as exports neared US$100-billion for the first time. Although Brazil is a long way from First World status, the progress has been impressive.
When Mauricio Botelho agreed to become CEO in September, 1995, after a successful career as an engineer and CEO of two Brazilian firms, the company needed a saviour. It had US$200-million in orders and debt of US$400-million. It had lost US$330-million on revenues of US$170-million the year before and was overstaffed, despite recent layoffs.
Mr. Botelho saw it as a good way to finish his career. "Imagine turning around a company of that relevance, in such a disastrous position," the 62-year-old says in an interview in Embraer's boardroom at its Sao Paulo office. "Well, that would be a good achievement."
A warm and gregarious man who wears his love for his country on his sleeve, Mr. Botelho had enjoyed a privileged childhood as the son of a cattle rancher in the Pantanal -- a vast swampland in the southwest that is home to jaguars, anacondas and storks. He grew up in the comfortable setting of Ipanema, the famed Rio de Janeiro beachside neighbourhood.
After earning an engineering degree, his first job took him to the heart of the Amazon, where he helped build industrial plants. He and the other engineers also built a school in the jungle. Children appeared from out of nowhere, rowing their boats to get to the school. "You never knew where these children came from," he recalls. "There were no houses, nothing around. Just forest. But they knew there was a school, and they just got the incentive to grow and to modify their lives. This was something very strong in my life from that point on. Every time you create the conditions for growth, people will take it -- no matter in what circumstances, in what conditions."
At Embraer, there was one big opportunity among the mess that Mr. Botelho inherited. For the past six years it had been in a race with Bombardier to develop a 50-seat airliner with jet engines to service feeder airlines primarily in the United States and Europe. The idea was to replace loud and shaky propeller planes with a smoother, faster and farther travelling regional jet. Bombardier had transformed its Challenger business jet into an RJ, while Embraer combined technology from one of its fighter jets and its 30-seat Brasilia turboprop. But its work had slowed after the CBA123 debacle.
The ERJ completed its first test flight in August, 1995, a month before Mr. Botelho joined, and he focused the company's efforts on getting the plane to market. Despite being well behind Bombardier -- whose CRJ was already certified and in service two years -- Mr. Botelho saw the ERJ as his company's "redemption."
Meanwhile, he led a severe restructuring. Within 18 months, Mr. Botelho cut close to half of Embraer's remaining jobs, bringing the ranks to 3,000 workers.
Embraer had managed to convince its suppliers to put up two-thirds of the US$500-million development costs, but it still needed money to produce the ERJs. Embraer's new shareholders increased their equity contribution, refinanced its debt to cut interest rates to 8% and got a US$115-million loan from the Brazilian National Development Bank.
It poured millions into modernizing its facilities and fine-tuned production, cutting the time to build a jet to 3.4 months from 12.
Then, Embraer went out and won a slew of orders. The RJ was catching on as airlines realized they could not only replace ageing turboprops, but also open new direct routes that were beyond the reach of the slow-footed incumbent aircraft. In late 1996, Continental's feeder service bought 25 ERJs and took options on another 175, followed by a big order from American Airlines. "In our wildest dreams, we never thought these 175 options would materialize, not even half of it," says Mr. Neto. They did, and more.
By early this decade, demand for 50-seat RJs had far exceeded the forecasts of both rivals, and the two have delivered 2,000 of the planes. After breaking even in 1997 with a US$3-million profit on US$764-million in sales, Embraer would soar to a US$323-million profit on sales of almost US$3-billion in 2001.
"We had the idea we could ask for a future," Mr. Botelho says. But that meant coming up with a new flying machine. The market for 50-seaters would soon be saturated. Airlines wanted something bigger. That would require years of planning, engineering, huge investment -- and a lot of luck.
In the century since Alberto Santos-Dumont had flown, not much had changed. But everything was about to.
Brazil takes flight
Sean Silcoff in
Financial Post
March 26, 2005
Bombardier Inc. may be one of the biggest, best-known and most controversial companies in Canada, but the world's third-largest maker of airplanes has been upstaged recently by rival Embraer. The Brazilian firm has been flying high thanks to the success of a new family of commercial jets, translating into a flurry of orders and worries for its Canadian rival. How did a Third World country like Brazil come to host one of the top aerospace firms in the world? Montreal Bureau chief Sean Silcoff travelled to Embraer's headquarters in Brazil this month for an in-depth look at the company. His three-part report begins today.
- - -
It's a balmy Wednesday night in March in Brazil's industrial heartland, where a group of top U.S. defence industry executives has landed for a secret fact-finding mission. On the other side of the equator, in Montreal, Bombardier Inc. is preparing to launch a new family of airliners, the 110- to 130-seat CSeries. But there is a lot of doubt in the industry about the jets, which has led these executives, who work for a Bombardier supplier, to the Churrascaria Vila d'Aldea, about an hour's drive east of Sao Paulo.
