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Embraer: Innovation and Technology
  XIV Japan Brazil Joint Economic Committee Meeting
  Salvador, August 9-10, 2011




José Serrador Neto
Director, External Relations and Foreign Trade Policy
Aviation Challenges…
    Climate Change                      Peak Oil




                                               Safety
  Financial Crisis




                                               Security
                       ATC Congestion
  Passenger Factors
… and the Technology Solutions

                    New Aircraft Concept
                             New Engines                                      Efficient Energy Management
                        New configurations                                     New sources

            Active drag reduction systems                                      Integrated management

                       Advanced materials                                      Electrical systems with high-reliability

                      …                  .                                    …




                                                                                     Safe operation
     Aircraft Life-Cycle Management                                                   Improved onboard weather
   Highly-integrated, multi-disciplinary
                                                                                     systems and tools
                                 product                                              Human-machine integration
 Lean Development and Manufacture
                                                                                     …
  Low operational cost through health
                  management system
       Green Life Cycle (manufacture,
operation, maintenance and disposal)
     …                                 .                                                  Secure Aircraft
                                                                                            Protection against short range
                                                                                           missile attack
                                              Operation in High-density                     Detection of abnormal trajectory
     Comfort and Onboard Features             Environment                                  to engage automatic control
              Fast boarding patterns          Pilot workload management &                 Biometry Systems
       New systems and installations         Single Pilot                                 …
                       New displays           Advance integration with ATC
                       …           .          4D Trajectories
                                              …
Aerospace Industry Fundamentals


                                 SUCCESSFUL
                                  BUSINESS




High Tech &   Qualified             Global              Cash            Flexibility
Innovation    People                Presence            Intensiveness

                           Customer Satisfaction
                          Base of our entrepreneurial action
Innovation @
  Embraer
4 Dimensions of Innovation @ Embraer

                  Product Innovation                                                                                    Processes Innovation

                                                                                               Phenom™ 100
Oval Lite®




                                                                                                                    Seat
                             Manufacturing                                                                        Capacity
                                                                  Integrated Product Teams
                Commercial         Customer                              (Functions Integration) rt
                                   Support                                                       pp
                                                                                                    o             160
                                                 Product                                       Su            gt                                           Narrowbody Aircraft
                                                                        ics                 er             sM
                                                                     ut           s       om            er
                            Core Team            Development       na           em     st
                                                                 ro          st                     r tn
                                                               Ae          Sy        Cu           Pa
             Program                                                                                    ....
             Management                                                                                           120
                                                                                                                                Right-sizing

                 Partners
                                            Fuselage I                                                                                           EMBRAER 170/190
                 Management                                                                                        80
                                                                                                                                                                            Natural Growth
                                               Wing
                             Quality                                                                                        30-70 Seat
                                                                                                                             T’ Props            37 -50 Seat
                 Design Build Teams                                                                                40
                   (Physical integration)
                                                                                                                                               ERJ 135/140/145
                                            Empennage
                                                      ....




                                                                                                                   0


         Organizational & People                                                                                        0                500      1,000
                                                                                                                                               Stage Length (nm)
                                                                                                                                                                  1,500         2,000




                 Innovation                                                                                                 Innovation in Marketing

             With the Backbone of Technological Development
Dimension (1): Product Innovation *(1/2)
Main design drivers                                  Commercial
for Light Jets                      Phenom 300       aviation experience

•   A TRUE “clean sheet” design
                                                 •     Designed for high
•   Premium comfort                                    utilization
•   Outstanding climb and speed                  •     High availability
    while maintaining short field
    performance                                  •     Low operating cost

•   Systems with next generation
    technologies that enable
    efficiency
Dimension (1): Product Innovation (2/2)

              Double Bubble E-Jets
                             Spacious cabin
                             Four abreast seating:
                                No middle seat
                                Easy access to bins & seats
                                Fast boarding & deplaning
                             Large headroom
                             Superior ground service access
                              and baggage handling
                             EMBRAER 170/190 Cabin is
                              Superior to any Mainline
                              Standards

                                                                     8
                                                      FC 14/Nov/02
Dimension (2): Process and supply chain (1/2)

                                                                                       S T OMMI C but t on
                                                                                        A C


                                                                              G CU 1                         S A C O A D b ut t n
                                                                                                                T   M U       o




   Raw material                Segments          Equipment         Avionics



                     Parts manufacturing




                        Minor segments
                           assembly



                        Major Segments
                           assembly
                                                  Final assembly


