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Randon S.A. Implementos e Participaç

Randon S.A. Implementos e Participações

Av. Abramo Randon 770
Caxias do Sul, Rio Grande do Sul 95055-010
Brazil
Telephone: (55 54) 3209-2000
Toll Free: (0800) 512158
Fax: (55 54) 3209-2566
Web site: http://www.randon.com.br

Public Company
Incorporated:
1952 as Mecânica Randon Ltda.
Employees: 7,100
Sales: BRL 1.94 billion ($795.08 million) (2005)
Stock Exchanges: São Paulo
Ticker Symbols: RAPT3; RAPT4
NAIC: 336211 Motor Vehicle Body Manufacturing; 336212 Truck Trailer Manufacturing; 336330 Motor Vehicle Steering and Suspension Components; 336390 Motor Vehicle Brake System Manufacturing; 336510 Railroad Rolling Stock Manufacturing; 551112 Offices of Other Holding Companies

Randon S.A. Implementos e Participações is a Brazilian holding company that, through subsidiary and joint-venture companies, is engaged in the manufacture, sale, and export of trailers, semi-trailers, railroad cars, and more specialized vehicles such as off-highway trucks, mining trucks, and aerial-work lift cranes; auto parts and systems; and services such as maintenance and sales financing. All of its eight industrial plants are in Brazil except for one in Argentina. Randon represents itself as the world manufacturer with the most diversified portfolio of equipment and vehicles for the transportation of road cargoes, and it is the largest manufacturer of road-vehicle implements in Latin America. It occupies more than 40 percent of the Brazilian market for trailers and semi-trailers and is among the five leading world manufacturers in this sector. Randon sells its products in over 100 countries.

WORKSHOP TO FACTORIES: 195280

Raul Anselmo Randon, son of Italian immigrants, was a poor student who left school to become an ironworker in Caixas do Sul, Rio Grande do Sul, Brazil's southernmost state, in 1943, when, at the age of 14, he began helping his father make farm implements. In 1949, after returning from compulsory military service, he began repairing engines for his brother Hercílio, who had bought a small lathe. They also formed a company with an outside partner to build typesetting machines, but the shop burned down in 1951. In 1952, with the backing of a different partner, they founded Mecânica Randon Ltda., for the production of road equipment and air brakes for trailers. Soon after, this enterprise turned to manufacturing the third axle for trucks.

In the late 1950s work began on Brazil's BR-111 highway, which fostered road transport and, consequently, the production of road vehicles. Mecânica Randon began converting and adapting truck chassis for use in buses and, in 1961, built its first two semi-trailers, on the basis of a design developed in Hercílio's own workshop. By 1965 the enterprise was producing a semi-trailer per day. Randon established a São Paulo branch in 1969 in order to install third axles on General Motors Corp. and Ford Motor Co. trucks. The company also took out a patent on third axles for semi-trailers. It also began publishing Informativo Randon, a house organ that, 30 years later, was available in Spanish and English as well as Portuguese, with nearly 50,000 copies per issue.

Visits to Germany and Italy stoked Raul Randon's ambition. In 1970 the company changed its name to Randon S.A.Indústria de Implementos para o Transporte, and the following year it became a publicly traded corporation. Raul and Hercílio continued to hold majority control, and Raul became director-president. The money they raised by selling shares of stock went to buy land for a new factory. They also received financing for this purpose from government development agencies. When the factory opened in 1974, Randon introduced a 25-metric-ton off-road vehicle, the RK 424, and thereby became the first totally Brazilian enterprise to build automotive vehicles in the south of the country. Accordingly, the company was renamed Randon S.A.Veículos e Implementos in 1975.

Randon joined with a French firm in 1976 to introduce a new enterprise. Based in Rio de Janeiro, it built platforms with axles modulated to carry cargoes from 100 to 700 metric tons. In the same year, it began establishing a post-sale network of authorized service shops that eventually grew to almost 70 in number. Randon had begun exporting on a very small scale to neighboring Uruguay in 1973. Four years later, it sent more than 1,000 semi-trailers to Algeria. The following year it acquired its principal competitor, Mêcanica Rodoviária S.A.

