Sunday, 13 November 2016

Micro Level Trends – Brazil's Automotive Sector – “Brazil 66”...Sixty Six Years of Economic Power Lifting (Part 4.4.2)

Formula One arrived at Interlagos this weekend and Brazilian GP fans can gaze upon the re-generative hybrid power-trains mated to ultra-expensive carbon-fibre tubs and panels designed for mass, aero and impact.

Fifty-two years ago the circuit witnessed a landmark event when a DKW-Malzoni GT was rebodied in what was then the first local example of a new and revolutionary material...Glass Reinforced Plastic. 

GRP went on to provide the foundations of the small but truly indigenous Brazilian auto-sector for the next thirty years.

In today's global political climate of increasing national protectionism (as already witnessed in Brazil with new 'back-door tariffs' against inferior Chinese and Asian goods) it is useful to review the events of the past, to mould policy that obtains the best from both globalisation and self-reliance.

Given its contribution to the Brazilian economy as regards national employment and export earnings, the automotive sector deserves special governmental attention.

Economics/Ecology Within a National/Global Construct -

As explained at the beginning of this long, topic dedicated weblog, since the country's formation during the various bygone eras when Brazilian export trade contracted, and national economic fortunes likewise constrained, many believed Brazil must become both more self-sufficient and vitally raise the inherent value-added of its export base beyond high volume low earning general commodities.

This long held attitude amongst 19th century industrialists was further prompted by the UN's ECLA (Economic Commission for Latin America) after WW1, and as seen over the last century and well recognised since WW2. Brazil quite obviously did indeed sprout a multitude of new economic tentacles to climb the added-value ladder, both at home and abroad, which now span an array of topics: from consulting services to other EM nations about its highly successful Sugar Cain derived Ethanol policy, to the use of the Rio de Janeiro template for likewise instigating web-enabled 'intelligent cities' again at home and abroad, to the its protection of the Amazon Rain Forest and a so a persona of guardian of Giai (Mother Earth).

In latter decades, and ahead of others, Brazil's considered use of its natural resources and as sympathetic as possible industrial consciousness led to eco-orientated projects, these arguably led by the enormous Itaipu hydro-electric dam which when created in 1984 providing power via twenty sub-stations for Brazil's new era of cleaner industrialisation.

As shown, that dam was the inspiration for much in the auto-industry, from the creation of a radical all- electric city-buggy, to the ability to deliver reliable and variable power to a new cohort of incoming global auto-makers, themselves beacons of Brazil's successful FDI initiatives.

Self-sufficiency became a popularist perspective, especially after the trade deprivations of WW1, WW2 and the impact of the 1973 Oil Crisis. But beyond the desire for independently produced transport fuel, by the mid 1960s Brazil also sought to create its own, necessarily alternative, passenger car and light truck solutions.

Unlike the strong rational for partial (ie blended) self-supply of transportation fuel (to absorb oil supply and price shocks) the rational behind Brazil's own wholly indigenous automotive industry has proven to be, if not faulty, then perhaps over idealistic. Though without doubt, for a period between the late 1960s and early 1990s it was a commercial goldmine thanks to propagation of the national interest.

However, although for a period there was impetus and success, the technical and scale short-comings of that necessarily alternative route would eventually become self- evident, and ultimately even what was a niche corner of the vehicle market would shrink to becoming today almost invisible.

That necessary route was of course based upon a requisite “low cost” mentality and mantra. Yet it also led to industrial learning and application which provided, for a time, national pride.

Such efforts toward new competencies should be re-ignited today as Brazil seeks to bolster its role as vanguard of EM progress and a participant in AM commercial and consumer demand.

Low Cost Vehicle Construction :
GRP (Glass Re-Inforced Plastic) and 'Plasteel'

As seen previously, the story of state-owned FNM as Brazil's 'national champion' was primarily regards heavy goods trucks and much subsidised support for likewise licensed manufacture of a premium passenger car. FNM products were essentially advanced European vehicles that had been born from the fruits of Italy's own rapid post-WW2 reconstruction era.

