(Prior to this weblog's continuation, a message of condolence to all affected by the recent air-crash reported in Colombia, that took the lives of Brazilian football players, staff, journalists and crew).
The previous section highlighted how the apparent ideal of nurturing a truly indigenous auto sector would provide an avenue toward notional national independence.
However, it was also
recognised from the late 19th century onwards that Brazil
would not fulfil its broad economic potential if their was sole
reliance upon Brazilian assets and its generally inferior domestic
technical capabilities.
As with elsewhere
previously, steam-power, rail-roads, the internal combustion engine
and electrical generation massively progressed the commodities based
economic miracle in the period, with similar advancements
simultaneously transforming Japan (which like Brazil gained much from
German, and American, cross-fertilization.
But it would be the
speed and leap-frog economic gains of German, Italian and Japanese
post-WW2 reconstruction, assisted by capitalism, more efficient
methods and new technologies that would serve as the continued
development template.
And although Brazil had
not been decimated – indeed it partially thrived in comparison –
those revolutionary changes to the broad economies elsewhere in
commerce and the populace's much improved quality of life, could not
be ignored.
Yet likewise, to avoid
absolute dependence, there had to be a cultivation of indigenous
assets and capabilities, those resources that were physical,
technological and intellectual.
Thus, although Brazil
quite understandably sought to delineate a degree of
self-independence, as exemplified by hydro-electric power and ethanol
fuels (their low eco-impact and cost-savings indisputable compared to
the immense gains) the fact remains that beside such engrained
knowledge of such disciplines, up until the beginning of the 21st
century Brazil's own internal capabilities had lagged behind,
specifically in both:
1. advanced technology
creation (Autos to IT to Aero)
2. the mass-manufacture
of mid-value and high-value, complex products and services
The astounding
advancement of the USA, Europe, Japan and South Korea across the
respective breadth of the 20th century, promoted by
technical research backed by capitalism, meant that up until the
1990s the so called BRICs had become even greater laggards to the Old
West and New East. (Indeed the commercial confluence of both
'supercharged' that development).
Thus whilst always
promoting nationalism, all the past and present governments of Brazil
have recognised the advantage of international relationships, and
obviously sought to broaden its capture of the add-value ladder, from
base mineral and agricultural commodities (mined and farmed with
greater scale efficiencies using foreign equipment or IP) through to
self-eduction into the realms of such disciplines as low construction
cost cars in the 1960s, and fifty years on, 'digitally intelligent
cities' today.
Most pertinently,
whilst the geography and spirit of of Rio de Janeiro, Brazilia and
The Amazon are the merged face of Brazil to outsiders, undoubtedly it
was the automobile that enabled and altered life so much that it
became central to the developmental spirit and so true persona of
Brazil.
Undoubtedly it was the
snowball and avalanche impact of GM's and Ford's trucks, VW's Fusca /
Micro-bus / Brasilia / Gol and FIAT's 147 / Uno / Palio that
instigated the developmental ambition; spanning much from B2B
research and development through to B2C modernised retail models and
much expanded consumer financing through to C2C brand-centric tribal
affiliations.
Thus whilst vehicles
like the Brasilia Gol or Palio may appear identifiably Brazilian, it
was globalisation that enabled such nationalistic creations.
6. Multi-National
Companies and Globalisation
As now well recognised,
the economic boom of the 1990s founded upon the commodities
super-cycle, led to MNC's and domestic producers considerably expand
consumer choice, from FMCG to 'big-ticket' items.
Aspirational everyday
brands, the uptake of widespread auto-ownership and the later gradual
but prolific impact of internet have together altered the commercial
and social landscape of Brazil; the country had at last once again
“has come into its own” by the turn of the millennium.
However, the
foundations of such economic success had, in part, been formed by the
industrial rationalisation effect of the far more austere 1980s. It
was in that era that VW and Ford recognised the need to combat FIAT's
growing success, creating 'AutoLatina' to do so.
AutoLatina -
This was in essence a
four-part Joint Venture between the seperate operating companies of
VW and Ford in Brazil and Argentina - 51% was held by VW and 49% by
Ford.
Obviously created to
effectively minimize costs across the board whilst maintaining a
feasible Brazilian and Argentinian market presence in cars and trucks
during what were problematic times.
Mutually beneficial
product substitution was the prime focus via a necessary strategy of
cross-companies 'badge engineering'. To this end in the cars realm we
saw:
1. the European derived
'B2' Passat introduced in 1984 was given an extended life as the
first JV vehicle in 1991, badged as VW Passat and Ford
Verseilles/Royale (sedan/estate); with facelifts in 1994 and 1998. It
was discontinued in 2002, thus giving 18 years service.
