Two of the world's dominant players in plastic fuel tanks plan to join forces and open new blow molding plants in Brazil.
Paris-based Cie. Plastic Omnium SA and Solvay Automotive Inc., based in Brussels, Belgium, will open two plants near automakers in the northern and southern regions of the country.
Both plants are scheduled to open within a year and together employ about 120, said Laurent Hebenstreit, president of Plastic Omnium's fuel systems business unit.
Other details of the 50-50 joint venture, called Plastauto Ltda., are still to be determined, including plant size and capital equipment investment. The agreement between the two fierce competitors was completed July 16.
The venture will position those companies among the dominant players in Brazil.
``Some local competitors are there on a smaller scale but don't have the global presence of a larger company,'' Hebenstreit said. ``It's a significant market already in size, and there will be a lot of opportunities due to growth.''
Last year, Brazil produced about 1.7 million vehicles. That number should be about 40 percent higher in 2003, Hebenstreit said.
Omnium and Solvay already have signed contracts to make fuel systems for Chrysler Corp., Isuzu Motors Ltd., General Motors Corp. and Renault SA, Hebenstreit said. Solvay also plans to do work with PSA/Peugeot-Citroen SA, said Ted Mabley, business development manager for Solvay's Troy, Mich.-based North American automotive headquarters.
The sites—in the area of Curitiba to the south and of Taubate to the north—will make 600,000-700,000 plastic fuel tanks annually, Hebenstreit said. The companies would like to capture 25-35 percent of the Brazil fuel tank market, he said.
The suppliers will face some competition in Brazil. Walbro Automotive Corp., based in Auburn Hills, Mich., opened a 109,000-square-foot plant in Cacapava, Brazil, in late 1996. Two Krupp Kautex blow molding machines at the plant have the capacity to make about half a million tanks annually, sources said.
In addition, Kautex Textron, a division of Troy, Mich.-based Textron Automotive Co., and Brazilian company Soplast Plasticos Soprados SA are supplying fuel tanks to automakers in Brazil.
The Omnium-Solvay venture is the first to unite two major competitors to make fuel tanks in the country. Worldwide, Solvay makes about 4.5 million fuel tanks a year, while Omnium makes about 3 million tanks, Hebenstreit said.
Neither firm now makes fuel tanks in Brazil. Solvay is working with GM to make fuel tanks at a recently opened facility in C¢rdoba, Argentina, Mabley said.
The teaming of two competitors helps the companies invest the capital needed to become major suppliers in South America, said analyst Georges Dieng, who follows Omnium for ABN Amro Securities Inc. in Paris.
``They can share the risk and make it possible to follow their customers there,'' Dieng said. ``If they want to survive long term, they need to be international and move overseas. It's possible that a customer asked Plastic Omnium to team up with someone else to make this a greater success.''
The joint venture also helps Omnium grow while grappling with a high debt load. The company has a debt-to-equity ratio of close to 120 percent, Dieng said.
``It's one of their major handicaps to growing outside Western Europe,'' he said.
Hebenstreit added that the venture will make it easier for the two companies to open two plants concurrently.
The plants will make fuel tanks from high density polyethylene. The firms have not decided whether the tanks will be blow molded from a monolayer construction or coextruded in several layers. The decision will depend on upcoming emissions regulations, Hebenstreit said.
The plants also will make integrated fuel system parts, including fuel and vapor lines, fuel canisters and fuel filler pipes molded from HDPE, he said.
``With two sites and the strength of two major companies that are leaders in Europe, this should be extremely successful,'' he said.