Embraer set to plant manufacturing flag on US soil

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It was November 2006, and Embraer needed some assurance. Ten months earlier, the US Army had terminated a contract to convert 38 ERJ-145 jets into surveillance aircraft due to technical issues that were outside Embraer's control. Calling on then-chief executive Mauricio Botelho in Rio de Janeiro, Adm Edmund Giambastiani, vice chairman of the joint chiefs of staff, told him that Embraer would get another chance for a US defence contract in 2007.

That was all Botelho needed to hear. According to diplomatic ­cables revealed in late January on the Wikileaks web site, Botelho closed the meeting with a confident pledge: "We will compete strongly!"

Writing another familiar chapter of Embraer's long pursuit to plant a manufacturing presence on US soil, however, Giambastiani's promise turned out to be wrong. Embraer would not have an opportunity to formally offer a larger aircraft, such as the E190, for a revived Aerial Common Sensor (ACS) programme, but the company's strategy never wavered.

Five years after the demise of ACS - when errant assumptions about Lockheed Martin's sensor scuttled Embraer's hopes to build ERJ-145s at Cecil Field in Jacksonville - the Brazilian manufacturer is back in the game.

  ©Embraer
Embraer is teaming up with Sierra Nevada to build Super Tucanos in Jacksonville, Florida, should the US Air Force select the Brazilian light attack trainer

Within a three-week period from 31 January, Brazil's Embraer is taking two major steps toward fulfilling a long-sought vision for establishing a manufacturing presence on US soil.

In late February, Embraer will open a final assembly plant in Melbourne, Florida, for Phenom 100 and 300 business jets. The 8,721m² (89,000ft²) final assembly building is capable of building a total of 22 Phenom 100 and 300s per year. Later this year, ­Embraer will open a 1,727m² customer design centre in ­Melbourne.

"It brings us closer to the customer," says Gary Spulak, president of Embraer Aircraft Holdings, the company's US arm based in Fort Lauderdale.

One key difference in the commercial market is that such decisions are discretionary. To win contracts in the lucrative market for US military aircraft, Embraer knows it is required to open a production line locally.

JOINT VENTURE

On 31 January, the company ­announced that it was teaming up with US contractor Sierra ­Nevada to build Super Tucanos in Jacksonville, Florida, should the US Air Force select the Brazilian light attack trainer over the Hawker Beechcraft/Lockheed Martin AT-6.

Embraer's strategy follows a well-worn path for European aircraft makers seeking closer physical ties to the world's largest aircraft market. In the last decade, AgustaWestland and Eurocopter have opened final assembly plants in America for civil and military helicopters. A pending USAF contract award for tankers could establish an Airbus factory for A330s in Alabama.

Like its European predecessors, Embraer's strategy is guided by a US military requirement to build or at least source the majority of the aircraft in the domestic market, and also by the marketing value of proximity to a large and vital customer base.

But the course does not guarantee victory. In 2008, the Airbus-derived tanker defeated Boeing's bid for the KC-X contract, but the award was over-turned by procedural errors in the source selection. At about the same time, Alenia Aeronautica committed to build the C-27J in Jacksonville after the army pledged to order more than 145 transports, but the Joint Cargo Aircraft programme was transferred to the USAF a year later and numbers slashed to a minimum of 38 aircraft.

Despite the risks, foreign manufacturers have targeted gaps in the US industry's ability to provide competitive options for US military requirements, and deepened inroads into the civil market.

IN DISPUTE

But congressional supporters of US-based companies have struck back at the rising trend: Boeing's allies have called for injecting the long-running dispute over commercial aircraft subsidies into the evaluation of bids for the KC-X contract.

As the company seeks to challenge entrenched competitors on US soil in the future, Embraer can expect to face similar resistance. Already, Republican Sam Brownback, who left the Senate two months ago to become governor of Kansas, has called a US trade agency to investigate alleged subsidies to Embraer that he claims damaged Hawker Beechcraft - the competitor of Embraer in the competition for the USAF light air support contract.

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 © Airbus Military
A pending USAF contract award for tankers could establish an Airbus factory for A330s in Alabama.   

In Giambastiani's meeting with Embraer's former CEO, Botelho perhaps anticipated the challenge from US competitors as the manufacturer expands its reach. Botelho told his American visitor that "Embraer looks at the defence market not so much as competing with US firms, but complementing US partners in competing for defence work."