But the end of FNM by the early 1970s, sold to Alfa-Romeo to encourage (and succeed) in further Italian FDI, meant that (like VW, Ford and GM) truly advanced engineering would remain in the hands of the major auto-players who earned their major income elsewhere and were able to re-invest to maintain business propulsion worldwide.

Advanced Materials to Mirror Advanced Countries

Consequentially, it meant that any idea of a Brazilian-own vehicle or brand would have to be predicated upon a very different business case and associative technologies, domestic affordability right through the value-chain, from raw materials to recommended retail price, vital to commercial success at home, and possibly abroad.

Given the explicit and implicit promises made by Brasilia to incoming foreign producers, the rejuvinated homeland effort would need to target the remaining available 'white space' within the national market. In practice this meant effectively those areas which the government procurement process could plausibly favour (in the nation's interest) and a small self-created sliver of the commercial and private arenas in which the big players had no or little interest.

This inevitably reduced the home-grown to a quite specialist 'niche vehicle' sphere, and the idioms of simplicity to aid cost reduction meant the deployment of very contained capital expenditure offset and supplemented by the considerable use of cost-attuned manpower.

The business model was to be a practical adoption of the examplar 'case studies' as proven in both America and Europe, and would be based upon the extensive use of 'fibre-glass', or glass re-enforced plastics' (GRP).

Yesteryear Background -

The science behind GRP had been essentially re-born in the early 1930s in the industrial laboratories of American glass-makers, having been previously discovered in Germany, but not developed, during the 1910s. When blown with a powerful air flow, molten glass could be formed into tiny globules which themselves could be set into long strands, which in turn could be rolled-up (like the silk-making process) and/or could be set into a matted form.

[NB Both the rolled-strand and cross-overlaid mat would later inspire the creation of carbon fibre].

This mat would be laid into a mould. This could be either a single part 'female only' type, or a double part mould with both 'female' and 'male' parts brought together. After a release-agent was brush-painted into the mould the matting would (in the case of a female-only mould) be brush-painted with a cellulose based liquid so as to soak into the matting and harden in the respective new shape. For more tolerance critical objects a male-female mould would be closed and securely clamped with the matting obviously enclosed. Into this, via a small input hole, the cellulose liquid would be gravity fed or pumped, so filling up the internal chamber and fully soaking the fibre-glass matting.

The new object would be released and trimmed of excess material and typically painted to provide a better harder and coloured ('A-surface') finish.

The method was productionised within a limited scope in WW2 when applied to sections of aircraft fuselage and internal fittings, alongside a far greater use of transparent acrylic 'Plexiglass'. However, because of the long mould curing time, and so slow productivity rate, and the limited number of recognised applications, the GRP process had little real-world impact for US military and civilian organisations during WW2.

This would change dramatically in the post-war era, when in a new climate of advancement, cost-consciousness and experimentation, a raft of new applications were identified within firstly American and thereafter European industries – primarily across the 'hi-performance' realms of private light aircraft, private marine and performance orientated automotive.

But as seen in Brazil it was also deemed the appropriate answer to the first modern attempts of low cost transportation and zero or low emissions eco-mobility.

However, the beginnings of automotive GRP was not in the lowest social quarters, but the highest.

In the automotive realm, even though Henry Ford has experimented with soya based plastic skin panels (hoods and trunks) in the 1940s, the first prominent product was General Motors 1953 Corvette. GM's engineers and designers well recognised the popularity, attributes and relatively high price tags of the small lightweight European sports-cars that had been imported by the US military officers after WW2. Recognising that such personal cars had become badges of 'taste' amongst the 'social set' that trend could be replayed GM set about creating an all-American car in size and style but with the key attribute of European ethos regards good power to weight ratio. To be built in smaller volumes and with high sticker price, the perfect technical solution was GRP, providing relative 'feather-light' build, a rigid enough structure and critically low investment spend on moulds and jigs. When added to the standard union rates for greater man-power content, break-even would be early and thereafter profitability greater than a standard steel-bodied vehicle.