The restaurant is a meat-eaters' paradise where waiters in black ties and vests hurriedly deliver slabs of beef on skewers to diners. Over in a corner, a noisy troupe of entertainers performs capoeira, a Brazilian form of martial arts set to percussion.
The visitors are more than willing to suffer the distractions of this tourist trap, however, because it is the place to come if you want to know what the top minds at Empresa Brasileira de Aeronautica SA, Bombardier's main rival, are thinking.
The Embraer executives the Americans have come to visit -- including Orlando Jose Ferreira Neto, director of market intelligence, and Satoshi Yokota, executive vice-president of development and industry -- are only too happy to share their skeptical views on Bombardier's plans. After all, unlike Bombardier, Embraer's new family of airliner, the 70- to 110-seat E-Jet, is generating the kind of buzz in the airline world Howard Hughes would have died for.
"This is the first time we would say Bombardier is behind us," Mr. Neto says.
Once dismissed as little more than a maker of "jungle jets" -- small aircraft with such colourful monikers as the Tucano (Toucan), Bandeirante (Bandit) and Ipanema (a crop-duster and favourite of Brazilian farmers), Embraer has emerged as one of the globe's hottest aerospace firms.
It's something some industry veterans still have a hard time believing: That a country with a well-earned reputation for instability and economic disaster could be home to one of the world's leading aviation powers.
"You conjure up some factory in the middle of nowhere, with employees banging away at sheets of metal under corrugated roofs," says Robert Milton, chief executive of Air Canada parent ACE Aviation Holdings Inc., a recent Embraer customer.
"But it is a spanking new beautiful modern facility with engaged people," Mr. Milton says. "I was just drawn to that."
Embraer is the result of a legacy that highlights the best and worst of Brazil over the past century, as the country attempted to transform itself from a coffee republic into a military power and a state with a modern industrial economy. Central to that design was a deliberate effort to champion Embraer at all costs -- a plan that has finally delivered some of the international respect Brazil has long coveted.
"It was quite audacious to try to develop an aeronautical industry in a country that had so many difficulties, so many challenges," Embraer chief executive Mauricio Botelho says. "I have pride in taking to the world Embraer as an image of effectiveness, competitiveness, quality, attitude, seriousness and competence. This is what is in this company."
When Alberto Santos-Dumont hung himself in 1932, the shock of his death was enough to stop Brazil's civil war for three days.
It was an era of heroic and daring aviators, and Santos-Dumont was the most famous and sensational of a slew of Brazilians to conquer the skies. Huge crowds had gathered to watch the audacious and showy feats of the impeccably dressed scion of a coffee baron. In October, 1901, his flight around the Eiffel Tower in a dirigible was witnessed by 12 kings and queens, Jules Verne and Gustave Eiffel himself. In 1906, he became renowned as the first man to successfully fly an airplane, getting his 14 Bis a few feet off the ground for a 60-metre stretch in France. That drew out the Wright brothers, who had done the same thing three years earlier in secret, and whose achievement would later relegate Santos-Dumont to the footnotes of history -- at least outside Brazil. To this day, some Brazilians dismiss the Wrights' achievement as a "chicken flight."
Santos-Dumont committed suicide after watching both sides in Brazil's civil war take to the air. Enemies laid down arms and lined up next to each other for miles to file past his coffin. But his pleas to keep planes out of war would be forgotten as Brazilian dreams of air dominance -- which he had inspired -- continued to grow.
A year earlier, in 1931, Casimiro Montenegro Filho had become a hero in his own right as a co-pilot on the inaugural flight of Brazil's air mail system. Brazil was at the dawn of huge transformation: The Depression brought plunging coffee prices and the arrival of Getulio Vargas, the dictator who set the country on an aggressive course of industrialization. Taking to the skies was seen not only as a way to link the country but also to modernize it.
Filho established air routes into the jungle and became a colonel in Brazil's air force when it was formed in 1941.
During the Second World War, he witnessed first-hand the growing importance of air supremacy, when Brazil sent fighter-bombers to Italy to contribute to the Allied effort. Convinced of the need to develop aerospace know-how, the influential Filho pressed for the creation of a centre in Brazil to train aeronautical engineers and develop homegrown know-how to build planes. He convinced Richard Smith, head of aero-astro engineering at the Massachusetts Institute of Technology, to draw up plans for a complex to be located in a valley straddling the Tropic of Capricorn, a place where Filho had once made an emergency landing in a rice field.
