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Marcopolo S.A.

Marcopolo S.A.

Avenida Marcopolo 280
Caxias do Sul
Rio Grande do Sul 95086-200
Brazil
Telephone: (55) (54) 209-4000
Fax: (55) (54) 209-4010
Web site: http://www.marcopolo.com.br

Public Company
Incorporated:
1954 as Nicola & Cia. Ltda.
Employees: 10,959
Sales: BRL 1.71 billion ($700.82 million) (2005)
Stock Exchanges: São Paulo
Ticker Symbol: POMO3; POMO4
NAIC: 336211 Motor Vehicle Body Manufacturing; 336312 Gasoline Engine and Engine Parts Manufacturing; 811121 Automotive Body, Paint and Upholstery Repair and Maintenance

Marcopolo S.A. manufactures almost half of all buses and microbus bodies built in Brazil and is the third largest manufacturer of bus bodies in the world. Its production includes bodies for both urban and highway-transportation buses, and for motor coaches, vans, and recreational vehicles. The company also repairs these vehicles and makes automotive parts. Marcopolo sells its vehicles under such brand names as Volare, Fratello, Andare, Paradiso, Viaggio, Torino, and Viale, and it has factories in five other countries: Argentina, Colombia, Mexico, Portugal, and South Africa.

MOUNTING BUS AND TRUCK BODIES: 194992

The company was founded by Paulo Bellini and six other young mechanics in 1949. Under the name Nicola & Cia., it plated and painted cabins for trucks in Caixas do Sul, Rio Grande do Sul. Settled by Italian immigrants to Brazil's southernmost state, this city abounded in small-scale manufacturing enterprises, many of them founded by skilled metal and wood craftsmen working out of shops in backyards and basements. The first order came from a local commuter bus line, and Nicola built the body on a truck chassis. "It was all trial and error at first," Bellini recalled to Joel Millman, writing for Forbes almost a half-century later. "Everything was handmade." By 1954, when the company was incorporated, it was producing bus bodies; however, with only 15 employees, it essentially remained an artisanal enterprise, taking three months to make a single one. However, in 1957 it opened a real manufacturing facility in a suburb of Caixas do Sul.

Nicola & Cia. could not compete with bigger bodybuilders on price or delivery time, but it offered superior service. "We could make special seats," Bellini told Millman, "give the customer a bigger or smaller luggage rack, or fruit racks for buses in farm towns. Leather seats or plastic. Whatever the customer wanted." By contrast, he said, the company's rivals, "were arrogant with customers, setting the price and the style and telling the people, 'Take it or leave it.' We went out with our shirtsleeves up, looking for customers everywhere." Its first export order was in 1961, from a bus company in Uruguay.

Nicola expanded in the 1960s and bought two other bodybuilders, one in Caixas do Sul, the other in Porte Alegre. By the late years of the decade it was turning out bodies for trucks with adaptable chassis. Production was doubling each year. In 1968 the company introduced a bus model called Marcopolo, and three years later it took that name for its own. Marcopolo began issuing stock shares on the São Paulo exchange in 1978. By 1980 it was making 15,000 units a year, but the oil-price and debt-crisis shocks that struck Brazil in this period reduced production to fewer than 6,000 vehicles in 1983. The company had to close the two factories it had acquired.

Under Bellini's direction, Marcopolo met calamity by seeking customers outside Brazil. In 1986 he and the company's production head went to Japan, visited many factories, and studied their manufacturing methods. When they returned, they began imparting what they had learned to the workers, organizing them into teams and stressing quality control. The company entered the U.S. market in 1988 with microbuses. In 1991 it established its first factory abroad, in Coimbra, Portugal. The following year it signed a contract with Dina Autobuses, S.A. de C.V. of Mexico to supply bus bodies and technology.

EXPANSION

By 1994, when Millman visited the Caixas do Sul factory, Marcopolo was making and assembling bus bodies on chassis made by Mercedes-Benz, Scania, and other big automakers. Half of its production was being exported to customers in 40 countries. Among them were Hertz Corp. and National Car Rental System Inc., which were using the vehicles as airport shuttles. Millman described Marcopolo as "obsessive about every aspect of its business, from the cleanliness of its factory floors to the mental health of its workers." Having adopted Japanese just-in-time inventory-control systems, the company carefully checked the ordering and installation of most of the 100,000 components needed, including seats, railings, dashboards, doors, and panels. No waste was tolerated; production teams were expected to monitor such details as how many liters of paint were being used on each bus.

