See How a Global Manufacturer of Seals is Fighting to Reduce Friction
Brazil's Sabó Group is one of the world's leading suppliers of seal solutions for the world's top auto manufacturers. Director of Sabó Americas, Lourenço Agnello Oricchio Junior, tells Michael Sommers how the company's commitment to technology and service has sealed its success on five continents.
It's hard to believe the largest manufacturer of sealing and fluid conveyance solutions in Brazil - not to mention one of the largest on the planet - began life in a small São Paulo workshop where the future founder of Sabó single-handedly produced carriage chains on a rented workbench. Five years later, the one-man business had blossomed into a small manufacturing enterprise devoted to the making of what would become its signature product - automotive seals.
At the time, Brazil had no auto industry of its own and all vehicles were imported from abroad, primarily the United States. Difficulties, however, arose during World War II when foreign manufacturers had trouble producing, not to mention exporting, replacement parts - which is where Sabó came in. Throughout the next three decades, the company grew gradually by producing seals for the small, but steadily expanding Brazilian auto market at the São Paulo plant it inaugurated in 1942.
A watershed moment occurred in 1975, when the company took the major step of entering the international market. When a leading German manufacturer of seals ran into difficulties, Sabó stepped in and began supplying its seals to Opel, the German subsidiary of GM, via German seal company La Bruss.
"In 1975, the Brazilian auto market was still very small; most cars were imported from Europe," explains Lourenço Agnello Oricchio Junior, director of Sabó Americas and vice president of Sabó USA. "We decided we wanted to be present at global development and manufacturing centers at 'moment zero'. So we went to where our clients were - which at the time was principally in Germany - in order to be close to them and to provide them with exactly what they needed. We carried out rigorous tests on our products in order to comply with our clients' very rigorous demands. Along the way, we perfected our technology to the extent that we were far ahead of our competitors in Brazil. We knew that when these European companies set foot, or began expanding, in Brazil, they would already have a supplier of components that they could trust."
Sabó's farsighted decision to set foot in Europe in the 1970s, and to begin developing and producing seals there, is without a doubt the reason for the company's present success both in Brazil and overseas. And yet, its arrival in Germany in 1975 comprised merely the first step of what would evolve into a global strategy.
In 1992, the company began branching out in its own backyard with the acquisition of two seal manufacturers in Argentina and further flexed its muscles in Europe with the 1993 purchase of Kaco, the continent's second largest producer of seals, with plants in both Germany and Austria (today Sabó operates under the Kaco name throughout Europe). Global expansion accelerated in the new millennium with the 2000 construction of a plant in Hungary, the 2007 building of a facility in Lincolnton, North Carolina, and, most recently, the 2008 inauguration of a plant in China, located near Shanghai. As a result, today the Sabó group possesses nine international facilities in addition to its two production units in São Paulo state.
Such ambitious strategies have paid off handsomely. Presently, the Sabó group can stake claim to being one of the largest manufacturer of seals in the world with annual earnings of US$400 million in 2012 (US$220 million in Brazil) and overall average annual growth rates of 13 to 14 percent, although, as Oricchio points out, growth differs significantly depending on the market in question.
"Proof of our success is that we're supplying Brazilian products to China."
In China, for example, where GM and Volkswagen - both of whom are Sabó clients - are the country's largest auto assemblers, sales in 2013 are expected to double from US$25 million to US$50 million. In Brazil, where Sabó's clients include GM, Volkswagen, and Fiat, Oricchio expects the company's growth to be proportional to that of the domestic auto market, where annual sales are predicted to hover around 3.5 million units.
"Today, our positioning is very global; we're present in 70 countries on five continents. In Europe alone, we possess 40 percent of the market" says Oricchio, adding that the group is currently in the midst of studies on how best to tackle its next target: India.
While being located in close proximity to its clients is a major selling advantage, Sabó is equally aware that, aside from service, it needs to offer products that are highly competitive. "Sabó's mission is to develop solutions that use technology to add value for our clients," says Oricchio. "For instance, we are constantly searching for new materials with which we can make components that combine high performance with reduced costs. Proof of our success is that we're supplying Brazilian products to China."
Currently, the biggest challenge facing the auto market - both in Brazil and around the world – is the development of new components that reduce friction, which in turn, allows motors to function more efficiently while diminishing the consumption of fuel. Despite being a major worldwide trend, friction reduction is a necessity in Brazil where the federal government has created a program known as Inovar-Auto, whereby all automobiles must reduce their use of fuel by 15percent by the year 2017.
Although this target can be met by innovations applied to various automotive components, Sabó's goal is to create seals that reduce friction more than those produced by any of its competitors. Among other solutions, such determination has resulted in the launch of F-Red, a special seal patented by Sabó that reduces friction of the crankshaft seal. However, the group is hard at work on other fronts as well; its efforts range from the creation of nanotechnology-based applications to plasma technology surface treatments.
"Once production becomes large-scale, (hydrogen) will become a viable solution."
Another area in which Sabó is carrying out research pertains to the development of bipolar plates for hydrogen fuel cell automobiles. "We've started making these plates, each of which possesses two seals that prevent the hydrogen from escaping," describes Oricchio. "Already, there are buses, including in Brazil, that operate using hydrogen cells. Because auto and diesel motors are still evolving and becoming more energy efficient, it will take a while before hydrogen becomes a mainstream solution. Right now, the costs are very high, but once production becomes large-scale it will become a viable solution - not to mention an essential one due to the environmental ramifications."
Indeed, Oricchio predicts that in 20 or 30 years all vehicles will be hydrogen-fueled. In the meantime, however, Sabó is content to rely on its carefully-honed combination of cutting-edge technology and high-quality service to ensure that all of its products are signed, sealed, and delivered to their customers' utmost satisfaction.