TRANSPORTATION FOR WELFARE AND GROWTH IN DEVELOPING COUNTRIES INVESTING, EXPANDING, AND INNOVATING IN THE INDUSTRY
INVESTING IN TRANSPORT IN EMERGING MARKETS
TRANSPORTATION EQUIPMENT: • Improving the ﬂow of goods and mobility of people in emerging market countries • Transferring technological and managerial know-how • Creating skilled jobs Since the 1960s, IFC has invested $1.3 billion in 70 transportation equipment companies in 23 countries. Investments in the automotive and other transportation equipment sectors create opportunities and help reduce poverty by enhancing the ﬂow of goods and the mobility of people, improving business opportunities, and raising standards of living and quality of life in emerging markets. IFC’s investments are creating jobs, building markets, advancing technology, and transferring managerial know-how. We play a critical global leadership role by ensuring that all of our projects set a strong example of environmental and social stewardship. What We Offer As the largest multilateral source of loans and equity ﬁnance for private enterprises in emerging markets, IFC, a member of the World Bank Group, brings the strength of our own $14 billion net worth, global focus, local presence, and industry expertise to bear for our clients. We offer: • Tailored solutions that respond to client needs: long-term debt, quasi-equity, and equity ﬁnancing products; local currency ﬁnancing, and tenures of up to 12 years. IFC Advisory Services offer retail and country expertise across multiple subsectors, support efﬁciencies in ﬁnancial restructuring. • Track record of commitments that span the globe: the transportation and equipment sector portfolio includes 30 investments in 20 companies and nine countries. • Leadership in sustainability: we are addressing climate change related to CO2 emissions and other greenhouse gases, and we help increase the recycling of materials used in manufacturing of transportation equipment.
Development and Economic Impact As a development institution, with a mission to promote private enterprise growth and job creation in the developing world, IFC helps clients understand the business case for social and environmental responsibility: lower costs, reduced political risk, increased productivity, and brand enhancement. IFC’s transportation projects have created: • Over 67,000 direct manufacturing jobs, plus thousands of indirect jobs in related service industries such as maintenance, gas stations, auto ﬁnance, and insurance • Signiﬁcant contributions to economic growth through revenue generated by the sector and indirectly through better access to goods, services, and markets • Managerial and technological know-how, contributing to growth of manufacturing in emerging market countries • Improved corporate governance and higher environmental, technical, and safety standards, with emphasis on energy efﬁciency, climate change, and cleaner production • Strong foreign exchange earnings • Enhanced supply chain management
INVESTING IN TRANSPORT IN EMERGING MARKETS
EXPERTISE ACROSS THE SUBSECTORS IFC’s sectoral expertise, regional knowledge, and leadership in sustainability offer signiﬁcant value to our clients, in addition to the full range of ﬁnancial products we offer. Our industry knowledge spans the range of production, from component manufacturing to vehicle assembly and distribution. Our expertise extends from the automotive sector to rail and air transportation equipment and components, shipyards, and selective automotive consumer services such as ﬂeet management, car rentals, and consumer ﬁnancing.
Fras-Le and Randon Group: Multiple ﬁnancing rounds in support of a local player Brazil has emerged as a burgeoning cluster for the automotive industry, causing automotive suppliers to set up shop as well. Fras-Le is a components company that has grown as the overall automotive industry has expanded. A majority-owned subsidiary of the Randon Group, it is Brazil’s largest manufacturer of friction materials, producing brake pads, brake linings, blocks, and clutch facings for trucks, buses, and automobiles. In 2002, Fras-Le’s products became 100 percent asbestos-free.
Long-term partnerships with industry leaders • Successful companies tend to grow in stages: it is not simply a matter of a one-time capital need or acquisition requiring a single ﬁnancing transaction. Instead, strong companies need ﬁnancial partners committed to establishing longer-term relationships. • IFC is a trusted partner: a strategic advisor with ﬁnancial stability, deep pockets, and presence in the global marketplace, as well as the expertise to provide guidance on future directions based on a thorough understanding of industry trends and the company’s past and current situation.
