Mexico Automotive Review 2015 by Mexico Business Publishing

2015

“Mexico has now become a world power in the automotive industry” Enrique Peña Nieto, President of Mexico

The more than US$19 billion in new investments in Mexico that were announced over the past two years confirm Mexico’s rise as an automotive powerhouse. Attracted by cost competitive labor, a stable business environment, and open access to the world through an unparalleled network of free trade agreements, newly arriving OEMs and their suppliers are rapidly expanding the already solid automotive ecosystem in Mexico. While most of Mexico’s automotive production is exported to more than 100 countries, and after almost a decade of stagnation, the domestic market also started showing strong signs of growth at the beginning of 2015, encouraging the automotive industry to double down on the Mexican opportunity. To ensure the long term success of the new market entrants and well established players, the Mexican government, automotive associations, academic institutions, and the private sector have joined forces to ensure that the necessary investments to solidify the industry’s sustainable growth are made in crucial areas such as human resources, supply chain development, infrastructure availability, and research and development.

At this time of unprecedented industry progression, Mexico Automotive Review 2015 is released to provide business and political leaders with the most comprehensive overview of the main industry trends, business strategies, and operational and technological achievements. The topics presented in this year’s edition give you the insiders’ perspectives on the priorities and ambitions of those who are shaping the development of the Mexican automotive industry.

ALL RIGHTS RESERVED ÂŠ Toguna, S. de R.L. de C.V., 2015. This annual publication contains material protected under International, United States and Mexican Laws and international Treaties. Any unauthorized reprint or use of this material is prohibited. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system without express written permission from Toguna S.A. de C.V. Mexico Automotive Review is a registered trademark. The publisher has made all reasonable efforts to provide accurate information, and the information contained in this publication is derived from sources believed to be true and accurate. However, the information in this publication should not be considered to be complete or definitive, and may contain inaccuracies or typographical errors. The publisher accepts no responsibility regarding the accuracy of information and use of such information is at your own risk. The publisher will not be liable to any party for any direct, indirect, special or other consequential damages arising out of any use of information in this publication. The publisher provides no representations or warranties, express or implied, including any implied warranties of fitness for a particular purpose, merchantability or otherwise in relation to any information provided by the publisher in this publication.

ISBN: 978-0-9855346-9-1

TA B L E O F C O N T E N T S 1

STATE OF THE INDUSTRY

INDIRECT SUPPLIERS

INVESTMENT & COMPETITIVENESS

RESEARCH & INNOVATION

LIGHT VEHICLE OEMS

LIGHT VEHICLE CONSUMER TRENDS

FLEETS & MOBILITY

AFTERMARKET & EQUIPMENT

HEAVY VEHICLE OEMS

DOING BUSINESS IN MEXICO

DIRECT SUPPLIERS

FUTURE OUTLOOK

10 11

HUMAN CAPITAL & EDUCATION

LOGISTICS & LOCATION

With double-digit growth in light vehicle exports to the US from 2013 to 2014, the automotive industry continues to be a fundamental cog in Mexico’s economy. Globally, the country is ranked as the seventh largest producer of light vehicles and the second largest exporter to the US market. The automotive sector now represents 6% of Mexico’s GDP, and the light-vehicle industry’s is expected to grow by nearly 70% by 2020, as a result of large investment projects entering into production. The auto parts sector is estimated to expand 30-35% by 2020, moving away from the traditional IMMEX standard and into more advanced manufacturing strategies. Comparatively, the heavy duty domestic market fell by 1.4% in wholesale, and 9.8% in retail sales during 2014. This was mainly caused by the impact of the fiscal reform, the stagnation of the Mexican economy, and imports of used heavy vehicles. Even so, the segment saw a record manufacturing year with exports reaching 124,015 units, representing a 27% rise over 2013 and sustaining Mexico’s rank as the fourth largest heavy duty vehicle exporter in the world.

This first chapter analyzes the state of the industry based on the perspectives of the leading industry representatives who provide in-depth assessments of the trends and strategies are shaping the industry’s future.