Marcopolo lost BRL 2.8 million (about $2.5 million) in 1994, when a drastic national anti-inflation program made the company's exports uncompetitive in price. The company earned BRL 13 million (about $12.4 million) in 1995, however, and began selling American Depositary Receipts, the equivalent of shares of stock, that year (but later dropped its listing). A factory was opened in Río Cuarto, Córdoba, Argentina, in 1998. In addition, within Brazil, an automotive-parts factory was now in São José dos Pinhas, Paraná, and the main plant was also making fiberglass components. By this time Marcopolo had subsidiaries in Rio de Janeiro and São Paulo and representatives in 22 Brazilian cities and 15 abroad. The company was turning out 28 vehicles per day.

In 2000 Mercedes-Benz México, S.A. de C.V. took a minority share in Marcopolo's Mexican subsidiary, which had opened a production line in the city of Aguascalientes the previous year, when its contract with Dina lapsed. This facility moved to Mercedes-Benz's chassis plant in García, Nuevo León. A similar arrangement was made in 2000 to produce urban buses on Scania chassis in Pietersburg, South Africa, and on Volvo chassis in Bogotá, Colombia. By this time Marcopolo was the biggest manufacturer of bus bodies in Latin America, and its workforce, 3,300 in 1997, had swelled to 6,300. The company also acquired a plant in Duques de Caixas in the state of Rio de Janeiro, managed by a subsidiary, Ciferal Indústria de Õnibus Ltda.

COMPANY PERSPECTIVES

Mission: To offer solutions, goods, and services in order to satisfy customers and users with technology and performance; to provide adequate remuneration on investment, giving priority to the transport of passengers and contributing to better the quality of life of its contributors and society.

Unlike its competitors, Marcopolo was vertically integrated, producing about 80 percent of the components and accessories it used in Brazil, including seats, windows, panels, and roof racks. Each highway bus was being turned out in an average of six days, compared to 20 in 1987. City buses took only four days. Another reason for Marcopolo's success was its traditional flexibility, allowing customers to choose a made-to-measure body on various chassis. In addition, because the customers of the Mexican subsidiary were in a hurry to get their vehicles, Marcopolo created a new system called PKD (partially knocked down), by which it shipped parts, already painted and finished inside as well as outside, from Brazil for reassembly abroad on a chassis. To speed delivery, Marcopolo transferred its port facilities from Itajaí, Santa Catarina, to Porte Alegre. By shipping from Brazil buses either partially assembled or in kit form rather than whole, Marcopolo was avoiding import duties. Always willing to oblige, for a Saudi Arabian client, Marcopolo fitted 95 of its buses with removable roofs so that Muslim pilgrims to Mecca could feel themselves closer to Allah. This "haji bus" was, according to a Newsweek writer, the first mass-transit convertible.

MARCOPOLO IN THE 21ST CENTURY

Marcopolo's ventures in other countries were broadly successful, but the Argentine operation was hard hit by the recession that ended with the country defaulting on its debts and withdrawing support for its currency in 2001. "Our business in Argentina was excellent," José Rubens de la Rosa, Marcopolo's chief executive officer, told John Barham of LatinFinance in 2005. "We were doing well and it was our best market. Then along came 2001 and our market stopped. Sales went from 1,000 units to zero. We halted production at the plant in Argentina and all that was left there was a guard dog." Nonetheless even in Argentina, Marcopolo eventually rebuilt its business.

Marcopolo was evolving in other ways as well. In 1996 its four chief shareholdersBellini, José Fernandes Martins, Valter Gomes Pinto, and Raul Tessari-turned over day-to-day management to professional executives, with de la Rosa as chief executive officer and Bellini as chairman of the board. After the professionalization of management came the professionalization of staff. By 2003, the company had divided its human resources needs into 202 job classifications, using a model adopted by some larger Brazilian enterprises. Applicants were evaluated not only on the basis of academic credentials and professional experience but also on personality and comportment, using a model created in the 1970s by David McClelland of Harvard University. Each of the 49 classifications on the factory floor was divided into up to five modules, or levels of competence, with performance rated once a year according to four criteria. Each favorable rating resulted in a promotion to the next module and an 8 to 10 percent salary increase. For executives, there were 62 classifications, rated in three segments: academic, professional, and emotional, with each subdivided into eight items. To reduce subjective evaluations, the assessor's evaluation was reviewed by that person's immediate chief and then by a committee.