The company holds a dominant position in the domestic after-market, and is a growing presence on the international scene as well, exporting primarily to Argentina, the United States, and Europe. Several rounds of IFC ﬁnancing, including equity and debt packages, have been supporting the growth of this strong local player for the past decade helping Brazil strengthen its position as a destination of choice for the automotive industry. IFC also supports the ambitious growth plans of Fras-Le’s parent company, Randon Group, which manufactures trailers and semi-trailers for trucks and rail transportation.
IFC’s role: • Multiple rounds of long-term ﬁnancing for Fras-Le and Randon, totaling $65 millions • Reduction in foreign exchange exposure risk • Advice on process improvements to reduce air and water efﬂuents, improve product quality, and achieve cost savings • Enhancement of the country’s competitiveness: support for a strong local player reduces automotive manufacturers’ reliance on imports of components
BUSES: A FIRST STEP TO INDIVIDUAL MOBILITY Studies have shown that isolation and the lack of affordable transportation options contribute to a host of social ills—poverty, bad health, poor attendance in school, and a shortage of economic opportunity. Increasing the accessibility of affordable mass transit, including rolling stock, is one way to begin to address some of these complex issues. Expansion of mass transit systems also helps reduce the trafﬁc gridlock that grips cities large and small around the world, while optimizing the use of gasoline and lowering carbon emissions.
Marcopolo: Comfortable, affordable transportation for more people Based in Caxias do Sul, Brazil, Marcopolo is among the largest bus body producers in the world. The publicly traded company partners with industry leader Mercedes-Benz Mexico through its Polomex subsidiary to assemble and sell buses in Mexico. Marcopolo also operates plants in Argentina, Brazil, Colombia, Portugal, and South Africa, employing 8,000 skilled workers around the world. IFC committed $38 million to support the parent company and its expansion into Mexico for this internationally competitive technology leader in bus production, making affordable transportation accessible to more people in emerging market countries.
IFC’S role: • $38 million in long-term ﬁnancing for working capital needs and equipment upgrades • Advice on a more sustainable ﬁnancing structure and better ﬁnancial management • Advice on industry best practices from around the world
AUTOMOTIVE COMPONENTS: EMERGING CLUSTERS IN EMERGING MARKETS Automotive components companies are ﬁnding tremendous potential in emerging market countries. Nations like Brazil, China, India, and Russia, feature strong manufacturing traditions, a comparatively low-cost labor force, growing consumer demand, and geographic proximity to their customers – and each has become an emerging cluster of automotive manufacturers. The expansion of the industry offers strong economic and development opportunities.
Recent IFC investments in these booming markets include: ZMZ Bearings, Russia: 2007 project to support Daido Metal’s entry into Russia through the acquisition of ZMZ Bearings, a leading local manufacturer of half bearings for automotive engines. IFC is providing a $5 million loan.
Launch Tech, China: IFC equity investment in Launch Tech in 2005 helped consolidate the company’s multiple leased facilities for its administration, manufacturing, and R&D functions into a large complex in a Shenzhen technology park. Launch Tech’s products include automotive diagnostic equipment, lifts, and wheel aligners and balancers.
INVESTING IN TRANSPORT IN EMERGING MARKETS
Sabo: Flexible ﬁnancing in support of investment program to compete in the global market Sabo is a midsize, family-owned automotive supplier based in Brazil, with operations around the globe. The company produces oil seals, gaskets, and hoses that are sold directly to the major equipment manufacturers and to other automotive component producers. While it expands to meet growing demand, the recent liquidity improvements in the Brazilian market have not beneﬁted midsize suppliers like Sabo, for whom ﬁnancing options tend to have shorter tenors and carry more restrictions. IFC provided longer-term ﬁnancing that the company could not otherwise obtain, thus giving it a stable funding platform to support rapid growth in an uncertain and highly competitive business environment. With Sabo being a key player in the auto parts sector—an important contributor to the country’s economy—its success and continued growth will generate development impact by contributing to the country’s GDP and increasing export revenue, technological and management know how, and training and employment. These beneﬁts will extend from Brazil into other emerging markets as the company expands its operations globally.
