US Probe Unlikely To Hurt Embraer Bidding - CEO

November 5, 2011

Bookmark and Share

A US government bribery probe of Embraer is unlikely to hamper the Brazilian plane maker's bidding for US military contracts, chief executive Frederico Curado said on Friday.

Curado declined to discuss the implications of the US Securities and Exchange Commission's investigation of Embraer for a possible violation of the US Foreign Corrupt Practices Act, but said he was "confident that it won't prevent us from participating in any bidding process."

Shares of the world's third-largest maker of commercial planes erased early losses and rose for the first time in a week. The stock closed up 4.4 percent at 11.58 reais on Friday, after losing 5 percent a day earlier after news of the probe.

Embraer's US-traded shares closed up 3.45 percent at USD$26.95 in New York.

The Foreign Corrupt Practices Act bans US-listed companies from bribing foreign officials or seeking illegal ways to win businesses. Companies convicted are banned from bidding for contracts in the United States, and executives found guilty of wrongdoing could go to jail.

Embraer, which earlier this year opened a factory in Florida and last month got its defence turboprop Super Tucano approved by the US Federal Aviation Administration, is bidding for US military contracts.

Curado said he was unable to comment further on the duration, scope or outcome of the investigation.

FBI INVESTIGATIONS

There were reports in September that US law enforcement officials were investigating possible bribery associated with contracts between aerospace companies and state airlines. There was no immediate evidence that the investigations were related to the SEC probe of Embraer.

While the aerospace industry has long been subject to such scrutiny, recent enforcement efforts by the Federal Bureau of Investigation have focused on sales and maintenance contracts on the commercial side rather than in defence.

Recent cases involving defence companies may have provoked a closer look at commercial aerospace deals, particularly given efforts by companies to offset declining demand in the United States and Europe with more deals in the Middle East and Asia, where corruption has been rampant.

Embraer posted a third-quarter loss on Wednesday due to a steep decline in local currency and said it could miss its target for revenue this year by up to USD$200 million because of delayed deliveries and cancellations of executive jets.

Such cancellations could reduce executive jet deliveries this year by about 20 units, Curado said, but he sees this cycle coming to an end and expects revenue from executive jets to rise next year.

The economic crisis in Europe was not leading the company to cut prices for smaller or larger aircraft, Curado said, adding that most cancellations of executive jets were concentrated among European and North American clients.

The company is not basing its estimates for deliveries and revenue on a scenario of "deep global recession," Curado said.

(Reuters)