   Fuselage matching and
    equipment installation                 Painting
Dimension (2): Process and supply chain (2/2)

“Dock” layout - 2008                              Assembly Line – 2009 Assembly Line – 2011




                                                        Process Innovation

 Performance indicators    May/2008   July/2009    Sep/2009   June/2010   Mar/11   Out/11


   Number of positions      100%        50%         50%         33%       33%      33%

    Cycle time (days)       100%        67%         56%         44%       44%      39%

 Work in process (US$mi)    100%        50%         45%         42%       32%      32%      3P Kaizen
Number of non-conformity
per a/c
                            100%        22%          5%         0%         0%       0%
                                                                                            Example
  Over time (% of work
  hours)
                            100%        15%         15%         2%         0%       0%
Dimension (3) : Organizational and People Innovation (1/2)



                        Number of Employees…                                                                                 …minimum high school level
                                                                                                                                               High School
                                                                                           21843 21550                                             65%

                                                                                   17503                 16853 17149 17194
                                                                     14493 15192
                                                       12227 12789
                                         10334 11048
                                  8302
  6087                     6737
         4319 3849 4494


                                                                                                                                  Ph.D.
                                                                                                                                   2%
 94

         95

              96

                   97

                          98

                                  99

                                         00

                                              01




                                                                                                         09

                                                                                                              10
                                                       02

                                                            03

                                                                     04

                                                                          05

                                                                                   06

                                                                                           07

                                                                                                08




                                                                                                                      1
                                                                                                                    01
                                                   20

                                                            20

                                                                 20

                                                                          20

                                                                               20

                                                                                        20

                                                                                                20
19

      19

              19

                   19

                        19

                               19

                                       20

                                              20




                                                                                                     20

                                                                                                              20
                                                                                                                   e/ 2
                                                                                                               jun
                                                                                                                                      Postgraduate                                Graduate
                                                                                                                                           4%                                       29%
                               +17.000 Emplyees (+ 3100 engineers)


                                         BRAZIL 16,002                                                        FRANCE 257                                SINGAPORE 63


                                         USA 810                                                              CHINA 59                                   PORTUGAL 3
(Not including employees in Brazil (Atech – 115 and Orbisat – 135) and JVs' employees in China (HEAI) - from 2003 on - and in Portugal (OGMA) - from 2005 on, these two sites have at the present time 213 and
1.500 employees, respectively)
Dimension (3) : Organizational and People Innovation (2/2)


                                             Engineering Experience
                          60%
                                2000
Engineering Man Power %




                          50%     52%


                          40%

                                2007               31%
                          30%
                                       33%

                                                                         19%
                          20%                                 18%

                                                                        18%
                          10%                                17%
                                                  12%

                          0%

                                   Level 1      Level 2     Level 3   Level 4

                                                                                12
25
        50
        75
              DC9
                               seats
                              70-110



                     F100




        100
                                   B737          B737
                                          MD80




Seats
                            B737
                                   A320
                     A320
                                                 B737
        125
              A320                 B737
                     B737
                            B737
                                                        Dimension (4): Marketing Innovation (1/2)




                                   A320

              MD80   MD80
                            MD80          B737
                     B737
        150


              A320
                     A320   B737                 B737



                     A320
  +
 175




                                          B757   B757
              B757   B757   B757   B757
Dimension (4): Marketing Innovation (2/2)

                                            June 2001



NYC - Mid-Manhattan
NYC - Mid-Manhattan




NYC - Wall Street
NYC - Wall Street
The Backbone: Technological Development Program



   Aircraft Health
   Management

                                                     Interiors Design &            Collaborative Product
                              Noise & Emissions                                        Development         Advanced Aerodynamic
                                                           Comfort
                                                                                                            Tools and Solutions




 Design for Manufacturing &
        Automation
                                 Evolution through                                                           Alternative Fuels

                                    Innovation
                                  Energy          Fly-by-Wire         CNS/ATM           Avionics Systems
   Design for Service
                                Management
                                                                Airborne Software Development



                                                                                                            Advanced Structures –
                                                                                                            Composites / Metallic.
   Multidisciplinary
                                                                                                           Smart Material, Morphing
  Design Optimization
                                                                                                                 Structures
Technology Development Strategy

                                      Technology Needs

             Prospective Scenarios                   Future Products Concepts
       Geopolitics; Economy; Energy; Infra-            Configuration; Features;
       structure; Environment; Innovation.       Performance; Technical Challenges.