IFC’s role: • Providing $40 million in long-term ﬁnancing that allows the company to manage its ﬁnances prudently • Long-term partnership includes guidance on improving corporate governance, environmental and social practices, and assistance in broadening Sabo’s ﬁnancing sources • Support for new cross-border investments
TBK: Environmentally-friendly supplier for China’s surging automotive industry A joint venture between Japan-based brake manufacturer Tokyo Buhin Kogkyo Co., Ltd, and Changchun Shili Automobile Brake Parts, a Chinese producer of brake friction materials, is leading to the introduction of high-quality, asbestos-free linings for drum brakes and pads for disk brakes in commercial vehicles produced in China. The JV (joint venture) company’s primary customer is First Automotive Work Group, the largest vehicle manufacturer in China, which produces close to 1 million passenger cars and commercial vehicles a year. IFC’s loan supported construction of a new manufacturing facility in Changchun, Jilin Province. The new plant incorporates advanced technologies to improve the quality of essential components, and introduces greener industrial practices.
IFC’s role: • Originally committed $4 million in ﬁnancing toward an $11 million construction project. However, due to the depressed market condition, the total project cost was reduced to $8 million. IFC disbursed $2 million in 2006 • Support for technology transfer from an innovative Japanese company to China, helping improve the environmental proﬁle and safety of commercial vehicles
TWO-WHEELERS: AFFORDABLE TRANSPORTATION As living standards improve in emerging market countries, there is a growing consumer demand for personal transportation. Two-wheelers offer a more affordable alternative for consumers who cannot afford to buy a car. IFC supports companies that produce such alternative transportation due to their potential positive impact: enabling transportation and increasing access to education, health care services, and jobs. Whenever possible, IFC also supports zero-emissions technologies, such as electric bicycles and scooters.
PT TVSM: More two-wheelers for Indonesia IFC’s investment in PT TVS Motor Company’s new manufacturing plant in Karawang, Indonesia, will allow the company to produce 300,000 motorcycles a year to meet growing domestic demand, which topped 4.5 million in 2006. Although the current two-wheeler market in Indonesia is highly competitive, the country has the third-largest market in the world after China and India, but still a low per capita ownership. Project sponsor, TVS Motor, is a member of the TVS group, a leading supplier of automotive components. TVS Motor, manufactures and sells two-wheelers, employs 5,800 staff, has strong in-house research and development capabilities, and a deep supplier base, as well as a wide dealer network, with more than 2,500 retail outlets in India. The new manufacturing plant is expected to create 500 new jobs in Indonesia. Future plans include developing a local supplier base and expanding dealer network in Indonesia.
IFC’s role: • $20 million in long-term ﬁnancing • Partnership boosts the sponsor’s conﬁdence and comfort level, given IFC’s strong local presence in the market and relationships with the government, ﬁnancial institutions, and private industry • Support for cross-border investment: this is the ﬁrst expansion for the sponsor based in one emerging country, as it moves into another emerging country
INVESTING IN TRANSPORT IN EMERGING MARKETS
AEROSPACE: THE NEW FRONTIER
GREEN TRANSPORTATION: INVESTMENT IN THE FUTURE
Globalization has contributed to the development of basic manufacturing industries in emerging markets. Now, the focus is on increasing skill levels and technological know-how so that developing countries can gain a share of value-added industries, such as aerospace engineering and production. This effort includes providing enough opportunities to keep highly educated workers at home. IFC is supporting the establishment of a more sophisticated engineering and manufacturing base, which will create more reasons for skilled workers to remain in their home countries.
In 2004 transportation in general contributed to 13 percent of global greenhouse gas emissions. As a world leader in sustainability, IFC invests in innovative projects – including those with potential to revolutionize the entire concept of energy efﬁciency and clean transportation. As momentum builds for such new products, IFC’s investments are helping forward-thinking companies turn great ideas into marketable products.
