TROY, Mich.—Dayco Products L.L.C. is making giant strides toward becoming a dominant force in the automotive products markets in South America and Asia.
In the first of three key moves aimed at significantly expanding its South American presence, the company purchased WVR Rolamentos Ltda., a maker of automotive tensioners and pulleys, located in Sao Paulo, Brazil, for an undisclosed sum.
Dayco also is more than doubling the size of its manufacturing operation in the country. It is moving from its present Brazilian production facility, estimated at 20,000 square feet, to a 50,000-sq.-ft. plant in Belo Horizonte, where it will continue to make tensioners for the original equipment market, according to James C. Orchard, CEO of Dayco and co-CEO of parent Mark IV L.L.C.
The factory is expected to begin operating Nov. 17.
On top of that, Dayco is adding a 75,000-sq.-ft. plant in Sao Paulo. WVR will be relocated from its present site, estimated at about 15,000 square feet, to the new facility, where it can triple its current production capacity, he said.
While the new factory primarily will serve the local market, it will create the opportunity for Dayco to export products to North America and Europe “to take advantage of our lower-cost footprint in Brazil,” Orchard said.
The new facility is slated to be dedicated in February 2011 but likely will be operating in the latter part of this year.
The company, which is already well established as a parts producer in both the U.S. and Europe, made the WVR acquisition to build its aftermarket tensioning and damper production base.
The deal will boost its market share from 7 percent to 20 percent virtually overnight in Brazil, Orchard said.
The move to larger quarters, the addition of another plant and the merger of WVR into the new factory all are expected to increase Dayco's sales in the region. Brazil has the most stable economy in South America, and the auto- motive industry in the country is expected to experience significant growth, he said.
“We have been optimizing our capacity structure in North America and Europe,” Orchard said. “All of our plants are fully utilized in Europe and the U.S.”
Dayco is especially strong in the aftermarket and heavy duty segments in North America and Europe and the light duty market is slowly growing, he said.
About 25 percent of the firm's sales are in North America, 65 percent in Europe and the remainder is in the rest of the world, which Orchard figures is a pretty good footprint with strong growth potential.
Because of that, Mark IV and Dayco aggressively branched out into China, India and now South America.
They recently opened a plant in China, which is expected to be in full production by March. The facility manufactures Dayco-brand timing and poly V belts for both the OE and aftermarket segments.
The companies started two joint ventures in India in the last several months and plan to launch a third venture in February.
Each factory is or will be dedicated to a key offering: air intake and cooling products, tensioners or dampers.
The moves Amherst, N.Y.-headquartered Mark IV and Dayco made in India, China and Brazil will not impact the firms' plants in other regions, Orchard said. “We keep making progress in those areas. Our footprint in Europe and North America will remain the same.”
The primary goal of Mark IV and Dayco is to grow regularly by acquisition and expansion.
They've been aggressively following that course since they emerged from bankruptcy protection in late 2009 with a strong balance sheet and far less debt than when they began the Chapter 11 process in late April 2009.
Dayco, which is Mark IV's primary division and accounted for about 63 percent of the company's sales of $1.3 billion in 2009, bounded out of the gate quickly and inked a number of long-term contracts. It won the largest long-term agreement for belts ever for the automotive aftermarket sector, according to Orchard.
The division, with sales of about $812 million in 2009, is a leader in research and design, manufacturing and distribution of a broad range of belts, hose, tensioners and pulleys for the automotive, trucking, construction, agricultural and industrial markets.
About 85 percent of its sales are in automotive and the rest in other transportation sectors.