The Corvette led the way in the “GRP revolution” (akin to the carbon-fibre revolution of today) and thus as an affordable (almost by-product) material it provided the perfect solution for a plethora of other new and updated automotive names; so as to markedly bolster the European and American supply of purist dedicated motorsport vehicles and as associated 'race-bred' lineage of 'personal- performance' cars during the economic boom times of the late 1950s and 1960s.

The first to properly broadly experiment with GRP elsewhere was France's 'DB' (previously Deutsch-Bonnet, and later absorbed by MATRA),who most interestingly had impetus to understand its uses not just in motor-sport but also in popular micro-cars; even though none were ultimately manufactured.

'DB' however has the (oft overlooked) accomplishment in retailing the world's first mid-engined sportscar – the Djet - in 1962/3 using a steel backbone chassis, GRP body and Renault components. Its inherent logic of “balanced low-mass” thus set the construction formula for the De Tomaso Vallelunga a year later and the Lotus Europa 3 years later. (Similar construction materials however had been used on the 1962 Lotus Elan).

GRP thus became the de facto body solution for lower cost, lower risk business templates. It was viewed by many, from informed engineers to shady 'get rich quick' entrepreneurs, as the perfect answer in transforming the automotive arena. The product formula of far lower production costs (vs metals) and much reduced 'sprung weight' meant it could theoretically be applied across a very wide price spectrum given thanks to the created 'product attributes'. From the rarefied delights of high performance in the higher price brackets, through to the stylistically unique for middling prices, through to more affordable (often alternatively propelled) mass-mobility.

Interestingly however, the route to GRP in theoretical mass-mobility did not for the most part come directly from sportscars ('DB' the experimental exception). Instead the material underwent technology transfer from the boating industry in which it was quickly initially adopted for small rowing boats, powered dinghys, small sail-craft and thereafter motorboats, launches to speed-boats. GRP suited the basic 'tub' design of boats (requiring only a large female mould) and so was quickly taken-up.

Motorcycle side-car producers recognised this as a very suitable technical route for themselves, and thus (as with caravans) allowed for a new sub-segment of lower priced products to be made for both motorcycles and even scooters. This trend was thought to be the natural solution for micro-car producers and so the likes of Britain's 'Peel Engineering Co' amalgamated GRP and motorcycle power to create what it though would be a new generation of popular micro-cars.

However, it was perhaps only the UK's Reliant Motor Company in the 1960s onwards and later France's MicroCar Company in the 1980s onward who would gain success with GRP enabled affordable mobility. Primarily thanks to the PESTEL peculiarities of their respective home nations.

[NB Indeed MicroCar was formed because of the boat-making core competance of its parent, the Beneteau Group].

The Perfect Economic Fit -

With the high start-up costs of major auto manufacturing undertaken by, and thus dominated by, VW, GM, Ford and FIAT and the undoubted planned transfer of state ownership of FNM into the wholly private hands of Alfa Romeo, a new route for truly 'domestic automotive' was required.

The combined adequate rigidity of GRP structures in specific land, air and marine use, together with the innate flexibility of (theoretically very adaptable) associated business models thanks to low start-up costs and the adaptable nature of production provided the ideal basis for what was assumed a myriad of opportunities and spectrum of business approaches.

This would range from periodic and piece-meal manufacture for higher priced rarefied vehicles in sports and luxury segments, to the nigh on continuous relatively high output of utility type products.

Moreover, critically GRP niche production was well recognised as being the polar opposite of conventional big production. And with that came locational and re-locational advantages, with the ability – as circumstances require – to either: a) follow the low cost curve on a town by town or region by region basis (akin to globalisation), or b) take advantage of local state and municipality subsidies to attract light industry into development focused areas.

Thus it was wholly unlike a permanently fixed location of an 'in-situ' mass-manufacture vehicle plant, with required geographic proximity to high electrical power generation / feed, the closeness of its prime supply Tier 1 supplier-base and the requirement of good infrastructure to aid speedy and reliable logistics.

