Embraer: The Brazilian Aircraft Manufacturer's Turnaround and Growth
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Case Code : BSTR243
Case Length : 31 Pages
Period : 1969-2006
Pub Date : 2007
Teaching Note : Available
Organization : Empresa Brasileira de Aeronáutica S.A
Industry : Aerospace
Countries : Brazil
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Privatization and Turnaround
In December 1994, Embraer was privatized by the Brazilian government. Even after
the privatization, the government retained a golden share with veto power which
gave it control over strategic issues like sale of shares to foreign investors,
employee relationships, and the terms of sale of aircraft to the military.
Control over the company was acquired by a syndicate of Brazilian investors,
consisting of the Bonazo Group (a holding company with interests in industrial
and financial ventures) and two of Brazil's largest government-owned pension
funds, Previ and Sistel. Each of these investors held 20 percent of the voting
capital of the company...
Focus on Regional Jets
When Botelho became the CEO of Embraer, with projects running behind schedule,
most of the company's new product development initiatives were in a shambles.
Consequently, Embraer had few products that showed commercial potential. An
exception was the ERJ-145 project , which had been launched in 1989. The ERJ-145
was a 50-seat regional passenger jet, which was being designed to compete
against Bombardier's comparable CRJ-200 aircraft...
The E-Jet Era
The success of the ERJ-145 demonstrated the potential for regional jets
and prompted Embraer to consider manufacturing a full range of regional
jets to tap more segments of the market. For a better understanding of
the regional jet market, Embraer surveyed more than 60 airlines around
the world. The survey indicated that the segment for mid-sized regional
jets was greatly under-served.
Bombardier was the leader in the 50-seat jet segment, while Boeing and
Airbus competed in the 130-seat segment.
However, no aircraft were available in the 70 to 110-seat
segment. This also seemed to be the segment with the maximum potential.
(According to analyst estimates, more than 60 percent of all flights in the US
had been taking off with passenger headcounts in this range.)...