Long before the BRIC acronym became popular, Liebherr was helping Brazil build
Because of the emergence of Vale as a leader, many in the mining industry already understand the importance of Brazil to the world economy. The same generalization could be made for the agriculture and petroleum industries as well. Then, of course, there is football and fans know that Brazil is the only country to hold three World Cup Championships. So, the decision to host the 2014 FIFA World Cup in Brazil seemed logical. Preparing for that event should serve as a great transition for the 2016 Olympics, right?
The growth that Brazil is about to experience, both domestically and abroad, will be staggering. The Brazilian government's Growth Acceleration Program is expected to invest $486 billion for infrastructure improvements during the next four years. These activities will be complemented by on-going private investment from major Brazilian companies. Those that deal with the traffic congestion in Sao Paulo and Belo Horizonte know that logistics will have to improve to support these special events in addition to the normal growth rates.
During November, Liebherr invited a group of journalists from several international trade journals to see first-hand how it was preparing to support its customers in the aerospace, shipping, construction and mining fields. Engineering & Mining Journal was representing the international mining industry. During a week-long trip, the group toured different facilities, saw how Liebherr was investing in its factories and its people, and heard stories about the past and predictions for the future from executives and dignitaries.
During the last 50 years, Brazil has advanced from a dictatorship to a consolidated democracy. It's now not only a great place to do business, but one of the world centers for capital investment. Brazilians number nearly 200 million and it's a race, religion, education and age diversified population. They have an optimistic approach to life. In the next four years, a whole new generation will be exposed to a vibrant culture that deserves respect.
Brazil is the seventh largest economy. In 2011, the Brazilian GDP was $2.37 trillion, which placed it above the U.K.'s $2.26 trillion. The IMF has predicted that the Brazilian economy could surpass the French economy in 2015. A weaker global economy caused the Real to lose value (R:$, 1.71:2.03) in 2012, which will probably push the country back to the seventh position, behind U.K., France, Germany, Japan, China and the U.S.
Iron ore, energy and agriculture played a crucial role in propelling Brazil to its current status. During the late 1960s and early 1970s, an economic modernization and growth cycle began in Brazil. At that time large state-owned companies were created or consolidated and a military dictatorship ruled the country. Plenty of financial resources were available and the Brazilian Miracle is well documented.
In the 1980s, democracy was re-introduced, but times were difficult. A downturn in the economy did not help the situation. Seeing that it could no longer service its debt, the Brazilian government declared a debt moratorium in 1987. The country entered in a period of economic stagnation and hyperinflation.
A new phase began in 1994 with the Real Plan and the creation of a new currency, explained Maurício Novis Botelho, former chairman for Embraer, which together with other strong healing measures, put an end to the unbridled inflation that corroded the economy and brought an enormous uncertainty and damage to the Brazilian society. Botelho spoke to the group at Liebherr's recently restored aerospace facility.
A mechanical engineer educated in Brazil, he worked his way to the top of Embraer. Botelho was president and CEO of Embraer from September 1995 to April 2007, where he was responsible for the company's reorganization involving the introduction of a new corporate culture oriented to customer satisfaction that repositioned Embraer as one of the world's leading aircraft manufacturers. In March 2006, Embraer was the first major Brazilian corporation to go public. From March 2006 to January 2012, he served as chairman of the board of Embraer.
The Real Plan adopted and implemented crucial measures to re-establish a solid economic and financial base, including inflation targets with a floating currency exchange system. "Also, the national financial system reform implementation and banking regulation actions, together with the promulgation of the Fiscal Responsibility Law, were of fundamental importance for the success of the economic reform," Botelho said. The law holds elected officials responsible for budgets liable.
During the years of hyperinflation, the Brazilian people lost their way, Botelho explained. "Every day they saw prices climb and they lost touch with the true value of goods and services," Botelho said. "The Real Plan placed a fixed value on good services that the people could relate to. It gave them something tangible."
With a stable financial structure and taking advantage of the world's appetite for raw materials, the government was able to stimulate growth, increase foreign trade and create jobs, Botelho explained, promoting a social migration of great relevance. "About 50 million people have left their poverty status migrating to middle class since 2003," Botelho said.
