1. Establishment of NIPPONDENSO REFRIGERACOES LTDA. (NDB)
[2] Breaking with Bosch
The results of the joint investigation found that Ford Brazil welcomed the establishment of the new company, and that it would provide information if the new company was able to produce inexpensive, high-quality products. Toyota Brazil was even more cooperative, offering to lease land and equipment. As the largest automobile manufacturer in Brazil with a localization rate approaching 100%, Volkswagen Brazil only wanted to receive compressors.
DENSO and Bosch disagreed on how to address Volkswagen. With 17 years of history in Brazil, which has a large German immigrant population, Volkswagens were highly popular, and boasted an overwhelming share of the market, so much so that they could be considered the national car. Consequently, Bosch insisted that the new company should only produce compressors, as Volkswagen had requested. On the other hand, DENSO was determined to deliver air conditioners as complete systems.
In addition, Bosch had completely reconsidered its overseas investments in the wake of the first oil shock that had occurred at the end of 1973, just before the joint investigation. As a result, the joint venture concept was scrapped and DENSO’s Brazil strategy found itself at a crossroads. In light of this, DENSO held repeated internal discussions regarding the following three points.
- Should DENSO launch the business on its own, or seek a new local capital partner?
- In the case of going into business on its own, should DENSO concentrate on sales, or embark on production?
- Should DENSO even continue with the existing business plan for Brazil as is?
After a review of the situation, DENSO re-asserted its intention to enter the Brazilian market. By this time, however, the boom of a few years earlier had passed, and inflation had crashed over the Brazilian economy. Moreover, Toyota Brazil was still the only Japanese automobile manufacturer in the country at the time.
Even so, DENSO felt that despite the risks, it should not abandon the Brazilian market with its rich future potential.