2. the European Ford
Orion used as the platform basis for vehicles named the Ford Verona
and VW Apollo, sold between 1989 and 1993.
3. the newer Escort (Mk
V) used between 1993 and 1996 for the new Ford Escort and VW Pointer
and 2-door VW Logus
It must also be
recognised that 'AutoLatina' was established with not just the
Brazilian and Argentinian markets in mind, but as the hub for broader
cost-controlled exposure to the rest of Latin America. It was
understood that these mainstream vehicles could remake the names of
VW and Ford in the Southern and Central Americas; offering good
quality (though not cheap) cars with pricing constraint helped by
high volumes, even if the individual markets themselves at the time
were relatively small.
The creation of
'AutoLatina' allowed the Wolfsburg and Detroit partners to
appreciably drive down costs through either the much longer length of
a product's lifespan, as with the near two decades of the 'B2'
Passat/Verseilles', or by utilising the 'Global Car' ideal and so
international economies of scale, as with both Passat and Escort.
[NB the 'B2' Passat
gained enormous scale economies, and so worldwide pricing
flexibility, precisely because of its voluminous manufacture in
China, where it became the de facto trusted vehicle by taxi drivers,
government and wealthier families of the period].
This expansive and
pervasive approach to 'baton down the hatches' during recessionary
times allowed for the latter-day enlarged revenues of the 1990s to be
immediately injected into operational and strategic re-expansion
projects aswell as the 'bottom line'. So providing for: availability
of more product types, the part-corporate financing of new franchise
dealerships, much improved press and TV marketing, growth in
cross-departmental headcount and critically decent reward for
shareholders at both the local level and the parental firms.
Lasting until 1994, the
JV's 'concentration of contraction' provided the basis for the
impressive corporate rebounds as strong and continually strengthening
de-merged independent entities between the boom decades between 1994
to 2014.
In turn this generated
a large multiplier effect for local, regional national and pan-LatAm
economies, the greater advantage going to Brazil itself.
The next developmental
revolution, that of 21st century Information Technology,
would also in great part be spawned by the globally connected local
auto-sector.
The Introduction of IT
Enabled Global Planning -
(ITC and CAE: CAD-CAM)
-
As early adopters and
advocates of IT, the automotive MNC's (Multi-National Corporations)
operating in Brazil were ostensibly the initiators, vanguard and
'preachers' of IT based productivity enhancements.
Though adopted
noticeably later in Brazil as a consequence of market dynamics and
thus delayed need, the requirement to act quickly to respond to
PESTEL change meant that in the late 1980s and early 1990s the new
world of Information Technologies could be deployed to appreciably
assist both the need to quench new consumer automotive needs and to
(in of itself) create new value-added services which appeared higher
up the value chain.
That embraced
electronic age allowed Brazil to leap into a new era of product
research, design, development, manufacture, distribution and retail.
It was as if internal development capabilities of the sector – and
thereafter other sectors - had suddenly shifted from that of the
1960s into the seeming 2000s; the transformation was so dramatic.
So whilst the Brasilia,
Mk1 Gol and 147 Panorama are recognised by as the Brazilian
'originals', the de facto 'originators' of the highly integrated
process that is modern industrial Brazilian design and build, were
the Mk2 VW Gol, the localised FIAT Uno and the Palio.
It was these vehicle
programmes that properly captured the advantages of the then new
digital age, as the new and burgeoning research and development
centres used new age communuications equipment – from the fax
machine to the super-computer and a myriad of international satellite
servers and terminals – to revolutionise the design-development
process of Brazilian made cars.
The result was that
Computerised Aided Design, Computer Aided Engineering and Computer
Aided Manufacturing was absorbed far quicker in Brazil than
previously seen elsewhere, where it had had to be learned 'first
hand' and as the IT disciplines themselves slowly emerged.
Instead after the year 2000 the combination of both social trends and corporate competitiveness rapidly changed the country's industrial landscape. The conjuncture between a younger tech-savvy workforce able to learn quickly and proficiently (so themselves technologically accomplished) and the need for EM located corporate divisions to better technologically align themselves with typically more advanced IT capabilities at their HeadQuarters, meant that the pace of change was unprecedented.
Instead after the year 2000 the combination of both social trends and corporate competitiveness rapidly changed the country's industrial landscape. The conjuncture between a younger tech-savvy workforce able to learn quickly and proficiently (so themselves technologically accomplished) and the need for EM located corporate divisions to better technologically align themselves with typically more advanced IT capabilities at their HeadQuarters, meant that the pace of change was unprecedented.
