VW outsells D/C in Brazil's heavy-truck and bus sector

Resende, Brazil. Antonio Roberto Cortes is in a good mood on this sunny day in August and it's no wonder.

Cortes, who is head of Volkswagen's heavy-truck and bus division in Brazil, saw the VW unit overtake its main competitor DaimlerChrysler to become market leader in its sector in the first half of 2003.

This positive signal from the largest country in Latin America is providing rare happy moments for Chairman Bernd Pischetsrieder and the VW group's top executives in Wolfsburg.

Complained Hans Dieter Poetsch, a member of the VW board: "During the past 10 years there has been no weaker market for the automotive industry than Brazil."

In the passenger car sector, up to 4,000 jobs at VW do Brasil's assembly plants remain at risk. Restructuring costs in Brazil are putting an enormous strain on VW. The success in the commercial vehicle sector came as a welcome surprise.

In 2002, VW built a total of 23,600 trucks and buses at the Resende plant.

Cortes expects production to rise to 27,000 units in 2003.

VW's share in the Brazilian truck market is 35.1 percent, while DaimlerChrysler's is 33.2 percent. Cortes' target for 2003 is record sales figures of 2 billion Brazilian real -- about 600 million euros.

The Volkswagen team in Resende relies on a production concept that is unusual within the commercial vehicle sector. In Portuguese, the concept is called Consorcio Modular.

"We have several supplier partners who, together, are responsible for the entire production process," said Cortes.

The supplier partners have control over a wide range of production issues -- from warehouse management, to the supply of components and modules to the central production line, to the final assembly of trucks and buses.

For example, ArvinMeritor is responsible for all the working processes necessary for the manufacture of axle and suspension systems. Carese, meanwhile, monitors activities in the paint shop. Siemens VDO is responsible for equipping the driver cabs and fitting them onto the trucks. Cummins and MWM supply the engines.

Only 450 of the 2,000 employees at Resende are on VW's payroll.

Financial Director Helmut Dieter Huemmerich is one of just two German executives at the plant. The other is the purchasing manager.

Employees at the Resende plant earn about 1,200 real per month -- about 360 euros. They work 44 hours a week. The average amount of workers on sick leave at any time is just 1.5 percent.

The advantages of the supplier consortium mean VW can offer its products at reasonable prices. A basic VW truck with 110hp and weighing 7 tons costs 52,000 real in Brazil -- less than 16,000 euros. The top Tractor model -- a colossus weighing 42 tons -- costs about 37,000 euros.

Cortes concedes that the equipment offered by VW's Brazilian commercial vehicles is below the standard of vehicles manufactured in Europe. But dispensing with high-tech features -- within the engine and exhaust emission sector, for example -- also has its advantages. VW's Brazilian commercial vehicles are equipped with robust engines that can use low-quality fuel without sustaining serious damage. They are also easy to drive on the country's poor roads.

Cortes believes there is strong export potential for VW's Brazil-built commercial vehicles. Markets that could be targeted are Mexico, Angola, South Africa, Saudi Arabia, India and China.

But Bernd Wiedemann, spokesman for Volkswagen Commercial Vehicles in Hannover, said there is no plan to bring any of VW's Brazil-built trucks to Europe.

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