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Embraer's mantra: Customers count

By Nick Easen for CNN

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Botelho has spread his business risk out by asking suppliers to take on some of the burden.

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Embraer SA
Bombardier Incorporated
Brazil

(CNN) -- Ten years ago Brazil airplane maker Empresa Brasileira de Aeronautica S.A., better known as Embraer was building turboprops and losing money.

Now it is the world's fourth-largest passenger plane company and the country's biggest and most important manufacturer and exporter.

Clever production and cheap labor have played a crucial role, but according to the CEO Mauricio Botelho, there is one overriding reason behind their success.

"Do not lose a sense of the business -- which is not to produce aircrafts -- it is to serve your customers, this is what really makes and creates value," he told CNN.

Botelho has plenty to boast about.

The 61-year-old, who has been at the company for nine years, is now in a position to start challenging the two global giants of the aviation industry: Boeing and Airbus.

This is a far cry from when Embraer regularly racked up multimillion-dollar losses, before it was privatized in December 1994.

Today the company has a number of competitive advantages, not forgetting the favorable exchange rate: Labor costs are lower than the U.S. and Europe, productivity is higher and Embraer has a new virtual reality center where airlines can visualize their finished product.

The company is also about to launch one of four new planes -- the Embraer 190 -- which seats between 70 and 110 passengers and is the biggest plane the firm has built.

"It is a very large investment for us -- in total around $1 billion, and I am very proud to say no support from the government," says Botelho.

Embraer was founded in 1969 and made its name constructing high-quality military and civilian aircraft.

But high pricing forced the company to look elsewhere and in 1995 they moved into regional jets.

Spread the cost

Initial funding for the new mid-sized jet was a problem, so Embraer asked its suppliers to take on some of the development and investment costs.

Risk-sharing partner Kawasaki Heavy Industries even moved wing manufacturing from Japan to the Brazilian site.

"(They were) not (just) providers of equipment but providers of subsistence and I think that this approach has worked very well," Botelho explains.

But not everyone is happy with Embraer's success.

Canada's Bombardier Inc., which once dominated the fast-growing mid-market, has seen its share slip in recent years.

-- CNN's Andrew Carey contributed to this report


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