Бразилияның бұрынғы қорғаныс өнеркәсібі: Engesa тарихы

Former Brazilian defence industry company

Engesa (Engenheiros Especializados S. A.) was a Brazilian company in the oil and later automotive and military sectors founded in 1958. In the 70s and 80s it established itself as one of the "big three" in Brazil's arms industry, alongside Avibras and Embraer. It manufactured 6,818 land military vehicles such as the EE 25 truck and the EE 9 Cascavel and EE 11 Urutu armored vehicles, which it sold to Brazil and 18 other countries, and are still used in conflicts today. Its technological peak was the prototypes of the EE T1 Osório main battle tank. Its founder, José Luiz Whitaker Ribeiro, was called the "civil armaments czar". In the civilian market, it became known with its Engesa 4 jeep. It went into decline at the end of the 80s as a result of mismanagement and a hostile internal and international environment, going bankrupt in 1993.

Engesa emerged as a micro enterprise, founded by José Luiz Whitaker Ribeiro, a graduate in mechanical engineering at USP's Polytechnic School, and other engineers from USP in 1958. The company had eight employees, including its shareholders. In 1963 it was incorporated as a company with capital from São Paulo. Its initial activities were the maintenance and production of parts for oil industry equipment. Its customers were the União Refinery, in Capuava, followed by those in Cubatão, Duque de Caxias and Mataripe, the latter in Bahia. Demand grew with the oil development of Bahia, resulting in the expansion to two hundred employees four years after its foundation, the purchase of machining equipment and the development of its own products. The main ones were oil pumping rods. New customers arrived: Petrobras' maritime terminals in Madre de Deus (Bahia) and Ilha d'Água (Rio de Janeiro). Trucks and utility vehicles frequently broke down on the harsh roads to their destinations in Brazil's northeast, leading to Engesa's "homemade solution" of a suspension and traction system. It impressed the people at Petrobras, who started requisitioning the vehicles for rough and slippery terrain during the rainy seasons. In 1966 the company patented its 4x4, then 6x4 and 6x6 traction system, as "Total Traction", giving great off road performance to trucks and pickups from Chevrolet, Ford and later Dodge. In 1969, the "Boomerang" double rear wheel drive was launched, capable of keeping the rear wheels in permanent contact with the ground. It was an off road technological asset and was used in future projects, giving a competitive advantage, although it was expensive, heavy and could not support high loads. it was a way of energizing the state owned company, which had "a certain character of a public department". IMBEL began to live in "symbiosis" with Engesa.