In 1979 Randon entered a business far afield from its usual concerns: it established Randon Agro-Pastoril Ltda., under government incentives, to grow and sell apples. This subsidiary, located in an orchard in Vacaria, Rio Grande do Sul, began as a kind of hobby for Raul Randon (who also delighted in making Italian-style cheeses from the milk yielded by cows imported from the United States) but became one of the nation's largest producers of the fruit. It later began producing and selling grapes as well, and was part of Rasip, an enterprise that included about 14,000 acres sown in corn, wheat, and soybeans, plus a herd of 5,000 short-horned cattle, and even capivaras, wild boar, and fish. Rasip Agro-Pastoril S.A. became a separate company in 1998.

NEW VENTURES: 198099

By 1981 Brazil could no longer sustain an economy marked by triple-digit annual inflation and heavy debt obligations. Randon's sales fell by half that year. The company was forced into receivership for two years, and many of the 6,000 employees lost their jobs. By the mid-1980s, however, Brazil and Randon had recovered. The company was now looking for foreign partners to help it sell to markets abroad, and in 1986 it formed a joint venture, Freios Master Equipamentos Automotivos Ltda., with Rockwell International Corp., to make brakes and other automotive products for buses, trucks, trailers, and semi-trailers. Another joint venture, Carrier Transicold Brasil Ltda., a unit of Carrier Corp. of the United States, was formed in 1993 to produce air conditioning for buses and refrigeration units for trucks and semitrailers. A third, Jost Brasil Sistemas Automotivos Ltda., was organized in 1995 with Germany's Jost Werke AG to manufacture parts such as spare wheels and towing hookups for trucks and automobiles.

Hercílio Randon died in 1989, leaving Raul in sole direction of the enterprise. Randon's revenues reached $134 million that year, not counting revenue from joint ventures, and its products included not only road vehicles and parts but even cranes and other moving hoists. About 15 percent of its sales volume came from customers in 40 countries. As a third-world manufacturer, Randon was doing well in poor countries such as Algeria, Ethiopia, and Kenya. Management saw Africa as a back door to nearby Europe. But the recession in Brazil during the initial years of the 1990s resulted in a $12 million loss in 1991 and the dismissal of about 1,000 employees.

COMPANY PERSPECTIVES

Mission: To coordinate, represent, and orient the Randon businesses, optimizing the disposable resources.

With the aim of raising productivity, Randon responded to this challenge in a number of ways, investing in new equipment, training new personnel, and stimulating production by means of monthly prizes. Special attention was given to bettering communication, by satellite, with the company's eight joint ventures, 45 distributors, and 60 points of sale. Another part of the effort was the transfer to outside contractors of some of Randon's functions. The first services to be contracted out were food, cleaning, and legal affairs. Within two months, expenses had been reduced by one-fifth. Next, the company was looking at contracting out other areas, especially transport. It also continued its longstanding effort to raise export levels. In 1991 it established another joint venture to make and sell trailers and semi-trailers in Portugal, followed the next year by a Portuguese subsidiary to sell the company's heavy vehicles in Europe, Africa, and Asia. But in spite of these measures, Randon's revenues fell again in 1992.

Randon was restructured in 1993. Four Randon companies that had been publicly traded were folded, along with six others, into a holding company, Randon S.A. Implementos e Participações. With the revival of the Brazilian economy in 1994, Randon's revenues rose by 50 percent, and the value of the holding company's shares of stock shot up almost eightfold. The company now held half of the Brazilian market for trailers, semitrailers, and truck bodywork. Its off-road vehicles, used in quarries and mines, held 60 percent of this sector. Randon also established, in a joint venture with local businessmen, a manufacturing plant in Rosario, Argentina. The company bought out these partners the following year.