            Technology Outlook

            Technology Trends
        R&T Initiatives; Public Policies;                    Technology
                  Regulation.                            Development Strategy
                                                           Technology Agenda
                                                           Roadmap & Portfolio
Policies: Aerospace industry

 U.S. – “Aerospace will be                                              EUROPE - “Aeronautics
  at the core of America’s                                               is a key asset for the
leadership and strength in                                                 future of Europe.
      the 21st century.




CANADA – “As one of Canada’s key high technology sectors, the aerospace and defense industry is an
important sector in the Canadian economy.
Technological Development and the role of
Governments
• Given the high risk of innovation/technology development in Aerospace,
  Governments play an important role in supporting new technologies
  development, mostly for pre-competitive R&D (low TRL)

• On the other hand, international competition is becoming increasingly hard
  as new entrants develop new aircraft. Several countries being supported not
  for pre-competitive R&D but in Launch Aid.

• Launch Aid distorts competition and, besides the fact that it is not WTO
  compliant, triggers a subsidy rush bringing to the market products that
  otherwise would not be launched.

• As the OECD Export Finance Agreement, Embraer advocates a “level
  playing field” in Government assistance for aircraft development providing
  that, competition is governed by market rules and not Government support.
Embraer - Innovation and Technology

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Embraer - Innovation and Technology