In June 1971, the VBB, now called "Wheeled Reconnaissance Car" (CRR), had its studies, project and industrial designs transferred to Engesa so that it could begin production. The transfer is common in developed countries, but in Brazil it was a milestone. The choice of Engesa and not Bernardini to take over the armored vehicle was due Whitaker's openly nationalist and sympathetic views to Brazil's dictatorship, as well as being a friend of lieutenant colonel Pedro de Mello, the commander of the Working Group of Automobile Engineers. The inherited technology became the 6x6 EE 9 Cascavel reconnaissance vehicle, initially with a 37mm cannon and later with a 90mm cannon. Another transfer of technology, initiated at the Regional Motor Mechanization Park of the 2nd Military Region (PqRMM/2), was the Amphibious Troop Transport Car (CTTA), also 6x6, armed with a machine gun turret. It became the EE 11 Urutu in the hands of Engesa, which equipped both with its "Boomerang" suspension. Combined production reached thousands of vehicles, being the company's most numerous armored vehicles. They have seen combat in current conflicts such as the Iraqi Civil War (2011–2017) and the Libyan Civil War (2014–present). Sales of adaptation kits for trucks declined in the late 1970s, with the latest successes being transport platforms for Scania models and trailers for Mercedes. The experience gained allowed the development of Engesa's own version of the GMC truck, the EE 25, designed hastily together with the EE 15 to accompany the sale of the Cascavel and Urutu, thus offering "complete packages". They were launched in 1974 and were capable of 1.5 or 2.5 tons off road or double that on regular roads. The EE 25 was the best selling vehicle, exceeding the production of the Cascavel or Urutu. The line of military "utilities" was completed by the EE 50, a 6x6 with a capacity of five tons (ten on a regular basis) from the late 1970s; the EE 34, a pickup truck using technology from Envemo, purchased in 1983; and the EE 12 or Engesa 4, a jeep presented in 1984. Rustic and with good off road performance, it became the company's most successful product in the civilian market. The EE 15 also had a civilian version, but its price was not competitive. Exclusive to this market, the EE 510 was announced in 1976, an articulated forestry tractor with a capacity of ten tons and seven meter logs. It did not sell much because it was a niche product in the reforestation of paper and cellulose industries, such as Aracruz Celulose and Klabin S. A. In 1981, the EE 1124, a 14.5 ton 4x4 agricultural tractor, was launched, with the EE 1128 version, with a turbo engine, and its equivalent without a cabin, the EE 1428, in the following years. The agricultural ones were the largest on the market, expensive and of high quality. Both forestry and agricultural production were highly nationalized. The fall in military exports, culminating in the 1981 crisis, resulted in an effort to diversify. The production of tractors designed years earlier, with financing from Finep and utilities, expanded, from 1983 onwards, the domestic market's share of sales. However, civil lines received less attention from senior management, being, in the words of a company interviewee, the "ugly ducklings". The line of wheeled armored vehicles continued with the EE 17 Sucuri tank destroyer, mounting a 105 mm cannon on the Cascavel chassis. Presented in 1977, The other tracked vehicle, the EE T4 Ogum, a light air transportable vehicle, did not generate enough interest to go beyond the prototype phase. Successes such as Cascavel and Urutu were characterized by "simple and flexible design concepts, low cost, good performance and reliability, easy handling and simple maintenance", results of Brazilian industry conditions; the low price was a result of the use of civilian components, especially trucks. Their demonstrated performance from the Egyptian–Libyan War (1977) and especially the Iran Iraq War (1980 1988) then provided "real marketing". The presence of armored vehicles since before the start of the Iran Iraq War guaranteed the following batches. With products suited to the needs of Third World buyers and battle proven, Engesa was able to capture value. In the 1980s, however, its civilian lines conquered limited markets. In the military sector, it reached a higher technological level (Osório), but was unable to achieve sales. The eight military vehicles that Engesa produced in series — armored vehicles EE 3, EE 9 and EE 11 and utility vehicles EE 12, EE 15, EE 25, EE 34 and EE 50 — together numbered a total of 6,818 units. It is a lower number than those published at the time, such as Whitaker Ribeiro's claims that, in 1979, he produced half of the equipment in operation in the world in his sector, having the "largest company producing armored cars on wheels of the free world" and selling 5,000 units by 1985 (Defence & Armament magazine then estimated less than 1,700 which was not denied).