STATE OF THE INDUSTRY

CHAPTER 1: STATE OF THE INDUSTRY 6

ANALYSIS: The Year in Review

9 GLOSSARY 10

VIEW FROM THE TOP: José Rogelio Garza, Undersecretary of Industry and Commerce

VIEW FROM THE TOP: Eduardo Solís, AMIA

VIEW FROM THE TOP: Oscar Albín, INA

INSIGHT: Ildefonso Guajardo Villarreal, Minister of Economy

VIEW FROM THE TOP: Guillermo Rosales Zárate, AMDA

VIEW FROM THE TOP: Miguel Elizalde Lizárraga, ANPACT

VIEW FROM THE TOP: Guido Vildozo, IHS Automotive

VIEW FROM THE TOP: Andrés Lerch, Ernst & Young Mexico

VIEW FROM THE TOP: J. Arturo Zapata, Corporación Zapata

VIEW FROM THE TOP: Rufino León Tovar, Former Minister of Mobility for Distrito Federal

PLANT SPOTLIGHT: Nissan Aguascalientes A2

THE YEAR IN REVIEW INTRODUCTION

compared to the units reported by Brazil’s National

Mexico continues to enjoy an unstoppable level of

Association of Vehicle Manufacturers (ANFAVEA), Mexico’s

development in the automotive industry, solidifying

production during 2014 was 2.3% larger than Brazil’s

2014 as a major historic milestone in its progress. The

production, representing an additional 73,400 extra

country remained the fourth largest global exporter of

units. In July 2015, Mexico’s total light vehicle production

automobiles, and, by the end of the year, it had become

reached 1,981,869 units, showing a 6.7% growth rate

the largest automotive manufacturing country in Latin

compared with January to July 2014. This was mainly due

America, finally knocking Brazil off its spot as the seventh

to a 78.1% increase in production from Honda, as well as

largest automotive producer in the world. Furthermore,

Mazda increasing its production by 215.1% compared with

the country is now the second largest exporter to the US

2014. From January through June, the industry reported

market, with a market share of 26.1%, leaving Japan in third

record production figures, until a minor setback of 5,322

place and opening a new opportunity to reach Canada’s

vehicles occurred when comparing July 2014 to 2015. This

first-place position by the end of 2015.

was related to FCA México’s drop in production of 19.7% and GM’s 15.3%.

From a national perspective, the automotive sector continues to make an important contribution to Mexico’s

Overall, all manufacturers have shown growth between

GDP, growing 16.3% in the vehicle segment and 11.3% in the

January and July 2015, with the exception of GM and

auto part sector in 2014. On the other hand, even though

Volkswagen, which reported a production decrease of

there is uncertainty regarding global vehicle demand,

respectively 4.9% and 0.2%. If this trend continues, AMIA

Mexico’s production values are reaching record figures,

expects the country to reach 3.45-3.5 million manufactured

and the domestic market is finally reporting figures similar

units by the end of 2015.

to the sales surge in 2006. The heavy vehicle industry registered equally positive In terms of foreign direct investment, Mexico has become

figures in 2014, reaching 168,882 units with a total

a lightning rod for automotive manufacturers. From

production increase of 23.5%, with the bus segment

2000 to 2014, the country received an accumulated

growing 28.24%, while truck production increased by

total investment of US$34.653 billion in the automotive

22.88%. Between January and April 2015, Mexico presented

industry, with several major projects also being announced

a total production of 100,333 units, which puts it in seventh

for leading up to 2020, when the country will begin to

position as an overall heavy vehicle manufacturer, and

produce approximately 5 million units annually.

sixth when considering only the truck segment. According to Miguel Elizalde, Executive President of the National

PRODUCTION

Association of Bus and Truck Producers (ANPACT),

According to the Mexican Automotive Industry Association

Mexico represents a highly competitive platform for

(AMIA), Mexico manufactured a total of 3,219,786 light

heavy vehicles, strongly focused on innovation and human

vehicle units during 2014, representing an astounding

capital development. Furthermore, ANPACT has set a goal

growth rate of 9.8% compared to 2013. Furthermore,

to reach 300,000 units produced annually by 2030.