The complex was called the Aeronautical Technical Centre (CTA) and had two research institutes and a university modelled on MIT with a focus on turning out aerospace engineers. Dozens of German aeronautical engineers, including the designer of the Luftwaffe's FW-190 fighter bomber, went to work for the institutes. Smith, meanwhile, became the first dean of the school within the CTA, the Aeronautical Technology Institute (ITA), which started in 1950.
"ITA is the beginning of everything" at Embraer, explains Henrique Rzezinski, senior vice-president of external affairs with the firm, as we drive past the long walls covered with barbed wire that surround the sprawling CTA.
The ITA revolutionized higher education in Brazil, and soon other universities built on a similar model sprung up.
Students found themselves in splendid isolation, living on campus for 10 months a year during the five-year program. Soon, such multinational firms as Kodak, Johnson & Johnson and GM opened plants in the area.
(Brazil's effort to push for excellence in higher education has left an odd legacy. To this day it continues to underfund primary and secondary education relative to its universities, most of which are free. That contributes to Brazil having one of the widest gaps between rich and poor in the world, says Lisa Schineller, who rates Brazil's debt for Standard & Poor's. "All theories and evidence on development show you want to bolster primary and secondary education," in Third World countries, she says. "That's where you want to put your scarce public-sector funding, more than providing free university education.")
Developing aerospace and defence expertise became a higher priority when the military took control of Brazil in 1964. With a steady source of engineers and a hive of research projects, the CTA was ready to build its own planes.
In 1969, Brazil's aeronautics ministry established Embraer next to the CTA. Its first president was an air force officer. Embraer developed commercial and military planes, and was soon selling its 19-seat non-pressurized turbopropeller "Bandeirante" airliner, a jet for the air force, and a crop duster.
But getting airborne wasn't cheap. In addition to its state-trained engineers, Embraer enjoyed unparalleled support as the favoured child of Brazil's military-industrial complex.
Unlike other firms in Brazil's closed economy, Embraer didn't have to buy locally; it was free to order components from anywhere. And the cost to international aerospace suppliers for gaining access to Brazil's market was transferring their know-how to Embraer. The company made Piper planes under licence, which led Cessna -- a longtime aircraft supplier in Brazil -- to lobby U.S. airlines not to buy Bandeirantes. Embraer suppliers agreed to take on its recruits for work terms fresh out of school. Many of Embraer's top executives got their start at the Pratt & Whitney engine plant in Montreal, which supplied its turboprops. Orlando Neto, Embraer's market intelligence head, learned to crosscountry ski during his stint in Montreal in the early 1980s.
Embraer received some of the taxes paid by Brazilian companies, a subsidy worth $500-million in its first 16 years. The company itself was exempt from many taxes, enjoyed government orders, loans and grants, and the support of Brazil's diplomatic missions in international sales. A 2002 World Bank report found the cost to develop Embraer "were enormous."
"We do not know whether the company could have succeeded without substantial government support," the report said. "Moreover, it is not clear that the net present value of the public investments made in Embraer are positive, even considering its recent commercial success."
By the 1980s, Embraer was part of an impressive Brazilian military-industrial juggernaut, with US$2-billion in annual sales and plans to build a battle tank, NATO-standard attack jets and nuclear submarines. Then, disaster struck.
The 1982 Mexico debt crisis spread to highly indebted Brazil. Dictatorship gave way to democracy. The Cold War ended. Defence sales fell as Brazil was unable to support its homegrown industry.
That left Embraer without a safety net when its new CBA123, a 19-seat turbopropeller-powered airliner flamed out. It cost too much and didn't sell as airlines hit hard times after the first Gulf War. "Being a state-owned company, Embraer didn't have the mechanisms and procedures to allow it to be a competitive entity," Mr. Botelho, Embraer's CEO, says. "They couldn't satisfy three basic conditions: to be agile, fast in response, and aggressive." By 1990, the CBA123 program had lost US$280-million.
Embraer cut its staff in half, to 6,100; revenue fell to US$177-million in 1994 from US$700-million in 1989. Privatization seemed the only way to save it.
But Embraer remained a symbol of national pride, and protests delayed its sale to private interests by two years. "We don't have that many Embraers in Brazil, so you can sense the pride, and it has some symbolic value also," Mr. Rzezinski says.
Ever the favoured child, the government wrote off US$700-million of Embraer debt and put US$350-million into the business. It also kept a "golden share" -- a small stake that gives it veto power over some company initiatives, including any change to its name and defence sales, and a seat on the board. The government sold 45% of Embraer in late 1994 to a group led by two public pension funds and a buyout firm headed by one of Brazil's richest men, Julio Bozano.
Even with the bailout, Embraer was in bad shape. It needed more working capital than anticipated. Plane sales fell. It was paying 30% interest on its debt and had to borrow more. By 1995, Brazil's air dreams were in a tailspin.
