transport sector brochure

8/6/2019 Transport Sector Brochure

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TRANSPORTATIONFOR WELFARE ANDGROWTH IN DEVELOPINGCOUNTRIESINVESTING, EXPANDING, ANDINNOVATING IN THE INDUSTRY



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.

TRANSPORTATION EQUIPMENT:

• Improving the flow of goods and mobility of people inemerging market countries

• Transferring technological and managerial know-how

• Creating skilled jobs

Since the 1960s, IFC has invested $1.3 billion in 70 transportation equipmentcompanies in 23 countries. Investments in the automotive and other transportationequipment sectors create opportunities and help reduce poverty by enhancing theflow of goods and the mobility of people, improving business opportunities, andraising standards of living and quality of life in emerging markets. IFC’s investmentsare creating jobs, building markets, advancing technology, and transferring managerialknow-how.

We play a critical global leadership role by ensuring that all of our projects set astrong example of environmental and social stewardship.

INVESTING IN TRANSPORT IN EMERGING MARKETS



Development and Economic Impact

As a development institution, with a mission

to promote private enterprise growth and jobcreation 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 growththrough 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



EXPERTISE ACROSSTHE SUBSECTORSIFC’s sectoral expertise,regional knowledge, andleadership in sustainabilityoffer significant value toour clients, in addition tothe full range of financialproducts we offer.Our industry knowledge spans the

range of production, from componentmanufacturing to vehicle assembly anddistribution. Our expertise extendsfrom the automotive sector to railand air transportation equipment andcomponents, shipyards, and selectiveautomotive consumer services suchas fleet management, car rentals, andconsumer financing.

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 understandingof industry trends and the company’s past and

current situation.

Fras-Le and Randon Group:Multiple financing rounds in

support of a local playerBrazil has emerged as a burgeoning cluster forthe automotive industry, causing automotivesuppliers to set up shop as well. Fras-Le is acomponents company that has grown as theoverall automotive industry has expanded. Amajority-owned subsidiary of the Randon Group,it is Brazil’s largest manufacturer of frictionmaterials, producing brake pads, brake linings,blocks, and clutch facings for trucks, buses, andautomobiles. In 2002, Fras-Le’s products became100 percent asbestos-free.

The company holds a dominant position in thedomestic after-market, and is a growing presenceon the international scene as well, exportingprimarily to Argentina, the United States, andEurope. Several rounds of IFC financing, includingequity and debt packages, have been supportingthe growth of this strong local player for the pastdecade helping Brazil strengthen its position as adestination of choice for the automotive industry.IFC also supports the ambitious growth plans ofFras-Le’s parent company, Randon Group, which

manufactures trailers and semi-trailers for trucksand 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 TOINDIVIDUAL MOBILITYStudies have shown that isolation and the lackof 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, affordabletransportation 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 thesebooming markets include:

ZMZ Bearings, Russia:

2007 project to support Daido Metal’s entryinto Russia through the acquisition of ZMZBearings, a leading local manufacturer ofhalf bearings for automotive engines. IFC

is providing a $5 million loan.

Launch Tech, China:

IFC equity investment in Launch Tech in 2005helped consolidate the company’s multipleleased facilities for its administration,manufacturing, and R&D functions into alarge complex in a Shenzhen technologypark. Launch Tech’s products includeautomotive diagnostic equipment, lifts,

and wheel aligners and balancers.



Sabo: Flexible financing in support ofinvestment program to compete inthe 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 couldnot 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 itsoperations globally.

IFC’s role:

• Providing $40 million in long-term financing

that allows the company to manage its financesprudently

• 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 industryA 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 supportedconstruction 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




PT TVSM: More two-wheelers forIndonesia

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 dealernetwork, 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 withthe 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

TWO-WHEELERS: AFFORDABLE TRANSPORTATIONAs 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 cannotafford 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.




AEROSPACE:THE NEW FRONTIERGlobalization has contributed to the developmentof 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.

Embraer: Aircraft manufacturing in Brazil

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.

IFC’s role:

• Long-term financing at a time when access to

financing sources was limited, given the risksascribed to lengthy product development cycles

in the aerospace industry and the sovereign risks

associated with an emerging market country

GREEN TRANSPORTATION:INVESTMENT IN THE FUTUREIn 2004 transportation in general contributedto 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.

Electrotherm, India: Technology transferfor energy efficient, clean personaltransport.

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.

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 andquasi-equity

• Project helps reduce greenhouse gas emissions

and enhances energy efficiency



OUR APPROACH

IFC seeks to partner withstrong, stable firms thathave an understanding oflocal, regional, and globalmarkets, a good track recordof success; and an abidingcommitment to transparentcorporate governance,social responsibility, and

environmental sustainability.

We look for:

• 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



AUTOMOTIVE INDUSTRY: PROCESS INNOVATIONAND ENVIRONMENTAL LEADERSHIP

In an industry characterized by increasing competition,margin pressure, and regulatory and environmentalrequirements, automotive companies are –, of necessity,– leaders in product and process innovations. Suchinnovations enhance the competitive marketplace andlead to higher productivity and economic growth. IFCprojects seek to maximize the use of best industry andenvironmental practices, enabling our clients to compete

successfully and contribute to long-term domestic andglobal sector growth.

One such project, with Turkish automotiveindustry leader Standard Profil is supportinginnovation, while facilitating expansionof the automotive supplier industry in anemerging market country. Headquarteredin Istanbul, the company is Turkey’s largest

manufacturer of automotive sealing systemswith plants located in Bulgaria as well asin Turkey.

IFC’s equity and loan financing is helpingStandard Profil enhance its researchand development capabilities, allowingthe company to focus on developingnew generation sealing systems usingalternative, nonconductive, andnitrosamine-safe compounds. Thesuccessful, award-winning companyhas elevated its environmental focusand innovation to the strategic level,demonstrating a strong businesscase for sustainability.




IFC’S TRANSPORTATION EQUIPMENT PORTFOLIO

As of July 31, 2007, IFC’s commitments in thetransportation equipment sector totalled $324 million,with 90 percent in the automotive industry. IFC’s mainautomotive 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 protected]

Emmanuel Pouliquen 1-202-473-9114 or [email protected] Castro e Silva 1- 202-458-1811 or [email protected]



® 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

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