The innate GRP process allowed for what seemed an infinite possibility of regional development possibilities. It was then no surprise, that having seen the futuristic product advances in the US and Europe and the impact of such a business model on local areas that the Brazilian government sought to prompt commercial uptake of GRP production – it was an absolute 'wonder' as regards:

1. the myriad of shapes and sizes the material could be moulded into.
2. the differing forms that associated business models could take.
3. the positive impact upon the local economy.

In the mid 1960s Brasilia had undoubtedly, from afar and perhaps close at hand, looked at the local development impact of various examples.

These included:

USA: GM's Corvette in Bowling Green, Kentucky...Studebaker's Avanti in South Bend, Indiana.
UK: Reliant Motors' Regal production in Tamworth, Staffordshire....TVR's Grantura/Vixen production in Blackpool, Lancashire....Lotus' Elite/Elan/Europa production in Cheshunt, Hertfordshire.
France: Matra's M530 production in Romoratin-Latheny, Simca's non-productionised exploration of GRP rear panels and whole body for the 1200 coupe (which could have altered its demise) in Poissy.

And perhaps most interestingly another much changed and developing country had deployed GRP as the foundations for its own second attempt at a national car.

Turkey: Otosan Anadol's production of the A1 saloon, coupe, the P2 'ute', (and later STC-16 sports) in Istanbul (using Rootes and Ford mechanicals).

By the mid 1960s then it had become well understood that GRP dedicated manufacturing companies (ranging from cars to boats, planes to caravans, utility furniture to container silos) could have a major economic impact upon out of town areas which had been fundamentally economically altered by the mechanisation of agriculture, and had been too far geographically remote to gain from the ongoing growth of conventional town-centric and city-centric industrialisation.

Here was an industry suited to the provinces and could help soak-up the surplus of untapped labour therein, and help revitalise more rural areas.

In Europe the impetus for such innovation would consist of a typical mix of both private and state funding / subsidies, the level of the latter dependent upon the political 'big picture'.

Thus for the post Kubitschek governments in Brasilia seeking new economic platforms for the more overlooked suburbs and regions, the idea of “Plastic Cars” became a very tempting policy route.

The Past Examples -

As depicted previously, even though small in ultimate numerical output, Brazil's niche vehicle production ultimately spanned a period of just about 30 years. It was effectively opened and closed by the sporadic activities of the Puma Motor Company between 1966 and 1995; with a heyday during the 1960s and 1970s.

To recap the prime examples of GRP founded business models were:

1. Brasinca Veiculos SVT S/A – located in Sao Paulo City (1964 to 1967)
2. Puma Motores S/A – located in Matao of Sao Paulo State (1966 to 1995)
3. Gurgel Motores S/A - located in Rio Claro, Sao Paulo State (1969 to 1993)
4. Miura Motores S/A – located in Porto Alegre, Rio Grande do Sul (1977 to 1993)
5. Lafer Motores S/A - located in Sao Paulo State (1974 to 1990)
6. Santa Matilda Industriel S/A – located in Rio de Janeiro State (1978 to 1995)
7. Farus Motores S/A – located in Belo Horizonte, Minas Gerais (1979 to 1990)
8. Dacon Industriel S/A – located in Sao Paulo State (1983 to 1994)
9. JPX do Brasil S/A [EBX-Auverland-Panhard] – located in Rio de Janeiro (1992 to 2002)
Each of these enterprises sought to exploit what were considered untapped potential for a majority or complete 'home-grown' Brazilian vehicle in specialist arenas.

These depict initial exploration of GRP's use on major panels with the Brasinca SVT 4200GT (a very good evocation of a truly luxurious personal car in the manner and style of its inspiration, the all-GRP Studebaker Avanti of the period), through to very speedy broad technical and commercial acceptance of the basic material for complete body structures, as per the Puma et al in sporting guise, and the early offerings from Gurgel.

