GM bets on Mexico

GM bets on Mexico

Photo credit: General Motors by Michael Kumm

General Motors has outlined plans, which will look to invest over US$600 million for the expansion of their Mexican operations. This investment will facilitate new factories and upgrades to existing premises. The company announced that the investment is intended as a celebration of reaching 78 years working in Mexico. The investment will also provide additional employment opportunities and development within several regions, together with allowing the company to develop more advanced technology, which will be of that benefit to their customers.

While the company is investing heavily in Mexico, it has not neglected their US investments. GM have unveiled additional plans to invest over US$100 million to create an addition to the assembly/stamping plant in Wentzville, Missouri. The construction is estimated to allow third stamping press to become operational in the next two years. This will allow the creation or retention of 55 jobs.

These new investments support the earlier announced plans of GM to provide a renewed focus on the standards of quality. The company is also looking to strengthen their manufacturing production within Mexico. Mexico, which is ranked as the eighth largest producer of vehicles worldwide, is quickly establishing itself as a regional supply base for the automotive industry.

This is largely due to the numerous free trade agreements in place within Mexico and the well-educated and cheap labor force available, in addition to the proximity to the vast and lucrative market within the United States. GM currently employees 15,000 people in their four facilities and headquarters in Mexico City. It is the second biggest producer of vehicles in Mexico, second only to Nissan.

GM is looking to expand and update their facilities, together with a shakeup within the design team. This is a commitment by the company to work harder to establish a greater synergy between Buick and Opel. It is also looking to obtain better leverage for the costly resources for engineering in Germany, where many designs for Buick and Opel are developed.

The desired effect for the reshuffle within the company is to allow sorting out effective strategies for the Buick and Opel brands. These are currently marketed within the three largest markets in the world-Europe, China and North America. These shared platforms that utilize different designs have created complicated issues that GM is hoping to optimize.

Many experts are watching the Mexico auto manufacturing industry with great interest. The industry has seen vast sums committed from former foreign investors, a trend which looks set to continue into the future.

Is Audi luring the German carmakers to Mexico?

Is Audi luring the German carmakers to Mexico?

Photo credit: MotorBlog.com

The interest in Mexico manufacturing is continuing to grow with additional automotive plants looking set to be built in the near future. Since announcement from Audi for creating their first plant for assembly and production in Mexico, automakers have found Mexico very likable for expanding automotive operations.

Audi confirmed plans for a $1.3 billion plant which is set to open in the next three years in San José Chiapa, Puebla. Plans have already been made for this new Mexican plant to be the sole global source for the Q5 model of SUV when it opens in 2016. Mexico has been highlighted as an ideal base for exports because of its geographical location between South and North America. Mexico also has a number of free trade agreements, a well-educated labor force and a close proximity to a lucrative market in the United States and the growing market in South America. These attributes have had a number of automotive brands queuing up to set up operations in Mexico, bolstering the Mexican economy.

The Audi announcement came shortly after Japanese brand Honda had committed to plans to construct a $470 million plant in Guanajuato. These major automotive brands are following in the footsteps of Mazda, Nissan, General Motors and Ford who have all announced plans for new plants.

This love of Mexico from the automotive industry has given the Mexican economy a huge boost, with it looking set to surpass Brazil as the largest economy in South America in the very near future. In the last year alone Mexico had attracted almost $4 billion in investments just from the automotive industry.

Since the year 2000 Mexico vehicle production has risen by almost three percent per year, while the United States and Canada are experiencing declines. This growth trend looks set to continue through to 2018 when the production forecast for Mexico is estimated at five percent annually. Mexico is currently the eighth largest manufacturer of automotive products in the world, but according to these estimates, this figure should only grow.

The Audi executive team has praised the competitive costs, free trade agreements and good infrastructure of Mexico as their reason for their chosen new plant site. The new plant looks set to be the size area of almost 400 soccer fields and will be located near to the Volkswagen plant in Puebla City. Since Volkswagen has announced that it intends to boost vehicle sales in the United States to a million vehicles over the next five years, with 200,000 of these vehicles from the Audi branch of the company, the new manufacturing facility could be a key factor.
The new production plant in Mexico is also included in plans for Audi to hit global annual sales of two million by 2020 and allow them to challenge luxury rivals such as BMW, Mercedes-Benz. With Mexico’s free trade agreements expanded to 44 countries, the new production plant will also help to achieve this goal. All these factors will soon have even more major auto plants being built to allow Mexico to develop into a serious car manufacturing industrial power.

IHS analyst Guido Vildozo, declared a couple of weeks ago, that two more plants were on sight. Now, several news on the internet point to BMW to be the next Plant to hit Mexico to produce Series 3. Apparently, BMW is already discussing terms with local authorities of the north and centre of the country. State of Queretaro appears to be the top contender. The Plant could start from 40,000 units, growing up to 150,000 units annually.

