Volume 11 | Issue 6 | Year 2008

Over the past few decades, Controil has succeeded in carving out a small but profitable niche for itself as a supplier of rubber components for the automobile aftermarket. Based in the town of São Leopoldo, in Brazil’s southernmost state of Rio Grande do Sul, the company was started in 1957 by a trio of partners who decided to open a repair shop for hydraulic brakes. At the time, Brazil’s automotive industry was in its nascent stages. Since very few auto parts were manufactured in the country, most – including brakes – were imported from overseas. During its first 20 years, the small company stayed afloat, but grew very little. In fact, by the mid-1970s, Controil was very shaky financially.
TURNAROUND
Things only began to turn around in 1977, when the arrival of a new partner coincided with a complete corporate restructuring of the company and a necessary injection of new capital. These watershed events were accompanied by a major change in focus – beyond merely repairing brakes for the aftermarket, Controil decided to begin manufacturing rubber components including products for brake systems and clutches, as well as hoses, valves, seals and other parts.

Over the next 20 years, Controil experienced solid, sustained growth. But things began to truly accelerate in 1997, when the company received significant financial investments from the BNDES, the state-owned Brazilian Economic and Social Development Bank, allowing it to update its facilities and switch over from manual to automated equipment.

“With this modernization of our plant, we were able to greatly increase our production capacity,” recalls company director Gilso Gotardo. “This made a big difference, particularly in terms of the brake segment. It put us on the path to becoming a market leader. As a result, by 2006, we were ranked Number One as a supplier of brake components to the aftermarket.”

Indeed, in the years between 1999 and 2006, Controil grew by a whopping 20 percent each year. The company not only consolidated its place in the automotive market, but also began expanding into completely new areas. It began making components for motors as well as a variety of technical parts for vehicles using special elastomers ranging from SBR, NBR, AEM, FPM and EPDM to different types of silicones. It even branched out beyond the auto industry when it began making components for Embraco (Whirlpool) and Tecumseh, the two biggest manufacturers of hermetic refrigeration compressors in the country. However, according to Gilso Gotardo, the biggest growth of all is yet to come.

NEW MARKETS, NEW GROWTH
Controil seems to follow a pattern of redefining itself within 10-year cycles. As such, it was no surprise that in 2007, the company decided to take another plunge and begin supplying products to the automotive manufacturing segment. “In terms of brake components, we had already conquered the aftermarket segment,” says Gotardo. “So suppyling to manufacturers was the next logical step. We don’t always just sell directly to the manufacturer, but often to the tier suppliers as well. In Brazil, the three main auto tier suppliers are Bosch, Continental and TRW and we now suppy to all of them.”

As it positions itself for new growth, the company is busy completing major expansions that will allow it to substantially increase output. It is currently enlarging its facilities and updating equipment at its 45,000-square-meter plant in São Leopoldo, where its two units – one for brakes and the other for elastonomers – currently employ 550 people. Meanwhile, taking advantage of proximity to Brazil’s major auto manufacturers, it has just opened a new 2,500-square-meter plant in São Paulo devoted to the manufacture of hoses, which by August will have 45 employees.

“Right now, we’re producing 70,000 brake master cylinders a month, which is our principal unit.” says Gotardo. “But at the rate we’re growing, we expect to be producing 100,000 by early 2009. Similarly, by 2009, we want to be producing 20,000 boosters (current capacity is 10,000 units a month). We currently make 150,000 wheel cylinders a month, but we want to expand this line as well. Together, these three products constitute our major brake components, but we also make 20,000 smaller parts as well as rubber hoses (145,000 a month, which will now increase to 200,000 due to our new São Paulo plant), refrigeration seals (20,000 units a month), and joints for intake manifolds (one million units a month), which is another product segment that we really want to focus on. Meanwhile, in terms of rubber brake components we have a production capacity of three million units a month.”

COMPETITIVE CHALLENGES
Controil’s optimistic outlook is buoyed by the fact that 90 percent of its products go to supply a market that is experiencing a considerable boom, particularly in Brazil, where last year automobile production increased by 25 percent. Figures for this year look even more promising – in January and February of 2008, there was an increase in production by 38 percent in comparison with 2007. “The market has a lot of potential,” declares Gotardo: “The challenge is to stay competitive. We compete very well against imports. Even though the fall of the dollar and an increasingly valued real facilitates imports, we have been able to lower our costs by 3 to 5 percent a year just by improving logistics and productivity. And although the price of elastomers depends on the price of oil, which has been rising, by increasing production and investing in better technology, we have been able to lower costs.”

In the meantime, Controil sees another reason for its success: the close relationships it cultivates with its aftermarket clients. Says Gotardo: “Our promoters and technicians really work closely with the mechanical applicators. We seek to create partnerships because the way we look at it, a distributor is just a channel, but the person who applies the product is both our client and our partner.” This isn’t to say that the company is not concerned with distribution as well. It has a network of regional distributors in place that allows Controil to better meet the specific needs of clients in different Brazilian regions. “One of our big competing points is our delivery time,” claims Gotardo. “The aftermarket segment is all about inventory. When a client wants a product, he wants it right away. We have to be fast and reliable. For this reason, we guarantee all our clients delivery within 48 hours.”

Another selling point is that Controil offers a full product line to its aftermarket clients. While its larger competitors can make the same boast in terms of auto manufacturers, they don’t concentrate on the aftermarket. And even if they did, they don’t have the speed and flexibility of a small outfit like Controil that has decades of experience catering to the aftermarket. In fact, according to Gotardo, Controil only began supplying to manufacturers because it perceived that the three major companies operating in Brazil aren’t able to meet all their clients needs. “Ultimately, we’re a simple company,” says Gotardo. “The advantage of this is that we have a high degree of transparency. Information flows very freely and all our workers have access to and participate in the company’s results. The upshot is that we have a very motivated team in which everyone is inspired to make better products and a better company.”