In the 1970s and 1980s the global arms market, characteristically concentrated in the hands of great powers with high technological capacity, underwent relative diversification: other powers and even some Third World countries began winning export contracts. The 1973 oil crisis boosted demand from buyers in the Middle East. Among its suppliers was the Brazilian industry. It had an export character, as demand from the Brazilian Armed Forces was limited. Brazil reached tenth place among armaments suppliers, representing less than 1% of total exports. The "super sophistication" of the great powers' armaments created a niche: there was not much need for technological sophistication in the armored sector. Underdeveloped countries were limited not only in budget but also in educational level and time to train technical staff, so that the already described "rusticity" of Brazilian products made them attractive to this category of buyers. Little attention was paid to this market, leaving space for Brazilians. Engesa realized the insufficiency of internal demand in the early 1970s, when it already had Cascavel and Urutu. At the same time, it had long had an eye on the foreign market, concluding from analysis of the 1967 Six Day War that it would be able to compete with Soviet vehicles. The first contracts were signed with Iraq and Libya, and the Brazilian Army was crucial in covering the bureaucratic work and bringing Whitaker closer to Muammar al Gaddafi, the Libyan dictator. For the remainder of its existence, there would be 18 countries in addition to Brazil. Its insertion into the foreign market was marked by versatility. At first, contracts were signed with the technology still incomplete, to the point where the first Libyan Cascavels arrived without armor; it was a risk made possible by the support of the Brazilian Army. Negotiations had a level of "informality" and were followed by after sales support. In Iraq, the modus operandi was to speed up negotiations through informal channels, despite the risks involved in directly exposing officials to ambassadors, ministers and generals. The willingness to modify the product to customer requirements was greater than that existing among European suppliers, and parts for weapons of other origins were also sold, such as Soviet T tanks and MiG fighters. The ideological distance between Brazilians and Iraqis was smaller: when customers made mistakes, the "Brazilians, instead of criticizing the Iraqis, remembered that they had made the same mistakes about five years ago and said: let's get it right, let's correct this situation", according to an interviewee from the company. Given the illiteracy of the Iraqi soldiers operating the Cascavel, the projectile cases were given different colors to facilitate identification and the training was recorded and delivered on video. Whitaker and Delfim Neto even visited the country, with the president of Engesa checking out the front line. Several Third World countries, such as Libya, Iraq and Iran, had difficulty buying from first world nations because of their "own dubious activities", such as the transfer of arms from Libya to the Provisional IRA in the 1970s. Engesa was successful by not caring about who their buyers were, including countries under international sanctions. The United States took a dim view of the sales because they took place without conditions of use — part of what was sold to Libya went to rebels in Western Sahara and Chad — and created a risk of disseminating technology to hostile countries in the Third World or even to the Soviet Union. The CIA monitored Engesa's production via satellite. Libya also passed it on to Iran. Regarding its policy of not restricting the use of products, not imposing end user certificates, Whitaker declared that resale is a "sovereign act that cannot be controlled". The largest exporters themselves already violate the principle. In response to U. S. criticism of the Libyan sales, Whitaker also reportedly called Gaddafi a "highly intelligent and balanced person".

Human resources were aggressively captured: the company looked for the most qualified professionals on the market and offered salaries up to two or three times higher than what they received. The preference was for an undergraduate degree at USP's Polytechnic School and a postgraduate degree at Getúlio Vargas Foundation (FGV); José Guilherme, the president's younger brother, graduated from the Polytechnic School, joined the company in 1969 and invited colleagues to work in the following years. Some researchers studied for a doctorate abroad. Training was offered according to the needs of the moment. The number of technicians, designers and engineers reached 600. Engineering was divided into experimental, for prototypes, and production, for "drawings, lists of materials, standards and specifications". In order not to lose engineers in managerial positions, the "Y shaped career" was adopted: technical positions could reach the same salaries as managerial ones. Likewise, managers were not afraid to hire very competent technicians who could take their place. Throughout the 1970s, management, especially finance, fell behind, unable to keep up with the development of engineering. Employees abroad, such as in Iraq, received bonuses for unhealthy and/or hazardous conditions of up to 300%. There they operated as cross functional teams. Benefits such as health insurance and a car were generous, especially for management level and above, and even existed in the form of status symbols, such as "better restaurant to eat in, room — with or without a door, with glass or without glass." In exchange for what they had, employees were committed to the goals, even participating in collective efforts. Information about union activities was shared with the military through the Paraíba Valley Community Security Center, which existed from at least 1983 to 1985. Planning, execution and control were not systematic; management was ad hoc, "low training for problem solving, using quick analysis and no learning". At its center was Whitaker's "entrepreneurial, political, and sales skills." He had a great influence on employees with his charisma and ambition, imprinting his personal characteristics on the company's culture. In the mid 80s he imposed his decisions, contradicting vice presidents and directors. Ad hoc management was successful at first, when the company was simple and the environment was favorable, but in the 1980s it could not handle the increasing complexity and Whitaker was unable to maintain control, having in the final stages lost practical administrative control. Wrong assessments were made.