[NB it must be
recognised herein that those tech-aware youngsters were usually the
fortunate sons and daughters of the old (ie bureaucrat) middle
classes. And that the majority of such IT learning – in Engineering
and Design at least - was not from colleges / universities
(themselves with only basic IT ) but whilst within the corporations
themselves].
The foreign
auto-producers themselves recognised (and still recognise) that then, as now, and into the near future, it is they who must take on
the role as primary educator.
Nevertheless, as seen,
such enthusiastic young people were able to quickly learn those
digitally based processes and methods that had themselves been
created in the USA, France and Germany; from the pan-departmental
use of Microsoft's Office (in American English and Portugese) to
Engineering's use of Dassault System's CATIA and AUTODESK to NX CAM
from Siemans.
[NB the larger global
providers such as Dassault and Siemans long since expanding their
integration into corporate methods by offering much expanded Product
Lifecycle Management IT beyond design, engineering and manufacturing,
to span the full value chain from raw material to recycling or
disposal].
For the Brazilian
divisions of both the major volume vehicle producers and their
locally based domestic and international supply-chain, by the mid
1990s Product Development process itself had transformed. From that
of previously being ostensibly 'serial' (ie the secondary
re-engineering of a European platform, as with Uno) to the truly
'parallel' (ie the simultaneous engineering of a complimentary EM
platform, as with Palio).
Globally reaching IT
had enabled the decades-long ambition of creating congruent yet
necessarily altered product offerings from a component set with high
degree of commonality in as quick a time as possible.
That allowed for
greater correlation to the ideal of more accurate Product Planning
which in turn allowed for better Manufacturing Planning, whereby the
higher scale of manufacturing volumes could be used to drive down
Procurement costs, whilst speedier Engineering Development (itself
increasingly computerised with 'digital mules' etc) also ensured
greater internal cost efficiencies, from manpower to capital
expenditures.
However, this IT
advantage was initially approached differently from within the
respective VW and FIAT empires.
The VW Gol Mk2 of 1994
was an update version of the previous BX platform, with much change
in a lengthened wheelbase and more curvaceous exterior. Thus VW's
ideological approach to digital technology investment was effectively
about altering and honing much of the given 'carry-over' sub-
structure to further amortise the costs of in-place tooling and
equipment.
This lesser demand of
its digital processes meant that it could 'up-skill' the back-end of
its Brazilian engineering workforce, to ensure a more seamless
transition between the Product Engineering and Manufacturing
Engineering functions, especially regards the increasingly important
issue of cosmetic appearance, 'fit and finish' etc. Thus instead of
re-inventing the fundamental 'wheel' (the complete platform itself)
instead better to improve the customer's perception of a quality
vehicle. This then points to a high degree of 'answerable autonomy'
in the period by Volkswagen do Brasil.
In contrast on the new
Palio of 1996, FIAT Automoveis was required to wholly harmonise with
the Global Product Planning, Design and New Programme functions in
Turin, Italy. To maximise the competitive gains super-computing could
bring, in time / speed / quality, it was believed that the EM
dedicated Palio must be created with as broad a geographic input as
possible to ensure the vehicle's capability and thus brand
credibility. Furthermore it would allow the programme to be run
in sync with its AM
segment siblings so as to contrast and compare engineering solutions
for relative performance and cost. The programme was named the
“Project 178” and would essentially be “all new” itself
subtly mechanically altered for specific variants (hatchbacks, sedan,
estate/wagon and 'ute') which would cater for a myriad of different
customer types and respective needs.
The enormous co-opted
and mutual learning from HQ in Italy on Palio was a vital stepping
stone toward the successful time-cost-quality execution for the later
“all-Brazilian” Novo Uno introduced in 2010. As the replacement
for the old (and near legendary) Uno it was expected be an “Uno
+” and the 'novo' (new) model was indeed so. It had to be bigger
and stronger to meet the needs of volume-hungry users (for loads and feeling of spaciousness) and to still be able to tackle the outer and
upper geographical reaches of Brazil, broad LatAm and the Rest of the World.
As such its regional
research regards use and marketing was the most comprehensive ever,
as was the prototype and 'first-off' test regime. Thus where as
previously Brazilian NPD familiarity had been regards structural and
aesthetic quality, and the match to manufacturing, the Novo Uno
project would see greater engineering research (from normative
competitor tear-down to far more 'in the field' user demands), so
melding greater marriage of Marketing Research, Design Research and
Engineering Research.
