SµO PAULO, BRAZIL — In the mid-1970s, when Brazil effectively closed its borders to imports, the German blow molding machine maker Bekum Maschinenfabriken GmbH faced a dilemma.
Bekum was importing into Brazil. Then in 1974, Brazil's economy turned inward, as the government stepped up its ``import substitution'' program to strengthen local industry. The move jacked import costs way up, in some cases doubling the price of imported equipment.
``We had to decide. We considered this an important, growing market for us,'' said Dietrich Pertschy, Bekum's financial executive and international controller. ``We had to make up our mind — should we [set up] production here in this country, or should we lose this market?''
Bekum took the long-term view. The firm opened a plant in SÃo Paulo in 1975. A few other German and U.S. plastics machinery firms started Brazilian manufacturing, but a number of those pulled back out in the 1980s.
Bekum do Brasil Indústria e Comércio Ltda. is a wholly owned subsidiary of Berlin-based Bekum. The company stayed through the ups and downs, through hyperinflation that some years topped 1,000 percent, through a closed market for components.
Today, inflation is under control and Brazil's borders are opening. Making machines in Brazil is a hot topic once again, as Bekum just keeps pumping out blow molding machines for bottles, containers, and industrial parts. But it was not easy.
``We started out in 1975 and it took us four to five years to become successful,'' said Pertschy, who helped start the operation.
Initially, Bekum opened a small plant to build machines for blow molding PVC and high density polyethylene bottles. The firm was allowed to ship in many high-technology parts that were not yet available in Brazil. But Bekum had to find many components stamped ``made in Brazil.''
Pertschy said the big challenges were finding local suppliers and learning how to do business under runaway inflation. Particularly alien to corporate thinking in Germany was the inflation, with prices and wages rising more than 50 percent a month.
``It was a hard learning process, because in 1975 when we started here, there was no reliability of suppliers,'' Pertschy said in an interview at Bekum do Brasil. ``You had to check everything [for quality].
``It was a hard learning curve to train all the suppliers in the quality we needed, because that was one of our most important goals here — that the quality of the Brazilian machines is exactly the same as we are going to produce in the U.S., or in Germany, or anywhere all over the world. And that was the hard part,'' he said.
But now Bekum has the experience, and the local contacts, to capitalize on Brazil's new economic growth. Bekum do Brasil competes against about 12 domestic blow molding machinery makers. Brazilian blow molders buy about 300 machines a year.
In 1980, Bekum do Brasil moved into its current 28,000-square-foot assembly and machining plant. The firm also has a second facility nearby that is used to warehouse subassemblies, but could be converted to manufacturing.
Bekum do Brasil employs 245 making machines for blow molding HDPE, PVC, two-stage machines for PET bottles, and larger machines to mold fuel tanks and other industrial vessels. The company does not release annual sales or units produced.
Growth in Brazil's PET bottle market for soft drinks has been well-documented. But the fastest growth now is coming from PET bottles for mineral water, sports drinks and edible oils, said Francisco De Souza, general manager of Bekum do Brasil.
This year, the German parent, owned by Gottfried Mehnert, is investing $2 million into the SÃo Paulo plant. Pertschy said Bekum officials decided early on to pass all its know-how to SÃo Paulo.
``Based on the decision of the government, it was very clear to us that we had to transfer technology to Brazil, and we had to expand our machine program, even if it meant only two or three machines a year for a certain type of machine,'' Pertschy said. ``We had to transfer all the technology to this country to keep this market, because we were in the driver's seat.''
Bekum also decided that Brazilians should run the factory.
``You can produce machines as good as you may produce it all over the world,'' Pertschy said. ``But if your sales department is not able to handle the inflation picture, you would lose everything you gained at a productive facility, through your sales. Because if you have 1,000 [percent] inflation a year and you are [financing the machine], not selling it for cash, then you may lose even more money than you ever invested. That's the problem.''