Production activities were carried out at the company's headquarters in São Paulo until its transfer in September 1974 to the new factory built on land negotiated with the city of São José dos Campos, later called Engesa Viaturas. Shortly before, the company had purchased another plant in Salvador. Acquisitions, number of employees and facilities increased in the 1980s. Engesa became the holding company for a group of many other companies or sub companies, classified as industrial production divisions (IPD) and service divisions (SD). After 1985 the child companies gained more decision making autonomy. It reached 1,111 employees in 1985–6. Engesa Química S. A. (Engequímica) (1979, Juiz de Fora): Manufactured 90mm ammunition for the Cascavel with Belgian and Engesa technology and an IMBEL plant. It increased production to 20 30 thousand rounds per month and expanded to other types of ammunition, such as mortar and 105mm, and managed to export to Cyprus, Venezuela and Zambia. It had 754 employees in 1984. Engesa FNV (1983, Cruzeiro): The FNV (Fábrica Nacional de Vagões) Veículos e Equipamentos S. A., a traditional company in the railway sector, also worked with trucks and buses and controlled Fruehauf, a manufacturer of trailers, semi trailers and implements for trucks and containers. It had been in deficit since 1981. It was purchased for US$20 million. Under Engesa it reached 3,866 employees in 1986. Engesa Eletrônica S. A. (Engetrônica) (1982 or 1983, São Paulo): Created with 70% participation from Engesa and the remainder from Philips do Brasil to produce embedded systems for the Osório and aircraft such as the AMX and Tucano. It had 212 employees in 1985. Its products were both civilian and military and included tactical radios and navigation systems. Engesa Equipamentos Elétricos S. A. (Engelétrica) (1982, Jandira): At the beginning of the year, Engesa acquired controlling interest in Bardella Borriello Eletromecânica S. A, existing since 1911 and responsible for overhead cranes and wire drawing, sectors in which Engesa had no experience. In 1984 it was subordinated to the FNV. It manufactured electric motors and had 692 employees in 1986.

Engeagro (1977): Sold agricultural equipment. Transgesa Transportes Engesa Ltda. (1983 or 1984): Redesignation of Transportadora Comercial FNV Ltda. in November 1984. It transported cargo by road. Engevideo (1977): Created to serve Iraqi soldiers, it produced videotapes and training programs. Aero Brasil (1983): Formed in association with Transbrasil, whose founder, Omar Fontana, was a long time advisor to Engesa, for air cargo transport. One of their 707s, converted into VIP transport, was called a "flying carpet" and gained a reputation for money waste. Axial (1980): Responsible for insurance brokerage and administration. Engexco Exportadora S. A. (1976 or 1977): Created to gain independence and expand into markets not covered by Petrobras' trading company, until then used to intermediate exports. Exports were then mixed, Engesa and Engexco, until 1981. From that year onwards they went exclusively through the new trading company. It reached 91 employees in 1985–6. It was also used by other Brazilian exporters, mainly military ones. It brokered deals for Casa da Moeda, Embraer, IMBEL, Companhia Brasileira de Cartuchos, Arco flex and Villares. Third parties even tried to sell poultry in Baghdad, which was not successful. Such contracts did not fit well with large arms sales.

After the shipment of the first Cascavels to Libya, in 1975, experimental engineering was segregated, with its personnel returning from São José dos Campos to São Paulo (later to Barueri, remaining together with the company's headquarters). There it took advantage of the tax exemption granted to research companies and sought funding from Finep for its research. It handled CAD/CAM used in 1980s projects. There were 220 technical employees and a product engineering division in each IPD.

