BUSINESSWEEK ONLINE : OCTOBER 23, 2000 ISSUE
INTERNATIONAL -- LATIN AMERICAN COVER STORY Parts Shops Are Tailgating Carmakers to Latin America (int'l edition) Eight years ago, Benteler Automotive accepted an offer it couldn't refuse. The company's main client at the time, Volkswagen, asked the Paderborn (Germany) maker of structural metal components, including chassis modules, to set up shop in Mexico to supply its huge Puebla plant. ''We had to move to Mexico to keep the business,'' says Benteler de Mexico's commercial director, Miakel Vluggen. Benteler did more than keep the business--it expanded it. In 1995, the company began supplying General Motors Corp., and in July, it opened a third Mexican plant to produce for Ford Motor Co. Benteler expects sales in Mexico to surge from $80 million in 1999 to $400 million in 2001. HOT SHOPS. As auto manufacturers have flocked to Latin America in recent years, auto-parts makers have followed close behind. Between 1996 and 1998, about 30 mostly European companies set up shop in Mexico to supply VW's Puebla operation, which churns out New Beetles for worldwide export. And of the 17 buildings that make up GM's new industrial complex in Gravatai, Brazil, 16 are occupied by suppliers. ''Our customers' expectation is that we will supply them on a global basis,'' says James H. Vandeberghe, vice-chairman of Lear Corp. in Southfield, Mich., which spent $15 million to build a plant at Gravatai to supply GM with the auto seats and door modules it needs. Between 1995 and 1999, Mexico and Brazil chalked up a combined $13 billion in auto-parts investment. In Mexico, suppliers ramped up labor-intensive operations to take advantage of the country's low wages. For instance, Delphi Automotive Systems' Delphi Packard Div. employs 50,000 people in 42 plants assembling electrical components. Mexico's exports of auto parts now run at $16 billion a year and Brazil's at $3.6 billion. But low-wage assembly work is only part of the story. The new trend in the auto-parts industry is toward capital-intensive plants and complex engineering. Delphi employs some 700 Mexican engineers at its Technical Center in Ciudad Juarez to develop patented products, such as a new oil sensor. ''It makes sense to have the technical center near where you have a manufacturing base,'' says the center's director, Mark A. Shost. Coddled by decades of protective tariffs, Latin America's own small and inefficient auto-parts industry has been powerless to resist the incursion of foreign rivals. In 1994, Brazilian-owned companies accounted for 52% of the industry's sales. By 1999, that share had dropped to 31%. The local outfits ''were restructured or were bought or merged with foreigners or died,'' says Herbert Demel, president of Volkswagen South America. A few stalwarts have survived. Sao Paulo's Sabo Retentores is a global supplier of oil rings, rubber hoses, and gaskets--with sales to VW plants in Mexico, China, and Germany. In Mexico, half a dozen local companies are emerging as multinationals in their own right. Nemak, a division of Monterrey conglomerate Alfa, is building a plant in the Czech Republic to supply aluminum engine heads to customers in Europe. And Mexico City's Sanluis Corp. has invested heavily in technology and training, to become a leading supplier of suspension systems to Detroit's Big Three carmakers. The company's revenues have been growing by 20% annually since 1996, with sales of auto parts expected to hit $450 million this year. One secret to Sanluis' continued success: The company has its own engineering center in Plymouth, Mich. That's further proof that it pays to stay close to one's customers. By Elisabeth Malkin in Mexico City, with Jonathan Wheatley in São Paulo _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Car Power (int'l edition) LATIN AMERICAN COVER IMAGE: Car Power CHART: Auto Output Is Rising TABLE: Big-Ticket Items Brazil Shows How Much It Loves Carmakers (int'l edition) A Sputtering Sound in Argentina (int'l edition) Parts Shops Are Tailgating Carmakers to Latin America (int'l edition) INTERACT E-Mail to Business Week Online

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