Randon, in 1996, purchased a majority interest in deficit-ridden Fras-le S.A., Brazil's leading producer of abrasive materials, which Randon returned to fiscal health. Fras-le was one of the world's leading manufacturers of brake linings and friction pads. In 1997 Randon created the company which became Suspensys Sistemas Automotivos Ltda. Located in Randon's Caxias do Sul industrial park, Suspensys immediately became the leading independent Brazilian manufacturer of heavy suspension for trucks, buses, trailers, and semitrailers. It also produced axles, brake drums, and wheel hubs, becoming the nation's fifth largest auto-parts manufacturer. Suspensys, in 2005, was 23 percent owned by Randon and 53 percent-owned by the brake joint venture. Randon also introduced the Sistema Bimodal Transtrailer, which allowed a vehicle to travel either by road or rail.

RANDON IN THE 21ST CENTURY

Randon commemorated, in 1999, its founder's 50 years in business, as a group of companies with customers in 80 countries, served by a sales-and-assistance network of more than 100 offices in Brazil and abroad. But the company shared in Brazil's next economic downturn, losing money in 1999 and 2000. Once again, there had to be a restructuring. The company sold its Portuguese subsidiary and, in 2001, its interest in Carrier Transicold Brasil, returning to profitability that year. In 2002, Randon signed a new joint-venture agreement with Arvin-Meritor Inc. of Troy, Michigan, which by this time had replaced Rockwell in the brake joint venture, now called Master Sistemas Automotivos Ltda. Randon agreed to convert Suspensys into a 50-50 partnership with Arvin-Meritor to build and sell truck and trailer suspensions and trailer axles. Thus, Fras-le produced linings, drums, and friction pads for Master's brakes, which were joined to axles and suspensions produced by Suspensys.

KEY DATES

1952:
Hercílio and Raul Randon begin making road equipment and air brakes for trailers.
1961:
The Randon brothers' enterprise builds its first two semi-trailers
1969:
The company has begun installing third axles on General Motors and Ford trucks.
1971:
Randon makes its initial public offering of stock.
1977:
The company opens a post-sale network of authorized service shops.
Brazil's economic problems put Randon into receivership.
1986:
Randon enters a joint venture to make brakes and other products for heavy vehicles.
1994:
The company holds half of Brazil's market for trailers, semi-trailers, and truck bodywork.
1995:
Randon is also taking part in three other joint ventures to produce automotive equipment.
1997:
Formation of the Suspensys unit, which becomes a leading auto-parts manufacturer.
2002:
A U.S.-based company now holds half of Suspensys and the brake joint venture.
2005:
Randon is rated the fourth best company to work for in Brazil.

By the end of 2003 Randon had made an extraordinary recovery, raising its revenues more than 40 percent from the previous year and its profit more than fourfold. Production reached record levels, too. The company was a leader in Brazil in everything to which it turned its hand. In the 1980s Randon had been a company more than 80 percent verticalized, that is, producing components for its own vehicles. Now, however, it was producing 90 percent of its components for others. The company was, for example, in addition to its own vehicles, making Fras-le brake pads for Honda and Yamaha motorcycles; Jost pneumatic suspensions, Suspensys auxiliary axles, and Master brakes for Volvo NH 12 6×2 trucks; brakes, brake drums, and wheel hubs for buses made by Volkswagen AG in Brazil; and Fras-le brake pads and linings for General Motors Corp.'s Corsa and Celta automobiles.

Auto parts and automotive systems were accounting for more than half of Randon's revenues in 2004. The group's strategy was to search for alliances with global companies that had the resources to support its technology and, above all, to allow it to enter new markets. Two of its transport businesses, producing rail cars and off-road vehicles, also illustrated this principle, since both were built on the same platform and with common basic components and engineering. Randon saw the rail market as sure to grow, because of the need to transport Brazil's grains, minerals, wood, and steel.

Raul Randon had spoken in the past of retiring at the age of 60, then at 65. He continued at the helm, however, until finally, in 2004, at the age of 75, fulfilling earlier pledges to step down in favor of the two eldest of his five children. His plan called for the two to take turns as chief executive officer, while himself filling the position of chairman of the board. Randon's third and youngest son was a manager for a subsidiary in São Paulo. All three, unlike their self-made father, had been trained in engineering and business administration. A controlling group that included Randon family members held 41 percent of the shares of Randon S.A. Implementos e Participações, the holding company that, in turn, owned the subsidiaries and held stakes in the joint ventures.

