MELCO Elevadores do Brasil Inauguration

Mitsubishi Electric begins Brazilian business

After a long and deep analysis of the Brazilian elevator market, the Japanese company Mitsubishi Electric Corp. acquired 90% of the shares of Brazilian manufacturer LGTECH Elevadores S.A., an elevator company located in Guaíba, Brazil. As the Palácio Piratini in Porto Alegre is the seat of the state of Rio Grande do Sul’s government (in which Guaíba is located), it was an appropriate venue to hold the official kickoff of a merger of the two businesses. Also celebrating the end of the acquisition process of LGTECH Elevadores S.A. (which had been announced in September 2013), the February 12 event introduced the new company MELCO Elevadores do Brasil S.A.

The Ceremony

Both Brazilian and Japanese flags waved outside the government palace. This important event was even announced on the front of the Palácio Piratini, indicating that the establishment of a new elevator company was not just a private business affair, but also an indication of progress for the state and its inhabitants, especially in the creation of jobs. This crucial aspect of the transaction was highly appreciated by Rio Grande do Sul Governor Tarso Genro, who indicated his government would also contribute with the “Elevar” project aimed at personnel education and training.

The stage was occupied by MELCO CEO Kazuhiko Kojima and President Lauro Galdino, founder of LGTECH Elevadores S.A. The two were accompanied by Mitsubishi executives and state authorities. The main reception room in the palace was filled, with many Japanese representatives, guests and local press members. ELEVATOR WORLD and Subir & Bajar were the only trade media attending the ceremony. When the speeches were over, a traditional Japanese celebration ceremony, kagami-biraki — literally, “opening the lid,” — was performed. Wearing red robes and using wooden mallets, authorities broke open the barrels containing sake and drank to the good fortune of the new company.

About the Companies

MELCO

The acquisition of LGTECH required Mitsubishi Electric Corp. to invest BRL52.7 million (US$22.3 million). Intended to facilitate the Japanese company’s penetration of the elevator and escalator market in Brazil, the new company will invest more than BRL20.3 million (US$8.59 million) to refurbish the factory in 2014. Other investments in the company will bring the total amount to BRL73 million (US$ 30.87 million). MELCO intends to triple its invoicing during the next two years and produce 150 elevators per month. To this aim, the factory will be enlarged over 3,000 m2, which will be added to the present 7,000-m2 surface.

Galdino, founder of LGTECH, was inaugurated as MELCO’s president. He will participate in the company’s management for at least five years, and his family will hold 10% of the shares for 10 years. Kojima indicated that the company will manufacture high-speed (2.5-10 mps) elevators. He announced that with the acquisition of LGTECH, “MELCO will import some components, but 80% of the elevators will be manufactured in the country. The suppliers of raw materials will continue to be Brazilian.”

Projects

In Brazil, MELCO intends to reinforce its present operations in the center-south region, with São Paulo as a major target due to its large high-speed elevator market. New branches will be opened, in addition to distribution and training centers. This business operation will also represent an important employment increase in Porto Alegre and surrounding areas: there were 350 employees at MELCO as of February, but the new firm expects to employ 500 to work in the factory and elevator installation/maintenance in 2015.

Mitsubishi Electric

Mitsubishi Electric is present in 92 countries, with a network of representatives, and owns 13 factories around the world. The brand is recognized for its quality and reliability almost worldwide in the elevator and escalator segment. It is one of the major companies in Japan, China, Holland, Thailand, South Korea, Indonesia and Taiwan. In Latin America, Mitsubishi has production facilities in Colombia, Mexico and, now, Brazil.

Interviewing Lauro Galdino at MELCO

Your reporter (EW) visited the ex-LGTECH Elevadores S.A. premises in Guaíba, Brazil, the day after the official ceremony. MELCO Elevadores do Brasil’s president, Lauro Galdino (LG), enthusiastically talked about his former company and the progress he envisions as a result of its merger with Mitsubishi Electric Corp.

EW: When did you establish LGTECH?

LG: At the beginning of 2006, I left my position as Research director at ThyssenKrupp Elevadores to start my own business using my longtime experience in the elevator industry in Brazil and [on] other important jobs like the Shanghai Financial Center in China, where I agreed with Mitsubishi’s use of active roller guides for that 492-m-high building. I had to wait three years to enter the Brazilian market with my own brand in 2010. During that period [in which] I projected my company, I furnished it with machines and tools, and reached an agreement with the federal government to develop a project on accessibility in residential buildings.

EW: Was it an integral elevator company?

LG: Yes. We had an R&D department, and we manufactured elevators later installed and maintained by us. The company managed to grow 600% from 2010-2012. During the last year, we sold 1,000 elevators, including a 32-floor office building with seven elevators traveling at 3.5 mps.

EW: Did Mitsubishi’s interest in your company surprise you?

LG: It certainly did. In fact, I was not thinking of selling it. My two sons were working with me, and LGTECH was doing quite well. I believe this is the reason why Mitsubishi decided to buy the company. Its executives had been analyzing different ways of establishing a company in Brazil, and LGTECH [ended up being] perfect for that purpose: a young company with great possibilities to grow. It already had branches in six states, covering all the activities of the elevator business. I am satisfied and happy, because I will remain as president for five years, and the Galdino family [will remain a] minor shareholder for at least 10 years. The synergy between LGTECH and Mitsubishi was natural, because both parts envision a continuous process as a whole.

EW: How many square meters does the present building occupy, and how large is the prospective space for expansion?

LG: At present, the premises sit on 7,000 m2, but another 90,000 m2 are available to enlarge the factory and related areas, including a school and venues to develop social activities to integrate the personnel. MELCO is located on a federal highway with easy access to ports and the Mercosur countries.

EW: Can you explain Mitsubishi’s projects in Brazil?

LG: Mitsubishi wants to supply the local market with local production [and] with the intention to export products into Latin America, where [it has] distributors. The idea is to manufacture, in Guaíba, 90% of the elevators that will be marketed by the Brazilian division. Its goal is to participate mainly in the office-building market with high-speed equipment.

EW: How many elevators and escalators are installed in Brazil annually?

LG: It is a market of over 15,000 units, and it should continue growing due to the new investments in construction to meet the demand of an increasing middle-class and the inhabitant migration to urban areas.

After this interview, Mr. Galdino toured your reporter around MELCO, through the administrative departments and the factory itself. The green expanse of land in the surrounding area is waiting to be turned into impressive installations in the near future.