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:

Cincinnati Money Manager Peter Klein: He's Singing In The Break Up G.E. Chorus

CINCINNATI (TDB) -- General Electric Co. traces its roots back to Thomas Edison, and the conglomorate is headed by another Ohio boy, CEO Jeff Immelt, who grew up in Cincinnati. GE's aircraft engine division is alongside I-75 in the Cincinnati suburb of Evendale, and the factory complex remains one of the state's largest employers and an a icon of Ohio's once-unmatched manufacturing might. But GE's stock is near 4 1/2-year lows, and a Fifth Third Bank money manager is wondering publicly if it is time for the corporate giant to start selling off big hunks of its holdings to raise the share price for investors. That should be news in Cincinnati -- home of both the bank and one of GE's largest divisions, along with thousands of GE investors and employees. Still, the local money manager's concern this week seems to have escaped notice by the local media.

Peter Klein, a senior portfolio manager at Fifth Third Asset Management, had this to say:

"Having a more focused organization probably would benefit that organization (GE). Whether it was focused on media or focused on financials or focused on manufacturing . . . management at least ought to entertain that approach that says, 'Let's separate them and see what would happen."

GE owns NBC Universal, but also makes railroad locomotives, appliances, power plant turbines and jet engines. Some say it is hard to see how owning Meet The Press (and finding a replacement for Tim Russert) and producing TV show mixes with manufacturing engines for Boeing airliners. Fifth Third's Klein was quoted in this Reuters business news story June 16 that pointedly raised the issue of whether it is time for GE make changes and shed some of its holdings.

[UPDATE: Fifth Third lost over 27% of its share value today. Asked why, some analysts were quipping: "Because it's open." GE fell 2.25%.]