Gurgel's Reactionary Pragmatism -

As shown previously, the most prolific exponent of GRP design, manufacture and in-use redesign was Gurgel Motores in Rio Claro of Sao Paulo state.

Whilst other companies were keen to direct sports-car and luxury-car efforts toward the private realm of status orientated wealthy consumers who typically themselves ran large enterprises (in industry and agriculture), Gurgel soon recognised the inherent risk of such a relatively 'high-stakes' venture dependent upon the strength of the economy and associated spending prowess.

Instead of entering such a theoretically high margin yet very competitive field, the founder (Joao Augusto Gurgel) preferred business stability to grow his vision of very functional vehicles for Brazil's self-betterment. And so pointed his firm toward the more cost conscious yet more stable and larger volume procurement needs for basic utility vehicles. These would include the Brazilian military, which would in turn give confidence to large federal organisations and regional state owned enterprises.

It seems highly likely that Gurgel was recommended this business direction by auto-sector bureaucrats, and given generous subsidies and incentives as part of the Brazilian self-sufficiency ideal, and thus had a ready-made customer base and so predetermined business case.

There is little point in recapping the previously mentioned series of vehicles that were ultimately produced, instead focus herein upon indigenous innovation the early creation of patented 'Plasteel' is highlighted.

“Plasteel” -

In itself it was hardly revolutionary, since it was long recognised by Americans and Europeans that basic GRP had strength limitations dependent upon dimensions and shape, which would typically be 'engineered around' in standard form via use of: curved corners, 'U' section channels, shallow or deep corrugation and internal 'webs'.

When such solutions were unsuited early builders could and would utilise small quantities of metal (aluminium preferable over steel) if deemed necessary to strengthen a specific portion of the moulded item. Thus 'Plasteel' was hardly new, even if marketed as such to possibly naïve Brazilian customers. Nonetheless 'Plasteel' allowed Gurgel to uprate his company's USP of light fuel efficient and relatively durable vehicles.

This came into be after the strength limitations of the basic unstrengthened material became apparent with structure failures on the second Gurgel model, the Xavante. As is the normal case with the military and many government and private users in EM countries regards pick-up trucks etc; the vehicles would be consistently overloaded to maximise their use.

[NB This would be well recognised by the Japanese (Landcruiser and Hi-Lux) and Germans (Unimog and G-Wagen) who effectively over-engineered their vehicles to absorb additionally high expections. Joao Gurgel would learn through experience].

Historically GRP has had very limited applications for military vehicle use, effectively restricted to only necessarily lightweight and highly mobile reconnaissance vehicles and as half-tonne load carriers. Given this limitation the vast majority of the world's military fleet would be for decades conventionally engineered in steel and aluminium for performance, durability and in-the-field and motor-pool repair reasons. That metal construction typical for a plethora of vehicle types across medium and heavy load bearing logistics vehicles (from single unique loads to freight containers), those general transport vehicles which would need to be 'up-armoured' (ie the addition of heavy armour plating) for combat zones and of course those vehicles dedicated to combat environment operations, from personnel carriers to tanks to mine-sweepers, etc.

Thus inevitably international armed forces recognised that GRP had a very useful, but very limited, role to perform regards the body structures of cross-country 'recon' buggies and as a sacrificial skin for very light, non ballistic, attacks (eg urban rioters' use of Molotov cocktails).

[NB this engrained convention only now slightly shifting with the introduction of increased carbon-fibre on task-dedicated vehicles].

However, with a keenness to appear modern and advanced, so as to grow a military export base, it is likely that 'Plasteel' was born as much from the behest of the Brazilian government and Joao Gurgel's own 'vision'.

Together Brasilia and Gurgel sought to fundamentally alter the status quo of all-metal vehicles within the 0.5 to 2 tonne 'light load' sector. And doing so because it recognised the massive international demand for basic light and efficient multi-task utility vehicles, themselves typically required in high production order numbers; 'plentiful, adaptable and cheap' the customer's mantra.