Apart from Engesa but with relocated employees, Whitaker Ribeiro created Ensec Engenharia em Sistemas de Segurança in the mid 80s. Designed to provide a security system for the new headquarters of the Casa da Moeda, it also served Vale do Rio Doce and Correios. In view of Avibras' success with its ASTROS II missile system, Engemíssil was created in April 1986 to operate in this segment. In partnership with the Italian Oto Melara it began the development of the MSS 1.2 anti tank missile. The ambition continued for a state owned company to compete with Avibras. Thus, Órbita Sistemas Aerospaciais S. A. was created in January 1987, with a shareholding of 40% from Engesa, 40% from Embraer and 20% divided between IMBEL, Esca (which integrated CINDACTA) and Parcom (civil association of engineers that worked with brigadier Hugo Piva, vice president of Órbita). In addition to the MSS 1.2, it would take on projects for the Piranha air to air missile and the Thunderbolt portable anti aircraft missile, developed in conjunction with British Aerospace. However, after thirty months "it was nothing more than a modest set of warehouses and workshops", due to the crisis at both Engesa and Embraer. It ended up being extinguished in October 1991.

Engesa's factory in Salvador was acquired with support from SUDENE in 1972 and modernized with financial support from BNDE. The first exports to Libya made it possible to raise financing for the transfer of production to São José dos Campos in 1974. Injections of state financing were important, as in 1975, when BNDE purchased 80 million cruzeiros (22 million dollars in 2006) in shares, a capital contribution of almost 400%. BNDE, in turn, borrowed from the First World, acting as an intermediary. As France, supplier of the Cascavel's 90mm cannons, began to see Engesa as competition and raised the price to make the product unviable, from 1975 Engesa acquired licenses to produce cannons (for US$3 million) and ammunition, to be produced respectively by Engex and Engequímica. This verticalization meant investing more to sell the same products, but it increased the profit margin and simplified logistics. Exports increased in volume and customers and the BNDE, Brazil's Ministry of Finance and Banco do Brasil were favorable. In June 1981, employees and suppliers were left without pay. In São José dos Campos, 1,500 workers went on strike, which was resolved two days later with the settlement of their salaries. The company blamed the government: it had not paid off its own debts and suspended IPI credits in November 1979, preferring to promote exports by manipulating the exchange rate. However, the real cause was a 51.7% drop in sales. Libyan orders were almost complete, Iraq was paying slowly, Third World buyers were in debt and BNDE was unwilling to lend money. Bankruptcy was not far away. As a reaction to the crisis, credit was obtained from Banco do Brasil's Foreign Trade Chamber (CACEX) and the BNDE's shares, equivalent to 12.7% of the share capital and controlled by Mecânica Pesada S. A. — Embramec, were sold to the Odebrecht group, which was interested in operating abroad through Engexco. For Engesa, it was formal independence from public capital. A consortium of European banks also made a loan of US$35 million guaranteed by BNDE. The latter was achieved when in December 1981 Whitaker's allies interceded with BNDE's president: businessman Francisco Catão and Morgan banker Keith McDermott. In the following months, Whitaker made successive bank transfers to Catão and hired McDermott as a consultant. In October 1982, as financial problems and dependence in Iraq continued, Anthony Gebauer, also from Morgan, signed a letter valuing Engesa at $130 million, which, according to an Engesa director, allowed him to convince BNDES to grant another loan. Whitaker later said the letter "cost me $5 million." Engesa also allegedly had corrupt relations with Chilean dictator Augusto Pinochet through his daughter's UBS account, Rajiv Gandhi, Prime Minister of India from 1984 to 1989, a Bolivian president and Delfim Neto. The direction of investments, in the previous decade focused on expanding markets and competitive advantages, was in the 1980s the "creation of productive empires" through market domination and diversification into more profitable activities. Diversification was insisted upon by BNDE and would be the response to the painfully perceived seasonality in 1981. It occurred both in the acquisitions of subsidiaries and in products, such as tractors for the civilian market. The technological level reached its peak with Osório, and for three years in a row R&D expenses reached 7% of revenue. US$50–150 million was spent on the tank. In 2000, the building in Barueri was auctioned for R$13 million, while Embraer purchased the plant in São José dos Campos for R$10.4 million. The money was spent on labor debts. In 2019, Engesa remained the 40th largest debtor to the federal government of Brazil.