MEXICO LIGHT VEHICLE PRODUCTION, SALES, AND TRADE (THOUSAND UNITS) 3,500

Production Exports Sales Imports Sales of Cars Manufactured in the Country

3,000 2,500 2,000 1,500 1,000 500

Source: AMIA

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

EXPORTS

LIGHT VEHICLE EXPORT DESTINATIONS (UNITS)

In 2014, Mexico exported a total of 2,642,887 light 8,032

of Mexican Exports vehicle units, recording a Main 9.1% Destination growth when compared

8,040 9,269

to the 2,423,084 vehicles reported 2015, US in 2013. By July Argentina the country reached a total ofCanada 1,631,969 exported units, Arabia

25,116

representing an increase of 8.4% compared to Chile the same Germany

1,153,660 79,398

26,424

period in 2014. Honda and Mazda were the companies Brazil Arubathat

34,678

showed the largest growth, withColombia export increases Others of 163.4% and 270.7% respectively. Just as with production figures, China

45,087 63,441 178,824

January through June 2015 presented steady growth compared to the figures of 2014, until July presented almost the same decrease, with 5,423 less units exported. During July 2015, four companies presented a reduction in their exports - FCA México with an 11.0% decrease, Ford

Argentina

with 6.3%, Nissan with 15.1%, and GM with a decrease of

Canada

Arabia

23.1% - which was mitigated by export increases from

Germany

Chile

Honda and Mazda of respectively 114.0% and 62.9%.

Brazil

Aruba

Colombia

other

Considering the numbers from January through July, only GM and Nissan showed an export decrease of 9.6% and

China

1.3% respectively.

Source: INA

In terms of export destinations, the US remains the

DOMESTIC MARKET

main market for Mexican vehicles with 1,153,660 units

In 2014, AMIA reported total sales of 1,135,409 light vehicle

and a 70.7% share of the country’s total exports in 2015,

units, which is very close to Mexico’s all-time maximum

followed by Canada and Germany. “Our export volumes to

of 1,139,718 in 2006. By the end of 2014, domestic sales

Canada have grown more than 27%, making this country

represented 16.6% of the total domestic production,

our second largest export destination. In Latin America,

growing 2.6% compared with 2013 to 534,795 units,

Colombia

important

meaning that 600,614 of the sold cars were imported.

destination and the fifth largest one on a global scale, just

now

Mexico’s

second

most

Furthermore, from January to July 2015, the country has

after Brazil,” explains Eduardo Solís, Executive President

seen total sales of 721,539 new cars, representing a 20.9%

of AMIA. “Germany remains in third position, while China is

increase over the 596,571 units sold during the same

currently in sixth position as Mexico’s main destination for

period in 2014. This shows that Mexico is finally recovering

the Asian market.”

from the 2007-2008 crisis, creating strong expectations that record numbers will be reached by the end of 2015.

Last year was a record year for the heavy vehicle industry,

Unlike production and exports, sales numbers in 2015

with a 27% increase in exports compared to 2013. Mexico

have continuously increased each month in comparison

is still the fourth largest exporter in this segment, as well

to 2014, with only Jaguar, Land Rover, Renault, and Smart

as being the second largest for trailers, as Mexico exported

reporting negative variations from 2014 to 2015 between

only 1,337 fewer trailers than Germany in 2014.

January and July. Additionally, KIA Motors’ arrival to the

MEXICO HEAVY VEHICLE PRODUCTION, SALES, AND TRADE (UNITS) Production

200,000

Exports Retail Sales Imports

150,000

100,000

50,000

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

Source: AMIA

market and Hyundai’s full establishment in the country are

2019. Toyota has also announced an expansion project for

expected to have an important impact on Mexico’s overall

its plant in Tijuana to increase its production by 40% during

sales numbers.