A 2005 supplement of the Brazilian business magazine Exame ranked Randon as the nation's fourth-best company in which to work. A five-module apprenticeship program consisted of leadership development, technological empowerment, incentives, formal education, and assignment to teams. Another program offered courses by Internet. About 10 percent of the employees in Caxias do Sul had been working there for 20 or more years. Twenty-five years or more earned a trip to Europe for two; 35 years, a gold watch; and 40 years, a lifetime health plan. At 57 years of age, employees began a program of preparation for mandatory retirement at 60. The work environment at Randon was ranked especially high for "respect," "pride," and "camaraderie."

Another Exame supplement ranked, for the second consecutive year, Master as the best-performing company in Brazil's automotive sector in 2004. In that year the company raised its sales to $99.3 million, a 45 percent increase. Its exports almost doubled. Especially useful for the firm was its leadership in air brakes for trucks and buses, two of the fastest-growing parts of the Brazilian automotive sector because of heavy demand from agribusiness and foreign countries.

In 2005, Randon turned out 14,543 semi-trailers in Brazil, almost half the total, and 665 in Argentina. It also built 494 rail cars, 133 off-road trucks, and 155 excavating vehicles. Master manufactured 469,731 brakes, and Fras-le turned out 51,389 metric tons of refractory materials. Road, rail, and special vehicles accounted for 49 percent of net revenues. Auto parts and systems also accounted for 49 percent, and services and others for the remaining 2 percent. Sales between Randon enterprises represented 14 percent of revenues. Only Randon Argentina lost money. With regard to commercial vehicles, according to Randon, Master held 55 percent of the Brazilian market for air brakes, and Fras-le held 95 percent for heavy-vehicle brake linings. Jost Brasil was the leader in coupling components and articulation between tractor and towed vehicles. Suspensys was the leader in axle girders and suspensions for commercial vehicles.

PRINCIPAL SUBSIDIARIES

Jost Sistemas Automotivos Ltda. (51%); Master Sistemas Automotivos Ltda. (51%); Randon Administradora de Consórcios Ltda; Randon Argentina S.A.; Randon Veículos Ltda.

PRINCIPAL COMPETITORS

Cinpel Cia. Indústria de Peças para Automóveis; Dana-Alborus S.A. Industrial e Comórcio; Delphi Automotive Systems do Brasil Ltda.; Featherline, Inc.; GKN Sinter Metals Ltda.; Maxion Components Automotivos S.A.; TRW Automotive Ltda.; Valeo Sistemas Automotivas Ltda.; Visteon Sistemas Automotivas Ltda.; Wabash National Corp.

FURTHER READING

"ArvinMeritor Forms Venture in S. America," Automotive News, August 26, 2002, p. 22J.

"De passaporte na caçamba," Exame, January 8, 1992, p. 43.

Gianotti, Carlos Alberto, Histórias de Sucessos, São Leopoldo: Editorial Unisinos, 1998, pp. 145-49.

Lorini, Arlete, "Uma idéia puxa a outra," Exame, August 4, 2004, pp. 64-65.

Naiditch, Suzana, "A saída pode estar bem ao seu lado," Exame, July 15, 1998, pp. 62-63.

, "Cara de blue chip," Exame, February 15, 1995, p. 75.

, "Eternos, só os diamantes," Exame, September 5, 2001, pp. 72-74.

, "Os hobbies viram um bom negócio," Exame, April 8, 1998, pp. 65-66.

Oliveira, Maurício, "Tratamento vip," Exame, September 24, 2005, supplement, pp. 46-47.

"Oportuna opção pelos pobres," Exame, January 10, 1990, p. 35.

Pinto de Almeida, Edson, "Com o pé no acelerador," Exame Melhores e Maiores 2005, p. 154.

"Um pé cá outro lá," Exame, January 6, 1993, p. 44.

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