March 26, 2010 Keeping It Cool

Volume 13 | Issue 2

Denso do Brasil, the country's biggest maker of air-conditioning systems for cars, is lucky enough to be selling in a growing auto market. T

Brazil is one of the few countries around the world that has come through the recent financial and economic turmoil without falling into a recession. The continued growth of its gross domestic product has spurred new job creation and with it demand for a wide range of consumer products, including new cars.

Denso do Brasil manufactures air-conditioning systems and compontents used in cars made by the country’s biggest makers, including Fiat, Volkswagen, General Motors, Ford, Honda and Mercedes Benz. Even as sales to these customers increase every year, the Curitiba-based company makes sure it stays focused on the needs of its customers and the Brazilian market, and works closely with suppliers to make sure those needs are fulfilled, said Mario Tano, Denso’s sales director.

“We concentrate on quality and we work very hard at it,” he said. “We also work with our suppliers to develop products that are adapted to the Brazilian market and appropriate in price, quality and performance.”

Denso also makes air-conditioning systems for buses, and distributes spark plugs, but the auto market represents 80 percent of sales. It’s been a good market for Denso, as auto sales in the country have soared in recent years. Car sales rose to a record high in 2009 from a year earlier, increasing 11.6 percent to 3.14 million units, according to the national dealers’ association, known as Fenabrave.

That was the third consecutive annual increase. In 2009 Fiat had the biggest market share, with 24.5 percent, followed by Volkswagen with 22.7 percent and General Motors with 19.8 percent. In January of this year sales of cars, trucks and buses increased 7.9 percent compared with the same month a year earlier.

Denso has a 35 percent share of Brazil’s vehicle air conditioning market, and has maintained that level for several years, with sales growing in line with the car market itself. This year is shaping up to be another good one and the company expects the car sales to grow by another 10 percent from 2009, Tano said.

The government has continued a series of tax incentives through to the end of the first quarter, and economic growth is expected to continue to be strong. The recovery of other economies should contribute to an increase in exports, which will in turn contribute to a 7.8 percent increase in auto production in 2010, according to PriceWaterhouseCoopers’ Autofacts unit.

“Our biggest markets outside Brazil are in Mercosul,” said Tano, referring to the South American trade bloc that groups together Brazil, Argentina, Uruguay and Paraguay. Chile, Bolivia, Ecuador, Colombia and Peru are associate members of the group, known as Mercosur in Spanish. “For exports we’re working hard, but Brazil’s currency is strong right now, and that makes it harder on us,” Tano continued. “We’re working to cut costs to maintain our international competitiveness and maintain our ability to sell in other countries.”

The company is working on several different areas to reduce costs. At the factory workers are getting training to increase productivity. Denso is also working with its suppliers to find ways for them to reduce costs and pass on some of the savings.

GROWTH CAPACITY
Brazil’s auto and parts industry is concentrated in the area around Sao Paulo, which is also the country’s biggest city. Denso has two factories, one located in Curitiba, the city where Denso was founded in 1982 as a maker only of compressors. Curitiba is the capital of the Parana state, which borders on Sao Paulo state.

During the 1990s the Curitiba factory expanded its production lines to include condensors and other components that are used to make the air conditioning system. The company also opened a research laboratory where new products are developed and tested, giving Denso the capacity to make and sell its own systems, and stay ahead of rivals.

“We’re market leaders at the moment, and our market has shown a lot of growth potential and attracted more competitors,” said Tano. “To maintain our position we’re constantly investing in new technologies, new products and in increasing productivity.”

The other plant, in the town of Pindamonhangaba, in Sao Paulo state, makes the casings for the systems. The company is at the end of an investment program to increase capacity in preparation for the expected increases in demand in coming years. Denso has spaced the investment out over three years, and when it’s finished the company’s capacity will have increased 30 percent, Tano said.

Between them the two factories now have the capacity to produce 250,000 systems per month.

Most of the investment of about $15 million was made at the Curitiba plant, and went towards purchasing new production equipment, he said. With the investment program almost finished, Denso is starting to seek out new markets.

“At the moment we’re trying to develop new products outside of air conditioning,” said Tano. “The air conditioning market is maturing, so we’re looking for new areas to expand. We’restudying the kind of products we make, to see what our clients’ necessities are, and we’re analyzing our manufacturing strengths and capabilities to see what we can produce competitively.”

AUTOMAKERS AND AFTERMARKETS
Denso has two sales teams that focus on different types of markets. One of the teams concentrates on car manufacturers, which represent about 80 percent of total sales. This team maintains close contacts with customers to ensure their supply needs are met rapidly, a key requirement for manufacturers who are also working to keep costs under control.

The other team focuses on the aftermarket, which consists of the repair shops that fix or replace air-conditioning components and systems. Aftermarket distributors include companies that buy the parts and then sell them to garages, authorized garages and auto parts stores.

The bus air conditioning market represents about 10 percent of Denso’s sales, and is made up of two similar groups. The bus manufacturers, such as Marcopolo, buy in bulk and install the systems in new vehicles. The businesses in the other group are known as “flippers,” and are companies that buy buses and customize them, installing air conditioners and other equipment before selling them to the final user.

ECO FRIENDLY
Denso is very careful to make sure that its manufacturing activities are as ecologically friendly as possible. The company has an Environmental Management System that undergoes constant revisions and improvements. The system has several goals, which are to prevent pollution associated with the manufacturing process, use natural resources responsibly and fulfill all the Brazilian environmental rules.

Denso employs about 2,000 people in its factories and administration, and is careful to make sure they work and live in the best conditions possible, Tano said. The company runs a school to give technical training to potential workers, though students sometimes go on to work at other companies as well.

“Denso tries to contribute to the local community, by employing local people and also contributing to education and the improvment of living standards in the area,” he said.

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