As E&MJ is reporting this month (See Leading Developments, p. 4) Vale, the world's second largest mining company by market capitalization, has budgeted $16.3 billion for capital expenditures during 2013. Iron ore projects account for $4.9 billion (48.4%) of Vale's 2013 project execution budget, with major expenditures going toward iron ore projects in the Carajás region and in the state of Minas Gerais, Brazil. Vale's global iron ore distribution network, including new ships, will also see significant spending.
Discovering significant offshore oil and gas enabled the country to become one of the few energy self-sufficient countries in the world. Petrobrás, the giant state-owned oil company, recently disclosed its new investment program for the period between 2012 to 2016, which foresees $236.5 billion investment up to 2016.
The Brazilian government is planning investments of $39 billion in the next five years, where highways will receive about $20 billion and the railways will receive $45 billion.
Brazil generates most of its electricity from hydroelectric power plants. The National Interlinked System installed capacity be expanded from the 2010 existing 110,000 MW up to 171,000 MW by 2020. The energy transmission system extension, around 100,000 km in 2010, will be expanded to reach 142,000 km by 2020, that is the equivalent to 40% of the existing system will be built in the next 10 years. All of these investments will reinforce Brazil's status as one of the most advanced nations of the world.
During the 1974, Liebherr established a presence in Guaratinguetá, Brazil, an area halfway between the population centers of Sao Paulo and Rio de Janiero. Today, Liebherr Brasil GMO LTDA, not only takes responsibility for the sales and service activities of Liebherr's construction and mining equipment divisions for the Brazilian market and beyond, but has also assumed engineering and manufacturing duties for various product lines from different Liebherr divisions. "This trans-divisional approach to marketing and local production can also be understood as a blueprint for Liebherr's strategy of developing and intensifying its services for customers in emerging markets," said Klemens Stroebele, managing director, Liebherr Brasil.
The original factory complex was devoted to manufacturing ship and offshore cranes, and in 1976 the first Liebherr ship crane manufactured in Brazil was delivered to a local shipyard. From there, the factory began to produce tower cranes before moving into telescopic mobile cranes. During the 1980s, the factory turned its attention toward earthmoving and mining equipment.
"In 2005, we not only intensified the production of large mining equipment but also extended our facilities with a modern production building suitable for the production of such large machines," Stroebele said.
The Brazilian factory was much more than construction and mining equipment. Liebherr created a joint venture with the Brazilian aircraft manufacturer Embraer, primarily to produce landing gear, in 1999. Liebherr Aerospace Brasil Ltda. constructed a plant (also at the Guarantinguetá facility) to produce aircraft systems components for Liebherr's Aerospace and Transportation Systems division. Unfortunately, it was destroyed by fire in July 2011. "To fulfill our existing supply contracts, we improvised production in other buildings on our campus and transferred another part of the production including 100 local staff to the division's European facilities in Lindenberg, Friedrichshafen and Toulouse," Stroebele said. "The company re-started its regular manufacturing operations in a completely new building recently erected on the original site. Today this company, with a labor force of more than 200, has regained the same level as prior to the fire, and we expect significant growth in the future."
Today, Liebherr Brasil GMO LTDA is a vital part of the joint production networks of four different Liebherr divisions: Earthmoving, Mining, Maritime and Construction Cranes, and Mixing Technology. "Our current manufacturing program includes the R 944 C, R 954 C and R 964 C crawler excavator models, the A 924 C material handler as well as the L 538 and L 580 wheel loaders," Stroebele said. "For worldwide mining customers we currently produce the R 9350 and R 9400 large hydraulic excavators."
The nationwide after-sales service network operates a total of 18 offices with experts in all of Brazil's five regions. These branches employ a total staff of 590 employees to provide services for construction equipment as well as for the products of other Liebherr divisions in Brazil, which includes about 40 pieces of mining equipment most of which are operating in the iron ore mines. "At our Carajas location, we intend to erect a maintenance workshop and a spare parts store for our mining equipment at Vale's iron ore operation—the largest of its kind worldwide," Stroebele said.
In the last 10 years, Liebherr Brasil has seen its business grow eightfold from $19.3 million in 2001 to almost $258 million in 2011.