Walking through Embraer's facilities today, it's hard to imagine its state a decade ago. Thousands of busy workers wearing company golf shirts with small Brazilian flags embroidered on their chests move quickly about a series of giant, cream-coloured buildings adorned with tropical flora. There are now as many workers at Embraer as there were before the layoffs of the 1980s and 1990s, but now they produce four times as much revenue, share in its dividends and produce planes in under one-third the time they took in 1995 in modern facilities. Embraer workers also receive subsidized meals, health care and transportation.
In many ways, Embraer's progress mirrors Brazil's, which has made great strides since 1994 thanks to its relatively stable currency, declining inflation, debt repayment and fiscal prudence. To the surprise of many, left-wing President Luiz Inacio Lula da Silva, elected in 2002, has stuck to the fiscally conservative program. Last year, GDP growth was the best in 10 years, as exports neared US$100-billion for the first time. Although Brazil is a long way from First World status, the progress has been impressive.
When Mauricio Botelho agreed to become CEO in September, 1995, after a successful career as an engineer and CEO of two Brazilian firms, the company needed a saviour. It had US$200-million in orders and debt of US$400-million. It had lost US$330-million on revenues of US$170-million the year before and was overstaffed, despite recent layoffs.
Mr. Botelho saw it as a good way to finish his career. "Imagine turning around a company of that relevance, in such a disastrous position," the 62-year-old says in an interview in Embraer's boardroom at its Sao Paulo office. "Well, that would be a good achievement."
A warm and gregarious man who wears his love for his country on his sleeve, Mr. Botelho had enjoyed a privileged childhood as the son of a cattle rancher in the Pantanal -- a vast swampland in the southwest that is home to jaguars, anacondas and storks. He grew up in the comfortable setting of Ipanema, the famed Rio de Janeiro beachside neighbourhood.
After earning an engineering degree, his first job took him to the heart of the Amazon, where he helped build industrial plants. He and the other engineers also built a school in the jungle. Children appeared from out of nowhere, rowing their boats to get to the school. "You never knew where these children came from," he recalls. "There were no houses, nothing around. Just forest. But they knew there was a school, and they just got the incentive to grow and to modify their lives. This was something very strong in my life from that point on. Every time you create the conditions for growth, people will take it -- no matter in what circumstances, in what conditions."
At Embraer, there was one big opportunity among the mess that Mr. Botelho inherited. For the past six years it had been in a race with Bombardier to develop a 50-seat airliner with jet engines to service feeder airlines primarily in the United States and Europe. The idea was to replace loud and shaky propeller planes with a smoother, faster and farther travelling regional jet. Bombardier had transformed its Challenger business jet into an RJ, while Embraer combined technology from one of its fighter jets and its 30-seat Brasilia turboprop. But its work had slowed after the CBA123 debacle.
The ERJ completed its first test flight in August, 1995, a month before Mr. Botelho joined, and he focused the company's efforts on getting the plane to market. Despite being well behind Bombardier -- whose CRJ was already certified and in service two years -- Mr. Botelho saw the ERJ as his company's "redemption."
Meanwhile, he led a severe restructuring. Within 18 months, Mr. Botelho cut close to half of Embraer's remaining jobs, bringing the ranks to 3,000 workers.
Embraer had managed to convince its suppliers to put up two-thirds of the US$500-million development costs, but it still needed money to produce the ERJs. Embraer's new shareholders increased their equity contribution, refinanced its debt to cut interest rates to 8% and got a US$115-million loan from the Brazilian National Development Bank.
It poured millions into modernizing its facilities and fine-tuned production, cutting the time to build a jet to 3.4 months from 12.
Then, Embraer went out and won a slew of orders. The RJ was catching on as airlines realized they could not only replace ageing turboprops, but also open new direct routes that were beyond the reach of the slow-footed incumbent aircraft. In late 1996, Continental's feeder service bought 25 ERJs and took options on another 175, followed by a big order from American Airlines. "In our wildest dreams, we never thought these 175 options would materialize, not even half of it," says Mr. Neto. They did, and more.
By early this decade, demand for 50-seat RJs had far exceeded the forecasts of both rivals, and the two have delivered 2,000 of the planes. After breaking even in 1997 with a US$3-million profit on US$764-million in sales, Embraer would soar to a US$323-million profit on sales of almost US$3-billion in 2001.
"We had the idea we could ask for a future," Mr. Botelho says. But that meant coming up with a new flying machine. The market for 50-seaters would soon be saturated. Airlines wanted something bigger. That would require years of planning, engineering, huge investment -- and a lot of luck.
In the century since Alberto Santos-Dumont had flown, not much had changed. But everything was about to.