Other news point to Mercedes Benz considering a joint venture with Nissan for manufacturing either the A-Class hatch or the CLA four-door coupe in Mexico. Mercedes is also scouting for locations of the new plant and considering all other factors.

As Audi is setting the pace and luring BMW and Mercedes Benz into the Mexican Auto Cluster, several news over the internet remarked the interest of Tata, Infinity (Nissan) and Ferrari in Mexico.

Audi is luring the German luxury automakers to fight over the North America market. Will Mexico be charming enough to lure the others? It certainly has the infrastructure, regulation, export incentive benefits (IMMEX), the free trade agreements, qualified workers, great location and many other features. And when that happens, companies need to be prepared for an open season for resources and talent.

Aviation manufacturing finds a home in Mexico

Aviation manufacturing finds a home in Mexico

Photo credit: Copenhagen Takeoff by Julien Menichini

The aerospace manufacturing industry in Mexico has been building momentum over the last decade. The national government has been focused on developing domestic industry to build the Mexican economy. This focus of priorities has encouraged the growth of the aerospace industry from $146 million of exports in 2004 through to $3.5 billion in 2010.

The Aerospace Summit taking place in Mexico September 2013 will showcase this growth and is aimed at building further growth. The summit will allow visitors to appreciate the competitive advantages which can be enjoyed by manufacturers operating in Mexico. It also looks set to detail the logistics and business dynamics of aerospace manufacture in Mexico, with tours of plants and facilities, exhibitions and seminars from experts within the industry.

This can only strengthen the position of Mexican estimates that the aerospace industry is forecast to achieve consistent growth of up to twenty percent per year through to 2016. This would boost the economy considerably and be responsible for the creation of approximately 37,000 jobs across 350 companies.

There are numerous benefits for companies looking to establish operations in Mexico, including significant cost savings. Recent research conducted documented savings of approximately thirty percent when compared to operational costs in other countries. Mexico manufacturers currently produce engine parts, turbines, landing gear, fuselages and other components. However, there is a great effort to coordinate the resources of state and federal government together with private industry to allow the further and strengthened development of the infrastructure including education to facilitate and support further industry growth.

Mexico has been keen to welcome businesses within a number of industries including the aerospace field to encourage establishing operations. Many companies have been attracted by the lower structure of wages in Mexico which allows manufacturers to pay a fraction of the assembly wage costs in the United States. Expert analysis estimate the job costs of Mexico manufacturing is approximately ten percent of U.S costs and almost thirty percent of European costs. This could be explained as different levels of skill but Mexico on state and national levels is aggressively pursuing aerospace investment and jobs to broaden their industrial base beyond current expectations of electronics and auto-motives. This approach appears to be extremely effective as two hundred and seventy aerospace companies now have factories within various regions of Mexico.

In fact, the World Bank now reports that ninety percent of Mexico’s exports are now industrial products and their economy is now classified as the thirteenth largest in nominal terms with a ranking of eleventh for purchasing power. This explains why the label of made in Mexico is becoming more familiar and commonplace.

The geography of Mexico, free trade attitude and adoption of new legal processes are also huge factors in this industry growth. These measures have removed a great deal of the bureaucracy and red tape for foreign owned companies looking to establish production operations. It has also allowed for efficient and speedy establishment of factories which far outstrip factory creation in the European or U.S market.

All these factors combine to confirm that aviation manufacturing has certainly found a home in Mexico, where it looks set to stay in years to come. Now, you may add that automotive industry has established a blooming industry that share IMMEX (export incentive program) with aerospace manufacturing. With IMMEX program, operations reduce and sometimes, eliminate duties and taxes. Mexico is building “the” automotive/aerospace cluster.

Mexico’s Booming Aerospace Sector: an Opportunity for Many

Mexico’s Booming Aerospace Sector: an Opportunity for Many

Photo credit: Leaving on a jet plane by McPig

For years, Mexico has been quietly but steadily building itself into a manufacturing powerhouse, and automobile manufacturers have known for decades that Mexico’s highly skilled and ethical workforce are among the world’s best. It’s a well known fact that the automobile industry in Mexico is expanding at an astounding rate to meet demand and that there are plenty of opportunities in Mexico for foreign auto makers and foreign auto parts manufacturers.

However, one industry that is also booming and might not be receiving as much press as the automotive sector is the aerospace sector.  And just like in the automotive industry, there are opportunities for many foreign companies.

But first of all, it’s necessary to have a look at why a foreign company would want to set up shop in Mexico. Sometimes, some companies will set up shop abroad to take advantage of lower wages; however, this can prove to be disastrous if the workforce is not highly skilled or educated.   Mexico has a highly educated, highly skilled, and hard-working pool of human resources, making them the ideal employees for high tech and specialised manufacturing.  While their wages may not be as low as the wages employees in Asian countries may receive, they are still much lower than their U.S. and European counterparts.  Therefore, foreign companies get the best of both worlds:  great value for money.