Recognising the mutual advantages and disadvantages of both GRP and steel Gurgel quite logically combined the two materials, putting steel bar, steel sheet, steel angle and steel channel as specifically placed substrates in the high stress areas of the vehicle's GRP 'tub'.

Thus whilst 'Plasteel' was hardly a true innovation, it did provide a sizeable increase in the durability of Gurgel's plastic-bodied vehicles so adding to their capabilities, lifespan and so ultimately general reputation.

'Plasteel' would thereafter feature in Gurgel's multi-passenger and load-lugging VW powered light trucks, vans and 'maxi-taxis'.

The End of the Indigenous 'GRP' Era -

Joao Gurgel's company had been the prime beneficiary of Brazil's protectionist stance from the late 1960s through to the early 1990s. Throughout this time, under the 'closed door' ethos to major foreign influence, Brazil had led Latin America in terms of its self-sufficiency political thinking.

The likes of its 'Pro-Alcool' Ethanol Fuel programme informed other suitably apt countries in South American and elsewhere to adopt or explore a similar strong domestic stance (including early introduction in the USA). And Gurgel did indeed gain export success to neighbouring countries – often with a heavy Socialist bent - who likewise had been reliant upon cheap low quality imported petroleum and thus, for greater independence, likewise sought fuel efficient utility service vehicles made in in South America.

But whilst Gurgel Motores had been thriving, by the late 1980s the winds of PESTEL change were to alter the Brazilian and LatAm environment. The erosion and eventual fall of Soviet Communism whose trade deals and finances had helped prop-up portions of Latin America had an enormous economic ripples.

Via cinema, TV and radio the peoples of Brazil and much of LatAm had seen much of The West and The East enjoy standards of living far in advance of themselves. And simultaneously inevitably viewed their own Communist-Socialist leaders as being in reality part of a collusive elitist set who themselves enjoyed the fruits of commercial monopoly in various sectors. Thus to this day Joao Gurgel himself (as with many other middle-men, merchants and industrialists) is deemed to have gained far too much government largess for too little real socio-economic return.

Instead, into the 1990s that 'closed world' diminished and Brazil substantially altered its ISI policy to allow the importation of usually better designed and manufactured world-class goods; vehicles the leading examples which illustrated how Brazil had in effect been stuck in its own time-warp for at least a decade and a half if not longer.

Into that vacuum that was Soviet collapse - and the resultant re-orientation away from an insular relationship with LatAm and Central American cohort countries – came the rest of the world: the Americans, Europeans, Japanese, South Koreans and the Chinese. Each came offering either better technologies or cheaper goods, often supported by strong stable and cheaper external financing to lubricate the Re-Globalistion process for Brazil.

The Ongoing Economic Re-Balancing Act -

Donald Trump's Presidential win has political and economic commentators on tenter-hooks about the real outcomes of his apparent very protectionist mindset. That in turn has created a domino effect amongst other nations regards a sizeable sway toward economic self-interest and self-reliance.

But let us remember that even in the midst of Brazil's 1950s Import Substitution Industrial policy it sought to retain the likes of already invested Ford and GM, and extended an invitation to the most apt foreign providers of suitable vehicles VW and later FIAT.The world itself, and the auto-industry specifically, is far too globalised to consider fundamental protectionist change. It was the case seventy years ago and it remains more so today.

However that should not halt Brazil from undertaking its own indigenous research, development and even low level production of 'advanced vehicles' in its own image. Perfecting such a vision to offer the world something new.

An ecologically sound recyclable lightweight material that performs far better than GRP but costs far less than carbon-fibre to produce would be perfect. Brazil extolled the virtues of ethanol for self-sufficiency and affordability and it gave that to the EM world.

It might be able to do the same with vehicles themselves.


In the 1980s-excess zeitgeist revealing book and film 'American Pyscho' the main character asks “is that Donald Trump's car?” Decades later the mass populace will echo those very words as Trump rides within the armour protected leviathan that is the Presidential 'Beast'.

How refreshing it would be to have a future Brazilian President riding in a very different animal, one of Brazil's own creation which offers revolutionary eco-technology to the world.