Leaked State Dept. Cable Discloses Brazilian CEO's Lie: Cincinnati's G.E. Aviation Was To Get Lift From Aircraft-Maker Embraer

Whopper Told To Members Of Congress

CINCINNATI (TDB) -- WikiLeaks has landed close to home by releasing a confidential State Department cable disclosing that Embraer CEO Frederico Curado admitted privately to a U.S. diplomat last year that business was bleak. Publicly, Curado was saying just the opposite.  He told a  visiting U.S. Congressional delegation on Jan. 29, 2009 that "sales were strong." 

 Curado runs Embraer, the Brazilian aircraft manufacturer that is a large customer of G.E. Aviation in Cincinnati.  G.E. has sold hundreds of 34-8E turbofan jet engines to Embraer for commercial airliners, including a fleet used by JetBlue.
Amb. Clifford Sobel reported in a February 2009 cable stamped confidential that Embraer's CEO said the company "has suffered tremendously, and expects Embraer's production to fall significantly after it worked through its current backlog."  Sobel reported that the Brazilian blamed the global economic crisis.  Sobel and the Embraer CEO were meeting about selling U.S.-made F-18 jet fighters to the Brazilian Air Force.  But the talk shifted to commercial planes.  From the State Department cable recapping the meeting:

"According to Curado, the financial crisis has brought Embraer's new sales to zero.  They are working rhrugh a backlog of planes, but in two or three years, Curado expects to have completed the backlog, leaving Embraer with no planes to produce.  He told Ambassador Sobel that he expects the crisis to have abated in three to four years, though he foresees further depreciation of assets worldwide.  He said that some clients have canceled contracts, despite losing deposits as hight as 40 percent of the value of the plane.  NOTE:  This differs from Curado's public statements that do not paint such a bleak picture.  In fact, Curado told a visiting Codel [congressional delegation] on January 29 that sales remain strong for certain classes of aircraft and that few of their clients have canceled orders. END NOTE."

So, he was lying, being deceptive or spinning a good yarn.  But he wasn't telling the truth and has been outed by the leaked cable.  Here is a link to a site about Embraer 190 airliners, which are powered by G.E. jet engines. Meanwhile, Goldman Sachs initiated coverage on shares of Embraer (NYSE: ERJ) earlier this week with a “buy” rating and a $38 price target on the stock.  Wall Street was unphased by the lie, or unaware of the WikiLeaks disclosure.  The Daily Bellwether is publishing the full-text of the State Department cable that quotes the Embraer CEO telling his falsehood -- continue on to see the document:


CC O N F I D E N T I A L SECTION 01 OF 02 SAO PAULO 000104

SIPDIS

STATE FOR WHA AND PM, PM/DTTC, AND PM/RSAT
DEFENSE FOR DEPSECDEF, USDP, USD AT&L

E.O. 12958: DECL: 03/14/2018
TAGS: PREL MARR MOPS ETTC BR
SUBJECT: EMBRAER'S CURADO -- ADVICE ON FX2 AND VIEWS ON THE
FINANCIAL CRISIS

REF: A. BRASILIA 73
¶B. SAOPAULO 31

Classified By: Consul General Thomas White; Reasons 1.4 (b) and (d).

¶1. (C) SUMMARY: Ambassador Sobel met with Embraer CEO
Federico Curado on January 30 to discuss Curado's views on
the FX2 sale, as well hear about how the financial crisis has
affected the company's sales. Curado stressed the political
nature of the decision, stating that in addition to
technology transfer, one of the primary goals of the Request
for Proposal (RFP) was job creation. He said this could be
achieved through a partnership between Boeing and Embraer in
the development of a next-generation Brazilian jet fighter.
Curado also suggested that the United States offer to
purchase a number of U.S.-assembled Embraer Super Tucanos in
exchange for the FX2 contract. He thought that tying
civilian aviation collaboration with the FX2 sale was too
complicated and too far off. Regarding the financial crisis,
he told Ambassador Sobel that Embraer has suffered
tremendously, and expects Embraer's production to fall
significantly after it works through its current backlog.
END SUMMARY.

¶2. (C) Curado emphasized the importance of the political
dimension of this decision. He said that even if Brazil
received full technology transfer, this would not achieve
what he sees as one of the principal goals of the program,
job creation. Curado explained that building a jet fighter
is a difficult process and that the only way to truly learn
how to build a plane is to develop the aircraft from the very
beginning. Not even technology transfer can accomplish this,
because "it is through trial and error that a company learns
how to actually build an aircraft." In Curado's view, the
GOB ultimately wants to create jobs from this sale and to do
so, they need a partner who can work with Embraer to develop
a next-generation aircraft in Brazil. Embraer would like
Boeing to be that partner.

¶3. (C) Embraer proposed matching the sale of the F-18s with
a comparable purchase of Embraer Super Tucanos, assembled at
the Embraer facility in Florida. Curado cited this as a
creative way to add value to the Boeing bid.
This promise would, in his view, be a convincing step in the
GOB's decision. Curado then stated that Embraer privately
hopes Boeing wins the contract, though publicly they must
remain neutral. He finally asked Ambassador Sobel to avoid
discussions of civilian aviation collaboration, which he said
could confuse the selection process for the FX2.

¶4. (C) According to Curado, the financial crisis has brought
Embraer's new sales to zero. They are working through a
backlog of planes, but in two to three years, Curado expects
to have completed the backlog, leaving Embraer with no planes
to produce. He told Ambassador Sobel that he expects the
crisis to have abated in three to four years, though he
foresees further depreciation of assets worldwide. He said
that some clients have canceled contracts, despite losing
deposits as high as 40 percent of the value of the plane.
NOTE: This differs from Curado's public statements that do
not paint such a bleak picture. In fact, Curado told a
visiting Codel on January 29 that sales remain strong for
certain classes of aircraft and that few of their clients
have canceled orders. END NOTE.

¶5. (C) COMMENT: Defense officials have told the Mission
that creation of a domestic arms industry is an essential
part of the bidding process (REF A). The head of the
Brazilian Air Force has said that he prefers the F-18, and
most experts believe it to be technologically superior (REF
B). Curado concurred that both technology transfer and job
creation are key aspects of the RFP. As it stands, the RFP
calls for a relatively small number of planes (36), and
Boeing officials have told Embraer that it is not economical

SAO PAULO 00000104 002 OF 002


to assemble or manufacture F-18s in Brazil. This fact would
not allow for the creation of significant numbers of jobs in
Brazil, something that Curado and Embraer see as key to
winning the contract. However, if Boeing and Embraer were to
partner in the development of a Brazilian next-generation jet
fighter, the technology transfer and job creation concerns
would be addressed, and potentially make Boeing's bid for the
FX2 more likely to succeed. END COMMENT.

¶6. This cable was coordinated / cleared by Embassy Brasilia
and Ambassador Sobel.
WHITE