Foreign companies operating in Mexico also get to take advantage of the free trade agreements that Mexico has with dozens of other countries.  This means access to virtually all markets in the Americas, the European Union, and some Asia-Pacific countries.

The third reason why companies, especially aerospace companies, should consider Mexico is the fact that companies can be 100% foreign owned, which is not the case in other countries trying to attract investment.  This means that the company has full control over how their business is conducted.

Opportunities

So what are the opportunities that exist in Mexico’s aerospace sector?  Well, the first big opportunity is the ability to enter the United States market without having to pay the wages that U.S. engineers and employees will expect in factories.   In other words, it’s a cost effective way to be a part of the American market and meet the needs of American clientele.  Furthermore, Mexico’s effective transport links make it easy to import raw materials if needed and export the finish product across the border.

The second opportunity for foreign companies in the aerospace sector is to set up factories for the Mexican market:  instead of paying costly shipping fees and high wages, some helicopter manufacturers from Europe have decided to make the helicopters for their Mexico clients right there in Mexico.

At present, there are over 250 companies in the aerospace sector operating in Mexico: Manufacturing and maintenance firms are expanding and the numbers of companies coming in is expected to grow as Mexico’s government is actively promoting the aerospace industry.   Making things especially attractive for foreign firms is the fact that the country provides a “soft landing” for businesses in high-tech manufacturing.  Red tape is cut to such an extent that manufacturing can start weeks or months after a deal has been signed; in other countries, this process can take years, affecting a company’s bottom line severely.

Finally, another good reason why an aerospace company should do business in Mexico is IP protection.  In an industry where design is so imperative, a rival company stealing a proprietary design can be devastating.  Mexico’s laws are strict where intellectual property is concerned.

Mexico’s aerospace industry shows absolutely no signs of slowing down and only growth is predicted; companies that take advantage of what the Spanish-speaking country have to offer will find that the opportunities are almost limitless.

Audi Could Double Mexico Production to 300,000 Units

Audi Could Double Mexico Production to 300,000 Units

Photo credit: Audi TTS by FotoSleuth

According to Audi CEO Rupert Stadler, Audi is on the path to strengthening already strong sales in the North American market with the laying of the foundation stone of automaker’s new plant in San José Chiapa, Mexico.  [This is] an important future element of the global Audi production network,” he stated recently in an Audi press release.

The new $1.3 billion Audi AG plant, set to become operational in 2016, will create 3,800 new jobs in the state of Puebla, where the plant will be located.   This will be the first factory in the Americas for Audi, and the vehicles manufactured in the plant will be the automaker’s popular Q5 SUV.

While the plant at first was intended to manufacture 150,000 units, executives at Audi have stated publicly that the plant will be large enough for 300,000 units, and there could very well be production of a Q6 SUV along with the Q5 models.

The goal of Audi AG is to make North America one of their top three markets.  Said Stadler at another press conference: “In 2020 every seventh Audi from our worldwide production will go” to North America, Stadler said in a speech at the groundbreaking ceremony in Mexico over the weekend. “Then we have reached our goal and strengthened America as a third pillar of our sales in addition to Asia and Europe.”

He further remarked at the laying of the plant foundation ceremony in Puebla“With the production of one of our most successful models here in Mexico, we will give significant impetus to our global growth and supply the extremely popular Audi Q5 from here to the world market.  By setting up a new car plant in North America, we are establishing a presence on another continent that is very important to us. In this way, we are strengthening our international competitiveness and consistently pursuing the Audi growth strategy.”

The plant will contain a paint shop, body shop, assembly line, and press shop.  The 400-hectare facility will be the Audi’s most modern and technologically advanced, and Mexico presented many benefits to the automobile maker.  The Mexican workforce is highly educated and famed for their strong work ethic, and the country’s well-developed infrastructure along with its numerous international free-trade agreements made it the ideal place for Audi to set up shop.

Furthermore, Mexico offers the best tax and business environment for automakers.  “With Mexico, Audi has made the best choice to help it develop and secure its growth,” emphasised Mexico’s Economics Minister Ildefonso Guajardo Villarreal in the same ceremony celebrating the start of the plant’s construction.

Rafael Moreno Valle, Puebla’s governor, further stated: “Our country and the new Audi location in San José Chiapa in Puebla offer the best conditions for the successful development of the entire American market. We are proud that with Audi México, the first international premium manufacturer in the automotive industry is at home in our federal state.”

On a separate occasion, Stadler mentioned that no jobs at the Ingolstadt factory in Germany would be lost when production of the Q5 shifts to Mexico; the additional demand for production cannot be met at the existing German plants.

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