Flying high: Embraer's Mauricio Botelho has taken a flagging, state-owned company and turned it into the fourth-largest aircraft maker in the world - Profile

Chief Executive, The, Jan-Feb, 2003 by Edvaldo Pereira Lima

At age 26, Mauricio Botelho left his hometown of Rio de Janeiro to take a job in the Amazon jungle. A promising mechanical engineer, he signed on to help build a sawmill on Marajo Island in northern Brazil. Given the remote location, the challenges were many, yet the project thrived.

"There was nothing around," recalls Botelho. "We had to attend to the employees, their families and the surrounding communities. So we built a school. Children rowed their canoes on the river long distances to come to class. Seeing that was deeply touching. I learned that if you give people an opportunity, they take it and blossom."

Three and a half decades later, Botelho, now 60, employs some of that same vision and faith in people as president and CEO of Embraer, a $2.9 billion Brazilian aircraft manufacturer--the fourth largest in the world. Since taking over in 1995, he has guided the company to extraordinary growth, owing to a focus on regional jets instead of slower, shorter-range turbo-props. He also has shown a deft hand in labor talks and in his decision to establish in-house engineering and MBA programs to create a pipeline of able technicians and managers.

Despite its share of post-September 11 struggles common to the airline industry, by most measures Embra continues to thrive. The company, the largest private sector exporter in Brazil for three years in a row, had an order backlog of $9.5 billion as of the fall. In December, it signed a deal to open a factory in China--its first outside Brazil--to meet demand for its popular 50-seat jet, the ERJ 145, among other models. Embraer already has subsidiaries in the United States, the United Kingdom, France, Australia, Singapore and China to provide postsale assistance and technical support.

Embraer may not enjoy the name recognition of its nearest rival, Bombardier, to say nothing of the larger Boeing and Airbus, both of which make jumbo jets. But within the airline industry, observers are taking note of Botelho's success. "I'm really impressed with his personality and drive," says Bob Booth, chairman of Aviation Management Services, a consulting firm in Miami. "His record speaks for itself. The regional jet is the future in the industry, as proven by the order backlog and the fact that small is beautiful in this business. The potential for 50-, 70-, 90-seat jets is unlimited. And Mauricio Botelho has all the right approaches."

Empresa Brasileira de Aeronautica, or Embraer, was created in 1969 as part of a broad government strategy to establish a modern aeronautical industry in Brazil. (As it happened, a Brazilian, Alberto Santos Dumont, launched the world's first officially witnessed flight, on the outskirts of Paris in 1906. The Wright brothers' historic flights in Kitty Hawk, N.C., three years earlier were not seen by authorities.)

Run as a state industry, Embraer operated on domestic and foreign investment. The first plane it produced was a modest, nonpressurized turbo-propeller. Few people, both in Brazil and abroad, thought the enterprise would succeed. It wasn't until 1978, when President Jimmy Carter deregulated the U.S. airline industry, giving rise to many new carriers, that Embraer and the entire regional-plane industry began to prosper.

But by the mid-1990s, business had long since cooled. The company had proved itself technologically capable, but was essentially a bust. The Brazilian government sold it to local private investors in December 1994. Nine months later, the new owners hired Botelho, by this time a seasoned executive with experience in construction and telecommunications.

The company that Botelho took over was in sorry shape. The year before he arrived, it ran up losses of $330 million on revenues of $250 million. Bad business moves had pushed it into a corner. Millions of dollars had been invested on the development of a twin turbo-prop plane, but not a single craft was sold. The company's backlog for new orders on all of its products barely exceeded $200 million.

Botelho moved fast. Two months after taking the helm, he unveiled a strategic plan to the company's board. His top priority: enhancing productivity Despite heavy layoffs before privatization--the work force had been cut to 6,200 from a peak of 13,000 in 1989-Botelho opted for still more. Against some associates' advice, he began to negotiate a new round of layoffs with the union, which by then verged on open conflict with management.

To his credit, Botelho took a straightforward, hand-extended approach. He met with union leaders and told them he had something sensible to share-his business plan-provided they agreed to keep it confidential, which they did. Then he explained his strategy, including plans to eliminate 600 jobs, cut wages by 10 percent and slash overtime hours in half. He vowed he was committed to building up the work force once performance improved.

The union spent two weeks analyzing the plan, with the help of an independent consultant chosen by both sides. The consultant gave his blessing, but still the union had demands. It insisted that Botelho take a 10 percent pay cut just like every other employee, and he did. Then the union asked for more time to poll its entire membership. He granted that, too. Finally, the workers approved the package -- layoffs and wage cut included.