Embraer and Brazilian Importing Embraer is a Brazilian company that manufactures commercial, military executive, and agricultural aircraft and provides aeronautical services. It is headquartered in Sao Jose dos Campos, Sao Paulo State, in Brazil. Importantly, Embraer is the fourth-largest airplane manufacturer in the world, and its imports of various raw material and component pans to Brazil to manufacture its airplanes make up slightly more than 1 percent of the Brazilian trade balance with all other countries, winch is a relatively large portion of the Brazilian economy for just one importer. Embraer has consistently been one of the top importers in Brazil since its founding in 1969. Today, the company has about 20.000 employees from 20 countries, revenue of more than RS20 billion Brazilian real (BR.L) or about 56 billion U.S. dollars, and more than 5300 million in net income. The company consists of three primary divisions: Embraer Defense and Security, Embraer Commercial Aviation, and Embraer Executive Jets. Across these divisions, the output is impressive. Embraer has served more than 90 airlines in more than 60 countries and delivered more than 5,000 aircraft to this clientele. To be able to produce that many aircraft and achieve a top-four position in its industry, Embraer has to import a lot of raw materials and component parts to Brazil to build the aircraft at the company’s main locations at its headquarters in Sao Jose dos Campos, as well as its other core plants in Brazil m Botucatu. Eugenio de Melo. and Gana* Peixoto. Some of these component parts are, m reality, finished products that are then inserted Into the planes m a certain position, such as the PurePower Geared Turbofan engines from Pratt & Whitney to power its E-Jets. Embraer also collaborates with some of its competitors in the industry, such as Boeing, in building its stretch civilian model of the KC-390 military transport aerial refueler. The list of suppliers to Embraer’s operations is lengthy, with partnerships with Honeywell, Saab, LTC Aerospace, SNC, Flight Safety International, Goodrich, Eaton, Thales, Sierra, and Air France Industries, to mention some of the company’s top suppliers. But, the complete list of suppliers needed for Embraer planes is incredibly lengthy-even lengthier than most car manufacturers, which have a reputation for using a lot of suppliers (e.g., some 50,000 in the case of General Motors). Though the number of suppliers for Embraer-or any aircraft manufacturer—is somewhat fluid, we can certainly put the number of parts used at more than 300,000. This places incredibly pressure on operating an efficient and effective global supply chain system and, most importantly, a well-structured importing operation into Brazil. Importing into Brazil. some would say, is a difficult task for most companies and product categories. At the consumer product level, it was almost impossible to find imported products in Brazil before 1990. The Brazilian government used a number of protectiomst measures and high taxes to discourage importing of products. Briberies of officials that can facilitate the importing process is normal. Adding to the importing difficulty the World Bank considers Brazil to be one of the most difficult places to start a business. Brazil’s tax system has also been ranked as one of the most complex worldwide by analysts at PwC. SOttral! Jon Ostrava. 1-ca Wait Ages for a Neu. Atrplane and Them Two Come Along.” CW Money. Mirth 7,2017; Masa DeFens. “Embraer Fitts Higher en Earnings.” Sarron’.7. March 9. 2017; Aid Suns. -Emtaser An Impressive Braid= Jet Producer.” Seeking .11pba. August 8.2007: RIM Wealth. ‘The Unit Aircraft Company That Coald.” Fond’s. November 14. 2005.
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Case Discussion Questions
1. Do you expect a company like Embraer to be able to compete long term with the top aircraft manufacturers in the world today (Airbus. Boeing) by staying heavily oriented toward producing its products in Brazil? 2. Similar to automobile companies, aircraft manufacturers have a staggering number of suppliers that supply a staggering number of component parts that go into the production of an aircraft. While plane producers will likely need a large number of parts in the future as well, do you think they should try to consolidate those parts into a much smaller set of suppliers? 3. Embraer imports a lot of these parts into Brazil—a country almost notorious for being difficult to clear its customs. Should Embraer consider developing more of its own parts, either by starting companies or subsidiaries in Brazil that can make these parts or help develop companies that can?
