May 26, 2012 Constantly Changing Gears

Volume 15 | Issue 2

Active in Brazil for 110 years, Cestari, the nation’s leading manufacturer of gearboxes, is always on the go. Executive Director Alcides Ces

Cestari is living proof that not every family suffers a generation gap. On the contrary, in the case of the four-generation Brazilian manufacturer of gearboxes and automotive parts, the transition from one generation to the next has been as smooth and seamless as shifting gears.

GROWTH OF A MARKET LEADER
Cestari’s humble beginnings date back to the early 20th century, when Luigi Cestari, an Italian immigrant who had arrived in Brazil to work in the cane fields of São Paulo’s interior, decided to start his own business. In 1901, he opened a small workshop in the town of Monte Alto, where he produced saddles and parts for horse-drawn carriages.

Over the next few decades, the little business grew steadily. In 1922, Cestari invested in an iron forge and began manufacturing components for agricultural equipment such as plows and harvesters. However, the company really took off in the 1940s when, responding to Brazil’s industrial boom, Cestari began producing machines and parts for the country’s rapidly expanding industrial sector, with a particular emphasis on the burgeoning automobile industry.

In 1953, the handing of the company reins to Luigi’s son, Alcides, coincided with Cestari’s foray into the production of gearboxes for both automotive and industrial equipment segments. Subsequently, the company began expanding its automotive line, adding gear racks, switch gears, flywheels, and other transmission parts to a product portfolio that continued to grow under the guidance of both second and third family generations.

The 1990s proved an important decade. The company modernized its foundry and invested in state-of-the-art equipment, technology, and laboratories that allowed it to produce gearboxes and auto components out of bronze and aluminum as well as cast iron. In 1994, the company launched its first geared motors. As it approached the new millennium, the company had become Brazil’s leading manufacturer of gearboxes, geared motors, and couplings, boasting the market’s largest range of gearboxes (ranging in capacity from 15 Nm to 600,000 Nm).

OFFERING A COMPLETE SOLUTION
Current Executive Director Alcides Cestari Netto took the helm in 2009. In the brief time that he has presided, Cestari has undergone massive – and unprecedented – transformation aimed at repositioning the company to compete in an increasingly complex, competitive and globalized market.

To start, Cestari invested R$45 million (roughly US$26 million) as part of a major five-year plan to modernize its facilities (its plant currently measures 197,000 square feet and employs 600 people) and increase production capacity. In 2009, it added a new service division to complement its two preexisting product divisions devoted to gearboxes and auto components.

However, the most recent – and most monumental – development has been Cestari’s creation of a joint venture with WEG, a Brazil-based multinational that is Latin American’s largest manufacturer of electric motors. Established in October of 2011, the new company (WEG-Cestari Redutores e Moto Redutores S/A) is a 50-50 partnership in which Cestari is merging both its gearbox and service divisions with WEG’s manufacture of motors.

“We partnered with WEG for many years, but our relationship had always been that of supplier/client,” explains Cestari Netto. “However, when I took over as executive director, I was very aware of changes occurring in the marketplace, both in Brazil and overseas. Many of the industry’s largest players, and our biggest competitors, were positioning themselves differently by offering complete solutions based on a ‘tripod model’ that embraced the production of gearboxes [mechanical], motors [electrical], and industrial automation [electronics].

“While some of our competitors were already working with this model, others – such as Siemens, for example, which purchased Flender – made acquisitions, or created joint ventures to provide customers with a complete solution,” continues Cestari Netto. “With our WEG partnership, we’re trying to create synergy between the two companies, so that we complement each other and, at the same time, consolidate our presence, not just in Brazil, but throughout Latin America.”

To date, Cestari’s activities outside Brazil have been limited; exports represent around five percent of the company’s business. Domestically, the company already caters to many of the top players in a wide cross-section of industries. Among the most important clients for its gearboxes are Cosan, Dreyfus, and Santa Elisa (sugar/ethanol); Vale and Samarco (mining); as well as various players in the cement, plastics, rubber, metallurgical, paper-cellulose, petroleum, and food and beverage segments. In terms of auto components, Cestari’s biggest client is GM, but it also supplies to assemblers such as Toyota, Honda, Perkins, Mercedes and MWM.

GROWTH IN A CHANGING MARKET
As a result of its joint venture with WEG, Cestari hopes to expand its market share in the gearbox segment in 15 percent. In terms of sales, it is predicting considerable growth – in double digits – for 2012. Cestari Netto estimates that revenues derived from its gearbox division (which currently accounts for 60 percent of business) and service division (10 percent) will reach R$120 million (US$70 million). He predicts that the company’s auto division – which remains 100 percent under Cestari’s ownership and is responsible for generating 30 percent of revenues – will earn around R$35 million (US$18 million).

“The Brazilian market is really changing,” observes Cestari Netto. “As a result, there are many more opportunities for growth. At the same time, competition has intensified. The biggest market trend right now is the increasing presence of big global players, a result of large foreign groups’ ongoing interest in Brazil’s thriving economy and expanding consumer market.”

Faced with increasingly fierce competition, Cestari recognizes the need to position itself more aggressively – hence, the service division and the joint venture with WEG. But the company also boasts other trump cards. Among them is the flexibility that results from being a small, family-operated company with decades of experience in the Brazilian market. Also, alone among its competitors, Cestari possesses its own in-house engineering department, capable of creating special products that are increasingly in demand. Indeed, Cestari Netto estimates that between 30 and 40 percent of all the gearboxes it sells are either adaptations or customizations, produced exclusively in response to clients’ specific needs.

Most inimitable, however, is the traditional and widely recognized Cestari brand name, which is synonymous with quality products. Still, despite being deeply aware of the importance of preceding generations, Cestari Netto is not one to cling to the past: “I’m proud that I’m of the fourth generation of Cestaris to run this company, but I’m always looking to the future. One thing that hasn’t changed over the years is the company philosophy established by my great-grandfather: to grow continuously and sustainably, and then to keep on growing, growing and growing.”

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