Marcopolo was ranked among the ten best companies in Brazil to work in 2002 and 2003 by the business magazine Exame. It established a "school for professional formation" in 1990 to counter two problems: a lack of skilled workers in its Caxias do Sul plant and a surplus of unqualified youths in the community. Another program, founded in 1998, originally had as its purpose to prevent drug and alcohol use among the company's workers and family members, using such means as lectures and theater presentations. In 2001, Marcopolo executives decided to structure the different company projects in the social area into a "citizen's program" focused on volunteer aid by employees in community health and education institutions. Marcopolo also contributed to environmental programs, for which it won an award in 2002.

KEY DATES

1949:
Enterprise that later becomes Marcopolo is founded.
1957:
Company opens a facility for manufacturing bus bodies.
1971:
Company names itself Marcopolo for one of its models.
1978:
Marcopolo makes its initial public offering of stock.
1980:
Company produces 15,000 units of truck and bus bodies a year.
1988:
Marcopolo enters the U.S. market with microbuses.
1991:
Company opens its first foreign factory, in Portugal.
1996:
Marcopolo's four chief shareholders turn over day-to-day management to professionals.
1998:
Marcopolo has plants in Mexico and Argentina as well as Portugal.
2000:
Company begins producing bus bodies in Colombia and South Africa.
2003:
Marcopolo is cited as one of the ten best companies to work for in Brazil for the second year in a row.

Marcopolo recorded consolidated sales of BRL 1.29 billion ($418.83 million) in 2003, of which exports represented 49 percent of the total. In 2004, revenues rose to BRL 1.61 billion ($549.49 million), and production of full-sized bus bodies increased to 15,938, of which 44 percent were exported and/or assembled in the company's plants abroad. However, the appreciation of about 50 percent for the Brazilian real in 200304 was raising the cost of selling goods abroad. As a result, Marcopolo began buying more raw materials and components from outside Brazil and then cutting production within Brazil while increasing production at its plants abroad. "This is not something we planned," de la Rosa told Jonathan Wheatley of the Financial Times in late 2005. "We simply saw the need and had to do it." Once made, the investments in manufacturing abroad would not be reversed, he said. "We cannot put the health of the company at risk by hoping the exchange rate will go back to where it was," he added. Marcopolo was reported to be planning to build plants in China, India, and Russia.

In spite of these problems, Marcopolo raised its net revenues to BRL 1.71 billion ($700.82 million) in 2005, although its net profit fell slightly. It raised the number of vehicle bodies that it produced to 26,983, of which 14,320 were for the Brazilian market. Forty-five percent of Marcopolo's revenues came from Brazil, and 55 percent from other countries.

PRINCIPAL SUBSIDIARIES

Ciferal Indústria de Õnibus Ltda.; Marcopolo Indústria de Carroçarias S.A. (Portugal); Marcopolo International Corporation (U.S.A.); Marcopolo Latinoamérica S.A. (Argentina); Marcopolo South Africa Pty Ltd.; MVC Components Plásticos Ltda.; Polomex S.A. de C.V. (Mexico; 74%); Poloplast Componentes S.A. de C.V. (Mexico); Superpolo S.A. (Colombia; 50%).

PRINCIPAL COMPETITORS

Agrale S.A.; Dina Autobuses, S.A. de C.V.; Daimler-Chrysler do Brasil Ltda.; Scania Latin America Ltda.; Volkswagen do Brasil Ltda.; Volvo do Brasil Ltda.

FURTHER READING

Barham, John, "Branching Out," LatinFinance, December 2005, pp. 30-31, 33.

Colitt, Raymond, and Richard Lapper, "Selling Brazil," Financial Times, September 15, 2004, p. 19.

Covarrubias, Benjamin, "Compran 26% de Marcopolo," Reforma (Mexico City), September 27, 2000.

Gianotti, Carlos Alberto, ed., Histórias de Sucessos, São Leopoldo, Rio Grande do Sul: Editora Unisinos, 1998, pp. 125-32.

Mano, Cristiane, "Quanto vale a competência?" Exame, February 26, 2003, pp. 64-67.

Margolis, Mac, "Flying South," Newsweek (International edition), December 26, 2005.

Millman, Joel, "'Evolving to Perfection,'" Forbes, November 7, 1994, pp. 298-99.

Naiditch, Suzana, "Marcopolo: Responsabilidade global," Exame, December 11, 2002, pp. 44-45.

, "Podem me chamar de Dona Flor," Exame, November 29, 2000, pp. 46-49.

Wheatley, Jonathan, "Strong Real Raises Fears of Regression," Financial Times, December 16, 2005.

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