The other local MNC's
of Ford and GM similarly sought to deploy IT and more relative to
their specific strategic market and product lifecycle requirements,
with a likewise snow-balling of Reasearch and Development
capabilities as ambitions grew greater over time to meet a much
expanding market, competitive threats and consumer expectations.
Thus GM do Brasil
introduced it in the VW manner when re-skinning Corsa as the upgraded
Celta, concentrating upon the 'back-end' of the project to create an
improved quality vehicle with considerations of shut-lines, 'A'
surfaces, interior and exterior plastics etc.
Expanding the local
Engineering team at the turn of the century allowed GM do Brasil to
create a joint development project for a small MPV with GM-Opel in
Germany. The result was the Meriva Mk1 of 2003, which whilst
luke-warmly received in Europe provided the Brazilian young family
with the near-perfect motoring solution. This project was the big IT
and Quality learning curve for GM Brasil.
However, the toward the
end of Meriva's lifecycle GM do Brasil recognised the need to create
a true EM orientated product, better suited to other less developed
countries than Meriva, and enlarged to enable 7 seats and create a
“Zafira for the EM-world”. Again its Engineering capabilities
grow significantly as it sought to self develop the new Spin,
launched in 2012 in Brazil and simultaneously produced in Indonesia
as of 2014.
Ford do Brasil's first
efforts at a self developed vehicle was the modification of the
European Ka (Mk1) launched locally in 2003. This the primary
'localisation' effort was the alteration of the rear hatch and lamp
housings, so allowing the then relatively small engineering staff to
undertake small acclimatisation design projects across the span of:
sheet metal (inner and outer), plastics and glass. This also allowed
for improved local supplier input and relationships, and was key to
establishing the next far more locally important Ka (Mk2).
The new Ka of 2008 was
effectively a Brazilian designed model so requiring a large 'ramp-up'
in engineering talent for its development. This model fundamentally
altered over its predecessor in size, engine capacity and additional
seating, so as to move up a segment from the A-segment into the
B-segment. In design and engineering terms this was Ford do Brasil's
'Independence Day' leading to its becoming 'on-par' (in terms of
functions if not scale) with the Development centres in the USA,
Europe and Australia by 2010 or so. (Indeed the European division had
undertaken a JV with FIAT using the 500 base for its small Ka
replacement in 2009).
In 2014 the new
Brazilian Ka (Mk3) was launched, appreciably bigger that its European-designed cousin it was derived from the old generation Fiesta, and with a broader span of engine capacities and fuel types,
this model demonstrates the world-class skills of the Brazilian
design and engineering teams. Reckoned to be a good-value proposition for Europe aswell it has recently arrived as 'Ka+', to expand the entry level offering.
Thus as we see, though
still closely connected to their respective HQ's, the Brazilian arms
of FIAT, VW, GM and Ford have adroitly illustrated themselves as the
curent deep-knowledge centres of EM attuned global 'converged
product' engineering.
Paving the Way into
Global Automakers -
Brazil's
entrepreneurial realists recognise the fact that in an ever more
trade connected world with ever greater consumer information about
product quality (born from costly research and development), and
critically the increasingly inter-connected web of capital markets,
that trying to beat the world's entrenched, massive and powerful
major auto-makers is a “fool's errand”.
Failed attempts with
the likes of Malaysia's Proton and Perodua and the limited local
regional success of Iran Khodro illustrate that trying to create a
world-beating EM originated vehicle producer is nigh on impossible.
Whilst massively supported initially, both Proton and Perodua have
each stumbled to grow beyond their national boundaries in any
meaningful manner, whilst, as seen, Khodro's maintains its more
pragmatic method of 'badge-engineering' other's vehicles with Gol the
latest incarnation of that tried and tested (if indeed overtly local)
approach.
To this end, the
acutely aware local entrepreneur with internationalist outlook, will
instead seek to create a national brand and product(s) which will
eventually be easily absorbed into a major player's vehicle
portfolio.
Herein, indigenous and
Regional ventures of such an ilk have come into fruiting and been
promoted in the Brazilian media through news stories, dedicated
'roadshows' and advertising.
The indigenous company
Troller was established in the early 1990s, with its Jeep-like
T-series (now refreshed and very visually appealing in its 4th
generation) has seen success and is being heavily marketed. But its
generic mid-size truck [eg Ford Ranger] the Pantanal appears to have
been discontinued. Tellingly, now as a Ford unit, it is Ford Credit
that is underpinning many of the Troller's sales.
Troller then depicts
how indigenous companies who originate as local niche or specialists
can and should be developed to, when brought under the wing of, or in
association with, MNC's can provide suitably aligned targeted product
to the world.