Embraer: Aircraft manufacturing in Brazil
Electrotherm produces electric scooters for consumers in India who want a clean, inexpensive, and reliable means of transport that is also compact and easy to maneuver through the country’s crowded streets. Electrotherm has developed the electric two-wheeler, using some of its core technology and competence in power electronics acquired and perfected from its induction furnace business.
Embraer is the world’s fourth-largest aircraft manufacturer and the only one based in an emerging economy. The company recently introduced a new generation passenger plane, with the help of IFC’s long-term ﬁnancing. Even before the ﬁrst plane rolled off the production line, the company had numerous orders from airlines and leasing companies from around the world. The company employs more than 14,500 people, helping reverse the brain drain of highly skilled workers from the country. As a member of Brazil’s prestigious BOVESPA Corporate Sustainability Index, Embraer also demonstrates the business case for sustainability: that the drive for proﬁt, environmental stewardship, social responsibility, and corporate governance can all align to achieve a strong triple bottom line.
Electrotherm, India: Technology transfer for energy efﬁcient, clean personal transport.
The new vehicle is compatible with the harsh Indian climate, comes into two prime categories of speeds up to 25 kilometers an hour and 45 kilometers an hour, and costs about $600-$1,000. Future plans include three-wheeled models and hybrid buses to increase access to clean mass transit. IFC’s $25 million investment is helping the company expand its production and enhance its competitiveness and energy efﬁciency.
IFC’s role: • $25 million in long-term ﬁnancing and quasi-equity • Project helps reduce greenhouse gas emissions and enhances energy efﬁciency
IFC’s role: • Long-term ﬁnancing at a time when access to ﬁnancing sources was limited, given the risks ascribed to lengthy product development cycles in the aerospace industry and the sovereign risks associated with an emerging market country
We look for:
IFC seeks to partner with strong, stable ﬁrms that have an understanding of local, regional, and global markets, a good track record of success; and an abiding commitment to transparent corporate governance, social responsibility, and environmental sustainability.
• Fast growing manufacturing companies • Investments in industrial restructuring, including privatizations • Foreign Direct Investments, including cross border opportunities • Investments in technology development and dissemination that reduce impact on climate change • Companies of vehicle related service networks including SMEs
INVESTING IN TRANSPORT IN EMERGING MARKETS
AUTOMOTIVE INDUSTRY: PROCESS INNOVATION AND ENVIRONMENTAL LEADERSHIP In an industry characterized by increasing competition, margin pressure, and regulatory and environmental requirements, automotive companies are –, of necessity, – leaders in product and process innovations. Such innovations enhance the competitive marketplace and lead to higher productivity and economic growth. IFC projects seek to maximize the use of best industry and environmental practices, enabling our clients to compete successfully and contribute to long-term domestic and global sector growth. One such project, with Turkish automotive industry leader Standard Proﬁl is supporting innovation, while facilitating expansion of the automotive supplier industry in an emerging market country. Headquartered in Istanbul, the company is Turkey’s largest manufacturer of automotive sealing systems with plants located in Bulgaria as well as in Turkey. IFC’s equity and loan ﬁnancing is helping Standard Proﬁl enhance its research and development capabilities, allowing the company to focus on developing new generation sealing systems using alternative, nonconductive, and nitrosamine-safe compounds. The successful, award-winning company has elevated its environmental focus and innovation to the strategic level, demonstrating a strong business case for sustainability.
IFC’S TRANSPORTATION EQUIPMENT PORTFOLIO As of July 31, 2007, IFC’s commitments in the transportation equipment sector totalled $324 million, with 90 percent in the automotive industry. IFC’s main automotive investment destinations include Brazil, China, India, Mexico, Russia, and Turkey. For more information about IFC and our transportation equipment investments, please contact: Sabine Schlorke 1-202-458-5480 or email@example.com Emmanuel Pouliquen 1-202-473-9114 or firstname.lastname@example.org Diogo Castro e Silva 1- 202-458-1811 or email@example.com
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速 2007 INTERNATIONAL FINANCE CORPORATION 2121 Pennsylvania Avenue, N.W. Washington, D.C. 20433 U.S.A. Telephone: 202 473-1000 Facsimile: 202 974-4384 Internet: www.ifc.org