To meet this level of growth, Liebherr Brasil's staff grew from 300 to 1,200 during the same timeframe. "Besides the volume of staff, one of our most persistent challenges is the question of qualification," Stroebele said. "In contrast to Liebherr's traditional European home markets, acquiring the qualified labor needed for our high product quality standards is a very difficult task. This is why we decided to establish our own training and education facility, which was opened in 2011."
In addition to these efforts, Liebherr Brasil established a welding course more than 10 years ago that helps maintain the weld quality for which the company is renowned. "We also created the Jovem Talento Programa (Young Talent Program) in 2008 in partnership with SENAI—Serviço Nacional de Aprendizagem Industrial (National Industrial Training Service), to provide the after-sales service skills needed by our organization," Stroebele said. "Last but not least we support the public 'Aprendizes SENAI Program' (Apprentice SENAI Program). This program is aimed at young people who wish to acquire technical and professional skills to facilitate their first career steps."
The success that Liebherr has enjoyed in Brazil was only possible with a sound investment. Decisions were made in good time and a general commitment to this market was a matter of corporate policy for Liebherr, Stroebele explained, long before the notion of BRIC as a synonym for dynamic markets was born.
Vale's Capão Xavier Iron Ore Mine
The mining-related stop on the Liebherr tour was the Capão Xavier mine near Nova Lima, Brazil. Vale operates in all five of Brazil's geographic regions. A large fleet of Liebherr mining excavators are employed at iron ore mines operated by Vale close to Belo Horizonte. One of those mines is Capão Xavier, which is part of the Paraopeba Complex, located on the east side of Minas Gerais.
The mine is part of a region known as the Iron Quadrangle, which is adjacent to the municipalities of Belo Horizonte, Santa Bárbara, Mariana and Congonhas do Campo and covers an area of 7,500 km2. In 2011, Capão Xavier's produced 8.4 million metric tons (mt) and contributed 2.6% to Vale's total production of iron ore. Before Capão Xavier went into operation in 2004, its capacity was estimated at 81.2 million mt of iron ore, which would be economically depleted by approximately 2014.
The Capão Xavier mine is a shallow open-pit mine where iron ore is extracted from seven 10-m benches. Depending on the ore type, it can sometimes be loaded directly from the bench. Harder formations require drilling and blasting.
For the loading process a fleet of 16 Liebherr R 964 C mining excavators is operating on site in the Paraopeba Complex. These machines excavate both waste rock and the iron ore, loading the material into a fleet of 38-mt trucks that shuttles it to a crushing installation.
Three units of Vale's Paraopeba Complex R 964 C excavator fleet are allocated to the Capão Xavier mine site. At first glance, this particular model would be considered a standard-size construction excavator. To upgrade this machine for heavy-duty mining operations, Vale's R 964 Cs are equipped with a 7-m gooseneck boom, 2.6-m stick and heavy-duty buckets of 4 m3 capacity. To guarantee maximum security the equipment includes piston rod protection, fall-over protection structure (FOPS), the rear camera monitoring option and fuel coupling safety devices.
The R 964 C is powered by a 320 kW (434 hp) Liebherr D9508 V8 diesel engine. With shovel attachment its operating weight varies between 67,900 kg and 78,000 kg. Shovels are available with capacities up to 5 m3. This version of the R 964 provides a maximum digging force of 308 kN (31.4 mt) and a maximum breakout force of 335 kN (34.2 mt). Its maximum reach values are 11.65 m at ground level and 7.7 m at dump height.
The R 964 C excavators at Paraopeba Complex have proved their strength and dependability for almost 10 years in severe conditions. This excavator size perfectly matches the 38-mt trucks that are the preferred transport vehicles on smaller mining sites such as Capão Xavier.
To ensure maximum availability for the Liebherr fleet at Vale, Liebherr has located a dedicated team of after-sales experts in the state of Minas Gerais. They provide services for nine different Vale mines from their headquarters in Belo Horizonte. Resources allocated there include 30 highly trained technicians. For all customers in Brazil, Liebherr also offers an efficient logistic system for spare parts that ensures maximum agility when responding to every client requirement.