November 26, 2013 Preparing for Brazil’s Future

Volume 16 | Issue 10

This global development partner for the automotive industry meets growing demand in Brazil for unique systems competence in the internal com

The Mahle Group is among the world’s top three systems suppliers for pistons, cylinder components and valves and reports annual revenue of $7.9 billion in 2012.

With a local presence in all major world markets, the group has over 48,000 employees, 100 production plants and seven research centers.

Mahle’s second-largest factory is in Brazil. A total of five facilities, Latin America’s largest technology center and distribution centers form an important market region for the group, representing 15 percent of global sales.

“In Brazil, there is a strong market tendency toward more efficient engines. For a long time cars have not met the technological standards of the United States and Europe and this is changing. We have the experience and knowhow to develop more advanced engine parts,” says Caio Moraes, Chief Financial Officer of Mahle Metal Leve SA (Brazil).

All In
In South America the catalyst of the success story is Mahle Metal Leve SA. There are 10,500 employees working in its factories, distribution center and technology center, the structure is concentrated in Brazil and Argentina.

The group began its activities in Latin America over 50 years ago when the Mahle brothers associated with other German immigrants in the south of Brazil to manufacture engine pistons. By 1971 the company was listed on the São Paulo stock exchange.

During the 1990s the Mahle Group assumed control of South American operations (1996) and the company took on the family name. “There were lots of changes. The Mahle Group’s companies in Latin America were gradually incorporated,” Moraes explains. In 2002, for example, the filter production company was acquired and five years later the valve production facility in Argentina was associated with Mahle Metal Leve SA.

“The most recent acquisition were the rings division in 2010 and forged parts in 2011, which were the last steps of our centralization strategy. Now, we have a firmer stronghold in the market,” Moraes elaborates.

Mahle companies producing other engine parts have now been totally acquired by Mahle Metal Leve SA. Today, 30 percent of the company is controlled by Mahle and 30 percent is held by shareholders. “Our new organizational structure gives us an important technological advantage – we are the only group to provide such a broad range of powerful engine parts. Thanks to our technology center we provide complete parts and services for sales and aftermarket,” Moraes continues.

Creating an Impact
Mahle’s 280,000-squaremeter factory in Mogi Guaçu (São Paulo) is the company’s headquarters for Latin America. The facility produces pistons, cylinder liners, connecting rods, pins and filters. “Our leading products are pistons for vehicle engines, bearings, cylinders and valves. Each facility is responsible for specific lines, such as our São Bernardo do Campo plant, which produces bearings. Looking ahead we foresee an increase in filter sales,” Moraes says.

Mahle South America has two distribution centers: one in the city of Limeira in São Paulo state, and one in Buenos Aires in Argentina. The technology center, located in Jundiaí, São Paulo, is the largest and best-equipped in Latin America for the development of autoparts and solution packages for internal combustion engines. Moraes adds: “The center allows us to add value to and surpass our clients’ expectations, in a customized and efficient manner and to develop innovative new product technologies and processes.”

The products made in Brazil and Argentina are sold in both these countries and exported to the United States, Mexico and Europe. The diverse client portfolio includes the world’s largest vehicle manufacturers; Volkswagen, Audi, John Deere, Toyota and Ford, among others.

Mahle Metal Leve SA has annual revenue of $1.2 billion. “Our global technology makes a strong impact on the market. We are the only company in Brazil who can make all this possible – vehicle manufacturers who trust in us abroad don’t think twice before working with us in Brazil,” Moraes says.

Re-Investment
The incorporation of the companies has accounted for a considerable amount of Mahle’s investment over the last few years. In 2010 the acquisition of the rings division cost approximately $409 million.

Mahle has also increased its holding in the Behr Group (autoparts) to 51 percent. An agreement has been reached between family shareholders enabling the full integration of Behr’s Thermal Management unit. The transaction adds Behr Brasil to the South American division, broadening the product range.

Improving its service and meeting the growing demands of customers is the focus of Mahle’s investment. Moraes describes re-investment as a constant. Annually, between 5 and 5.5 percent of sales is spent on developing products and opportunities. The breakdown of spending reveals that 60 percent is directed at processes and products, 15 percent on automation and the remaining 25 percent is shared between areas like quality control, infrastructure and software.

“Our clients mostly request adaptations of parts, rather than design from scratch. We combine the latest technology to produce components with higher productivity, lower emissions and better performance, which mean improved profits,” Moraes says.

As a multinational company, Mahle has the advantage of extensive access to global technology. “Brazil is in a crucial moment: cars are evolving fast and we have access to the technology the market needs,” Moraes adds.

Despite the strong advantages, Mahle’s favorable position has been achieved through focus on incorporation of the Group’s companies and not aggressive marketing. “In all of our market regions, we are either the leader or joint market leader,” Moraes affirms.

It is leadership that has become synonymous with Mahle worldwide. On beginning operations in Brazil, Volkswagen, Toyota and Fiat are just some of the companies that extended international agreements to South America. The global structure supports sales and reduces costs.

Moving forward, the road ahead is promising. A recent depreciation in the value of the Brazilian real has favored exports and despite high taxation in Brazil, labor remains comparatively cheap considering other markets.

The Brazilian government is also financing incentives to encourage the development of vehicle technology in the race to bring Brazilian-produced cars up to international standards. Raw materials are accessible and affordable and Mahle Metal Leve is extremely competitive.

Mahle has the tools, technology and solutions and specifically in Brazil, the opportunity to continue to grow and revolutionize the market.

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