  • 1. Embraer: Innovation and Technology XIV Japan Brazil Joint Economic Committee Meeting Salvador, August 9-10, 2011 José Serrador Neto Director, External Relations and Foreign Trade Policy
  • 2. Aviation Challenges… Climate Change Peak Oil Safety Financial Crisis Security ATC Congestion Passenger Factors
  • 3. … and the Technology Solutions New Aircraft Concept  New Engines Efficient Energy Management  New configurations  New sources  Active drag reduction systems  Integrated management  Advanced materials  Electrical systems with high-reliability … . … Safe operation Aircraft Life-Cycle Management  Improved onboard weather  Highly-integrated, multi-disciplinary systems and tools product  Human-machine integration  Lean Development and Manufacture …  Low operational cost through health management system  Green Life Cycle (manufacture, operation, maintenance and disposal) … . Secure Aircraft  Protection against short range missile attack Operation in High-density  Detection of abnormal trajectory Comfort and Onboard Features Environment to engage automatic control  Fast boarding patterns  Pilot workload management &  Biometry Systems  New systems and installations Single Pilot …  New displays  Advance integration with ATC … .  4D Trajectories …
  • 4. Aerospace Industry Fundamentals SUCCESSFUL BUSINESS High Tech & Qualified Global Cash Flexibility Innovation People Presence Intensiveness Customer Satisfaction Base of our entrepreneurial action
  • 5. Innovation @ Embraer
  • 6. 4 Dimensions of Innovation @ Embraer Product Innovation Processes Innovation Phenom™ 100 Oval Lite® Seat Manufacturing Capacity Integrated Product Teams Commercial Customer (Functions Integration) rt Support pp o 160 Product Su gt Narrowbody Aircraft ics er sM ut s om er Core Team Development na em st ro st r tn Ae Sy Cu Pa Program .... Management 120 Right-sizing Partners Fuselage I EMBRAER 170/190 Management 80 Natural Growth Wing Quality 30-70 Seat T’ Props 37 -50 Seat Design Build Teams 40 (Physical integration) ERJ 135/140/145 Empennage .... 0 Organizational & People 0 500 1,000 Stage Length (nm) 1,500 2,000 Innovation Innovation in Marketing With the Backbone of Technological Development
  • 7. Dimension (1): Product Innovation *(1/2) Main design drivers Commercial for Light Jets Phenom 300 aviation experience • A TRUE “clean sheet” design • Designed for high • Premium comfort utilization • Outstanding climb and speed • High availability while maintaining short field performance • Low operating cost • Systems with next generation technologies that enable efficiency
  • 8. Dimension (1): Product Innovation (2/2) Double Bubble E-Jets  Spacious cabin  Four abreast seating:  No middle seat  Easy access to bins & seats  Fast boarding & deplaning  Large headroom  Superior ground service access and baggage handling  EMBRAER 170/190 Cabin is Superior to any Mainline Standards 8 FC 14/Nov/02
  • 9. Dimension (2): Process and supply chain (1/2) S T OMMI C but t on A C G CU 1 S A C O A D b ut t n T M U o Raw material Segments Equipment Avionics Parts manufacturing Minor segments assembly Major Segments assembly Final assembly Fuselage matching and equipment installation Painting
  • 10. Dimension (2): Process and supply chain (2/2) “Dock” layout - 2008 Assembly Line – 2009 Assembly Line – 2011 Process Innovation Performance indicators May/2008 July/2009 Sep/2009 June/2010 Mar/11 Out/11 Number of positions 100% 50% 50% 33% 33% 33% Cycle time (days) 100% 67% 56% 44% 44% 39% Work in process (US$mi) 100% 50% 45% 42% 32% 32% 3P Kaizen Number of non-conformity per a/c 100% 22% 5% 0% 0% 0% Example Over time (% of work hours) 100% 15% 15% 2% 0% 0%
  • 11. Dimension (3) : Organizational and People Innovation (1/2) Number of Employees… …minimum high school level High School 21843 21550 65% 17503 16853 17149 17194 14493 15192 12227 12789 10334 11048 8302 6087 6737 4319 3849 4494 Ph.D. 2% 94 95 96 97 98 99 00 01 09 10 02 03 04 05 06 07 08 1 01 20 20 20 20 20 20 20 19 19 19 19 19 19 20 20 20 20 e/ 2 jun Postgraduate Graduate 4% 29% +17.000 Emplyees (+ 3100 engineers) BRAZIL 16,002 FRANCE 257 SINGAPORE 63 USA 810 CHINA 59 PORTUGAL 3 (Not including employees in Brazil (Atech – 115 and Orbisat – 135) and JVs' employees in China (HEAI) - from 2003 on - and in Portugal (OGMA) - from 2005 on, these two sites have at the present time 213 and 1.500 employees, respectively)
  • 12. Dimension (3) : Organizational and People Innovation (2/2) Engineering Experience 60% 2000 Engineering Man Power % 50% 52% 40% 2007 31% 30% 33% 19% 20% 18% 18% 10% 17% 12% 0% Level 1 Level 2 Level 3 Level 4 12
  • 13. 25 50 75 DC9 seats 70-110 F100 100 B737 B737 MD80 Seats B737 A320 A320 B737 125 A320 B737 B737 B737 Dimension (4): Marketing Innovation (1/2) A320 MD80 MD80 MD80 B737 B737 150 A320 A320 B737 B737 A320 + 175 B757 B757 B757 B757 B757 B757
  • 14. Dimension (4): Marketing Innovation (2/2) June 2001 NYC - Mid-Manhattan NYC - Mid-Manhattan NYC - Wall Street NYC - Wall Street
  • 15. The Backbone: Technological Development Program Aircraft Health Management Interiors Design & Collaborative Product Noise & Emissions Development Advanced Aerodynamic Comfort Tools and Solutions Design for Manufacturing & Automation Evolution through Alternative Fuels Innovation Energy Fly-by-Wire CNS/ATM Avionics Systems Design for Service Management Airborne Software Development Advanced Structures – Composites / Metallic. Multidisciplinary Smart Material, Morphing Design Optimization Structures
  • 16. Technology Development Strategy Technology Needs Prospective Scenarios Future Products Concepts Geopolitics; Economy; Energy; Infra- Configuration; Features; structure; Environment; Innovation. Performance; Technical Challenges. Technology Outlook Technology Trends R&T Initiatives; Public Policies; Technology Regulation. Development Strategy Technology Agenda Roadmap & Portfolio
  • 17. Policies: Aerospace industry U.S. – “Aerospace will be EUROPE - “Aeronautics at the core of America’s is a key asset for the leadership and strength in future of Europe. the 21st century. CANADA – “As one of Canada’s key high technology sectors, the aerospace and defense industry is an important sector in the Canadian economy.
  • 18. Technological Development and the role of Governments • Given the high risk of innovation/technology development in Aerospace, Governments play an important role in supporting new technologies development, mostly for pre-competitive R&D (low TRL) • On the other hand, international competition is becoming increasingly hard as new entrants develop new aircraft. Several countries being supported not for pre-competitive R&D but in Launch Aid. • Launch Aid distorts competition and, besides the fact that it is not WTO compliant, triggers a subsidy rush bringing to the market products that otherwise would not be launched. • As the OECD Export Finance Agreement, Embraer advocates a “level playing field” in Government assistance for aircraft development providing that, competition is governed by market rules and not Government support.