US aerospace giant Lockheed Martin may suffer a slight twitch from the demise of its $870 million Aerial Common Sensor (ACS) development contract, but for subcontractor Embraer the loss deals a more painful blow.


For the Brazillian manufacturer, participation in the ACS programme represented a strategic victory for its ambitions to dramatically broaden its small defence business. In 1999, Embraer announced a five-year strategy to triple the size of its defence portfolio, which then accounted for 10% of its overall sales. By 2003, Embraer had reduced its goal to raising defence sales to 20% of revenues, but even that remains unmet.

The ACS deal offered the opportunity to sell 57 ERJ-145s to the US Army and Navy, break into the lucrative North American defence market and establish a manufacturing presence on US soil. The US military’s acceptance of the ERJ-145 for ACS also was used as a key marketing theme for other international customers seeking commercial aircraft variants for special mission programmes.

Moreover, the termination of the Lockheed ACS deal comes only one year after the Brazilian government decided to cancel the F-X fighter programme, for which Embraer had teamed with France’s Dassault to offer the Mirage 2000. The US government also blocked the sale of Embraer EMB-314 Super Tucanos to the Venezuelan government. US officials cites concerns over Venezuelan president Hugo Chavez. The Super Tucano contains US-made military equipment, and is therefore subject to an export licence review.

Embraer’s strategy for expanding defence sales was based mainly in participation in both the F-X and ACS programmes, which will remain dormant for several years. Brazil may resurrect the F-X competition at the end of the decade, while the army and navy have launched plans to restart the ACS competition in late 2008.

Embraer announced on 13 January that it has suspended operations at a new ERJ-145 final assembly site under construction for ACS in Jacksonville, Florida. Although Embraer was formally teamed with Lockheed, it has not yet signed a contract on the programme, says Ed Bair, the army’s programme executive officer for intelligence, electronic warfare and sensors.

For the foreseeable future Embraer’s defence portfolio will be focused on sales of the EMB-314, special variants of the ERJ-145 and the modernisation of the Brazilian air force’s Northrop F-5 fleet. Embraer also has a partial stake in the production and upgrade of the Alenia/Aermacchi/Embraer AMX attack aircraft.

Source: Flight International