Adjusting the focus

Manufacturers bet in exportations and in replacement market to balance the sharp reduction of engine sales in the country

Going to its end, the year of 2015 definitely presented a scenario of big challenges also for the independent engine manufacturers in Brazil. As occurred in the area of heavy construction machines, engines showed a sharp drop in demand during the first half of the year. The current production is around 6000 trucks per month. But much more was expected.

After overcoming the difficulties for supplying Arla and S-10 diesel, the area sees a healthy increase in exportations and in the replacing market. But nothing that may balance the drop occurred in internal sales for OEM truck manufacturers. And it is more likely that this scenario of slowness will be maintained at least for some time. “We do not expect more surprises, but we do not see a better situation for the second half”, points Luis Pasquotto, president of Cummins South America. “We are seeing many clients programming production downtimes. And for the next year, we foresee the same scenario of stability.”

In the first half of this year, Cummins produced a total of 20,700 engines. In the same period of the former year, the production was 32,000 units. Till the end of the year, the production points to about 35,000 units (48,000 in the former year). Due to the situation, the order in the company is to maintain the balance until things get better. Meanwhile, the company tries to do its homework and to look for options inside the industry. “We have to move on through this situation until calmness comes back”, says Pasquotto. “We are carrying out all actions needed to go on with minimum damage. We did not stop to invest in productivity and R&D in a long-term approach. We are also looking for opportunities in other markets, diversifying our action in areas connected to engines, such as filters, turbochargers and post-treatment systems.”

For FPT, the production (including the units of Brazil and Argentina) was of 25,200 units in the first half of the year. For the second half, the expected production is of 23,300 units, getting a total of 48,500 engines in 2015. In 2014, 55,000 engines were produced. “There is no immediate trend of recovery, since the crisis of confidence has not passed”, confirms Marco Aurélio Rangel, president of FPT for Latin America. “We carried out some adjustments in the demand, may be in a slower pace and it is possible that more reductions would occur in the second half. But the stability expected by all companies—the arrival to the bottom—is not confirmed. The recovery will proceed in a slower pace till the second quarter of 2016, when we may see more positive internal and external signals in the economy.”

The same is occurring at MWM International. The company is expecting a yearly drop of 25 percent in its production, closing the year with approximately 73,000 engines produced. The difference is that this company sees a slightly better scenario in the short term. “The adjustments needed in the production were already done and will be quite lower in the second half”, explains Thomas Püschel, sales and marketing director of MWM International. “Stocks are starting to be reduced and it is possible that the second half would be slightly better than the first.”

According to him, one of the chances of the company is the exportation of components such as blocks, area where the company will get an increase of 30 percent in 2015. Recently, the manufacturer restarted the production of engines in its plant of Jesús Maria, in Cordoba (Argentina), starting the assemblage operations in November, 2013. With this addition, sales may soon increase 20 percent in the Argentine market. “This fact does not mitigate the drop of the internal Brazilian market. We just carried out an analysis of the market to detect where the opportunities are”, says Püschel. “Sometimes we identify a niche of power and start to supply it, as occurred with the client Caterpillar, which now integrates our portfolio.”