Toward the Bigger 'Value-Pyramid' of Tomorrow -
As is well known, many
products sit within a broad 'pricing-pyramid'; one which encompasses
a mass market price-sensitive base, a sizeable middle which balances
quality and price and a top which provides premium qualities.
Half a century on from
its truly tractable beginnings, Brazil has successively moved through
the lowest and middling phases, with the 2000s seeing a meaningful
growth in imported premium vehicles from Germany, Japan, UK and
Italy.
Thus the upmost echelon
(the peak) of the pricing-pyramid has also become normative for a
fortunate thin slice of Brazil's entrepreneurial talent.
However, as seen with
much from IT to Retail, given that globalisation has untapped much
thus far, and that there remains still much future potential as a
leader of the EM world and intersect with the AM world, the fact is
that Brazil's complete auto-sector pyramid is set to grow larger and
larger.
At its base new
entrants such as exemplified by Effa Motors. Based in Uraguay it
imports and rebadges a range Chinese manufactured vehicles (from
differing brands) for 'finished assembly' and regional market into
various Latin American countries. Recent soft-protectionist actions
to deter such imports will undoubtedly succeed in the near-term to
keep poor quality and copy-cat products at bay; but it seems probable
that 15 years or so into the future, with improved quality and
non-copies, Brazilian-Chinese and Brazilian-Indian joint ventures
will be manufacturing vehicles for those people who require more
affordable, low-end, mobility.
In the mid-ground, as
seen from foreign interest levels, more of the European firms,
Japanese and S.Korean firms will seek local production for their own
'glocal' vehicles. Albeit small, Renault's own Brazilian design team
helped co-conceptualise the radical cross-over coupe 'Kwid' as an
offering to a multitude of EM nations. Developed with creative input
from Renault's satellite design centre in India, and first shown at
the 2014 Delhi Auto Show, the well finished concept vehicle itself
was obviously a PR exercise for the brand 'glocally'; and vitally a
segue for the recently launched 'Kick' X-over. Others have since
shown such interest to make their similar marks across EM countries.
Thus the mid-ground will inevitably attract more diverse brands and
products as the middle-classes re-expand in the future.
And with any such
economic expansion, the first to enjoy such fruits tend to be the
more wealthy, at the forefront of business themselves. This
expansionary trend thus propelling the interest of premium and luxury
car-makers. So at the peak of the price-pyramid many a premium
manufacturer has highlighted intent to enter Brazil for 'glocal'
production purposes, able to enjoy expanding national and export
markets, whilst gaining from a typical lower cost of labour;
especially necessary for so called 'crafts-people tasks'. Jaguar-Land
Rover seeks to massively expand its presence (as illustrated by its
PR efforts of in-car celebrity coverage at Interlagos and around Sao
Paulo). Its mix of luxury/status, AWD and security obviously seen to
prime attributes the wealthy seek.
And likewise VW has
seen great success with its expansion of Audi and Porsche into Brazil
and LatAm, similarly Mercedes-Benz and BMW, with FIAT seeking
Maserati, Ferrari and Alfa-Romeo's expansion in the markets. (These
buoyed by the existence of Argentina's Pur Sang Cars which makes
exact replicas of yesteryear marque icons such as the A-R 8C). As
wealth grows so will the consumer base for luxury goods companies
(including the now embraced “things automotive”). Under this
idiom, if deemed suitable and profitable, Aston-Martin could indeed
set-up yet another new assembly plant (for CKD kits) from Wales to
Brazil.
To Conclude -
To end, the point is
that even though the Brazilian government is seemingly becoming more
protectionist so as to re-direct the possible outward flow of
investment monies back into the country – and especially toward
higher-value activities – the fact remains that historically
Brasilia has well recognised the importance of the connected
globalised economy.
So as to provide very
necessary commercial diversity that can further strengthen its
already broad interests from base raw materials right through to
scientific instruments and services. And moreover, foreign automotive
input has always played a leading role, whether policy was notionally
written as 'closed-door' or 'open-door'.
An analogy is that of
F1 driver Felipe Massa's recent (and abrupt but very gracious) retirement.
Just as one door
apparently closes so another (closely connected) opens. Thus it would
be good to see Senhor Massa become an Ambassador for Brazil's future
technological aspirations and efforts.
Aspirations that should
be married to the technical ambitions of both domestic and foreign
'Technologists' (such as Williams', and McLaren's hi-tech divisions) and those of the bigger MNC's,
so that Brazil can continue to wave its flag with grand ideals internationally.
