Profit and social responsibility need not be exclusive. That’s how it works in Latin America. Take Brazil, a nation with a thriving automotive industry. In this fertile environment, a safety focused company such as Takata-Petri S.A. can prosper. Paula Menna Barreto profiles this successful organization that based its business on a safety device: air bags.
Latin America boasts a strong automotive market. In Brazil, in the first three months of 2011, car sales jumped 4.7 percent. This presented opportunities for air-bag manufacturers. Indeed, a recent law required both driver and passenger airbags. From 1987 to 2006, this technology helped save about 22.500 lives in a nation (the United States) where 95 percent of vehicles are equipped with airbags (according to the National Highway Traffic Safety Administration).
Takata-Petri S.A., Brazil’s airbag modules sales leader, intends to increase its production by 80 percent, an effort that will be advanced by two new plants: one in Brazil’s northeast region and another in Uruguay. Expansion will allocate 100-percent of production to meet new Brazilian automotive industry demand. Further, and most importantly, the expansion will help Takata-Petri fulfill its dream of the “zero victims” level in traffic accidents.
Research related to the Brazilian automotive production and safety provides some eye-opening numbers. Consider: If driver airbags had been required since 2001, nearly 4,000 lives could have been saved. And that’s only gathered information that brings statistics up to 2007. But it’s not just about traffic fatality; injury comes into play: Predominant airbag usage could have prevented harm to more than 70,000 individuals.
Further, the costs associated with traffic accidents are enormous. Consider what this means for just one Latin American country: In six years, the Brazilian government would have saved approximately $1.3 billion if only a driver airbag had been installed in vehicles in that country during the highlighted period (according to Cesvi Brasil, the Brazilian Road Safety Research Center).
LEADING THE WAY
When it comes to safety concerns, regulations, and increasing consumer awareness, the Brazilian automotive market resides far above other nations. Indeed, Brazil – and its car manufacturers – take safety quite seriously. By 2014, all vehicles will be required by law to be equipped with both driver and passenger airbags. Currently, only about 20 percent of the fleet has one or two front seat airbags. But Brazil is on a road to catch up to other nations as far as air-bag safety, and it’s proving to be a front runner, even a pioneer.
The country’s vanguard safety position is based on several factors. The most important include: Brazil’s growth in terms of the automotive industry and consumer sales; and the new car safety laws (which not only foster safety awareness but also provide companies such as Takata a solid platform on which to build). It actually created a “non-existing” market, according to industry experts.
With 46 factories in 17 countries located throughout the world, Takata, a specialized supplier of automotive safety systems – and a provider of automobile safety components – has taken the lead for this major concern, It has invested $35,000 million to meet a growth potential that’s almost five times bigger than current production in Brazil.
SOUTH AMERICAN EXPANSION
Takata-Petri, a company 100-percent owned by the U.S. subsidiary of the multinational, Japan-based Takata enterprise, just laid the foundation of its new plant. Located in Uruguay, in the San José province, this is the first plant in South America to manufacture the materials that will comprise modules. End product includes the bag (the produced fabric), an inflator module, the case for the complete airbag module, and the cover (visible in the vehicle to the driver).
The Uruguay factory will have a capacity to produce seven million bags annually. Further, the company anticipates providing, by 2014, between five and six million airbags modules exclusively to the Brazilian market. That represents a gigantic leap from the 800,000 modules that the company now assembles.
Takata-Petri’s $10 million investment plan will not only help it keep its 55-percent Brazilian market share; it also will enable the company to assume the role of the biggest bag supplier for the region’s leading airbag module assemblers.
According to Airton Evangelista, Takata’s South America vice president, the fiscal incentives that Uruguay offered proved crucial in plant location. If a company wanted to produce bags in Brazil, it would need to pay about 26-percent in fabric importing fees. Such fees don’t exist in Uruguay. Evangelista also pointed out that Uruguay is a MercoSur (Southern Common Market) export strategic location, a position that lowers labor costs (compared to Brazil or Argentina).
The new plant, which is expected to create up to 600 jobs, should be up and running by November 2011.
Evangelista reveals that another $20 million will be invested over the next three years in the plant in Jundiaí, in the state of Sao Paulo, where the airbags modules are assembled and distributed. “Only the bag, one of the components of the airbag module, will be manufactured in Uruguay, but the entire module is assembled in the plant in Judiaí, where the company also has its engineer center,” explains Evangelista.
Evangelista describes Brazil’s emerging automotive market as important and strategic, pointing out that Brazil “surpassed Germany in consumer-size market for Volkswagen sales.” As European automotive markets mature and stagnate, carmakers are looking to booming markets like Brazil, the largest in South America for sales growth. From January to March of this year, approximately 900,000 vehicles were sold in the country, according to Anfavea, Brazil’s association of auto makers.
“In Brazil there is an average of nine inhabitants per vehicle, an increasing number. No surprise that the Brazilian automotive market is key to the world’s biggest automakers, including Italy’s Fiat, Germany’s Volkswagen, and U.S.-based General Motors and Ford,” says Evangelista.
That is why Fiat and Ford are installing new factories in Brazil’s northeast region, where Takata-Petri S.A. is headed next. The company is evaluating the potential to attend to the manufacturer’s expecation for the region.
Formerly Takata do Brasil Autopeças Ltda., Takata-Petri is constantly investing in sophisticated systems, engineer centers and high-end technology. The company also has operations in Germany, Japan and the United States. In Brazil, its airbags are installed in vehicles manufactured by Volkswagen, Fiat, Honda and Toyota, among others.
With 1,600 employees in Brazil – and anticipating the creation of 1,000 new jobs over the next two years – Takata has three factories in the country: Jundiaí (Sao Paulo), Piçarras (Santa Catarina), and Mateus Leme, in Minas Gerais state. At the Sao Paulo plant, airbag modules are assembled, still using the soon-to-end imported bags, as well as inflators with the cases, structural components and covers. In Piçarras, Takata’s factory makes webbing for seat belts. The Minas Gerais plant produces steering wheels and other automobile safety components.
Evangelista believes that while Takata is leading the airbag market in Brazil, it still has room to grow in the seat-belt segment, and it plans to allocate significant amounts on its engineering centers.
Some of the major factors driving growth of airbag installations include regulations, awareness, introduction of new systems (e.g., side impact airbags), increase in safety concerns, launch of safer products, and competitive dynamics.
Worldwide, Takata is the leading supplier of automotive safety devices such as airbags, seatbelts, and child safety seats. In Japan, it is the largest airbag supplier and is counted among the world’s three largest companies in the global airbag industry in terms of production volume.