Elbit Systems Hiring Locals to Win Large Brazilian Tenders

Michael Federman's Elbit Systems is hoping increased investment in Brazil, the largest market in Latin America, will have them doing the samba all the way to the bank. Elbit Systems' CEO Yossi Ackerman says the company is involved in projects totaling hundreds of millions of dollars, building UAV remote-controlled airplanes, land and teleprocessing systems, upgrading planes and developing systems that will be used in space programs.

Elbit Systems has decided to turn its subsidiary AEL, headquartered in Porto Alegre, Brazil, into a center for excellence in Latin America. AEL, which has 130 employees, most of them local residents, develops and manufactures avionic systems sold in Brazil and throughout Latin America, and provides maintenance services for these systems.

Elbit Systems acquired the outright ownership of AEL in July 2001, for $2.3 million, as part of a policy aimed at operating local companies in order to win government tenders.

In Brazil's case, Elbit Systems figured that manufacturing in Brazil and hiring local workers would increase the company's chances of winning tenders to upgrade F-5 and AMX fighter jets for Brazil's air force.

Following the investment in AEL, Elbit Systems transferred knowledge and technology to the Porto Alegre plant, including training dozens of AEL workers at Elbit's headquarters in Haifa.

That same year Elbit Systems formed a strategic partnership with Embraer, the third largest aircraft manufacturer in the world. That partnership won a $230 million tender to upgrade F-5s in 2001 and provided systems for super Tucano ALX planes. In 2008, they won a tender worth $187-million to upgrade AMX planes.

These projects provided Elbit Systems with the lion's share of the company's total operations in the Brazilian market, which totaled $750 million over the past 15 years and reached a high of $70 million in 2008. Elbit Systems is now anticipating 30% annual growth for the next 5 years. Ackerman says that the company's increased investment in Brazil was prompted by a recent statement by the Brazilian government that local manpower and manufacturing facilities would be a prerequisite for contracts with the Brazilian air force.

The main technology that Elbit Systems will transfer is for UAVs, in preparation for an anticipated Brazilian air force tender worth hundreds of millions of dollars.

Elbit Systems will be competing for this tender against companies such as General Atomics Aeronautical Systems, an American company, and Israel Aerospace Industries, which is more limited in developing manufacturing bases abroad.

Ackerman, who is accompanying President Shimon Peres on his trip to Brazil this week, says that Elbit Systems believes technology for use in outer space will be a growth engine for AEL. Brazil is one of the most involved countries in space development, and Elbit Systems aims to take advantage of the company's good relations with the Brazilian security establishment to obtain a significant share of the country's space projects.

AEL currently manufactures components for satellites and sources at Elbit Systems figure Brazil's space projects could also use the space cameras developed by subsidiary El-Op. These cameras are already being marketed to the space programs of France and South Korea and the Israeli Ofek satellite.

AEL is also involved in the management of fleets of cars via systems developed to monitor the locations of cars and process driving and traffic data.