2015. Moreover, KIA has revealed its new plant project for Pesqueria, Nuevo Leon, making it the first Korean OEM to

Within the imported vehicle arena, Mexico has also seen

establish in Mexico. Even though this was the last plant to

major achievements. Even though NAFTA regulations

be announced, it will be the first one to start operations.

now allow used cars of at least four years old to enter the

Construction started in October 2014, and the plant is

country, figures from January to June 2015 show an all-time

scheduled to begin operations by May 2016, making it the

low, only comparable with numbers from 2009. During the

fastest constructed KIA plant in history.

first half of this year, AMIA reported only 83,464 imported units, representing a 69.5% decrease compared to the

The first half of 2015 was also full of excitement, since

273,256 vehicles reported for the same period in 2014.

Volkswagen had by March announced its US$1 billion

Nevertheless, since 2014 there was a notable difference

expansion plan for its plant in Puebla. This project will be

in the number of imported units, with a 29.3% reduction

focused on the new Tiguan and it will take Volkswagen to

compared to 2013. This was possible thanks to stricter

a 500-unit daily rate of production. GM is also continuing

regulations regarding the condition of the vehicles and the

with its US$5 billion investment plan for all its facilities,

elimination of injunctions to skip these legislations.

scheduled to conclude by 2018.

On the other hand, the heavy vehicle segment was not as

In April 2015, two more announcements were made.

successful as in 2013. According to ANPACT, wholesales

Toyota revealed its plans to establish a manufacturing

dropped by 1.4%, while retail sales decreased by 9.8%.

plant in Guanajuato in which it will invest US$1 billion in

“There were macroeconomic reasons for this situation,

this facility to create a 200,000 unit production capacity.

such as the volatile global environment and lower growth

Two days later, Ford announced a major investment plan of

in the segment compared to what was forecasted,” claims

US$2.5 billion, divided between the construction of a new

Elizalde. “Nevertheless, there were also strong internal

transmission plant in Guanajuato, as well as an expansion

reasons including the neglected scrapping program, as

for its engine plant in Chihuahua, and a whole new plant

well as the challenging situation regarding imported

also in Chihuahua. With these two projects, Guanajuato

units.” Even so, the forecast for 2015 is quite positive, as

has now become the biggest state for the automotive

the federal government has now updated the scrapping

industry, boasting six OEMs within its borders.

program. This is expected to impact 35% of the national AUTO PARTS

fleet, targeting both new and used vehicle sales.

Consisting of 860 companies, the auto parts segment now OEM INVESTMENT

represents 7.4% of the manufacturing GDP in Mexico. This

Investment for plant expansions and new facilities

sector currently represents 11.8% of the total manufacturing

continues to flow into the country, and various investment

exports, as well as 18% of the jobs in the manufacturing

announcements were made during 2014. Daimler, along

industry, and is expected to grow 35% by 2020. Between

with the Renault-Nissan Alliance, shared its investment

January and April 2015, auto parts production reached

plan of US$1.3 billion to annually manufacture 300,000

US$26.9 billion, representing an increase of 0.2% compared

Mercedes-Benz and Infiniti units at a brand new plant

to 2014. Meanwhile, sales increased by 1.1% in the same

in Aguascalientes. Construction will begin in 2015, with

period, reaching a grand total of US$27 billion.

the first models to be produced in 2017. Following that announcement, BMW disclosed a US$1 billion project for a

To support the auto parts segment, the government

new production facility in San Luis Potosi to manufacture

and Bancomext have relaunched the ProAuto program

150,000 annual units, expected to be ready no later than

to help Tier 2 and 3 companies develop as suppliers for

TOTAL VEHICLE, TRUCK, AND BUS PARK (MILLION UNITS) Total Vehicle, Truck and Bus Park (million units)

2013

24,134,019

2014

25,092,186

2015

25,917,518 0

Fuente: Source: INEGI

9,462,501 9,807,701

347,114

10,247,364 5

INEGI

339,831

352,083 35

major Tier 1 companies. Most OEMs have the objective of maximizing local sourcing, and according to José Rogelio Garza, Undersecretary of Industry and Commerce, the

| GLOSSARY

government is now focusing on identifying the strongest areas of opportunity for local players in order to strengthen

AIAG

Automotive Industry Action Group

the local supplier network.

AMDA

Mexican

Association

Automotive

Distributors HUMAN CAPITAL

AMIA

Mexican Association of the Automotive Industry

The large number of new projects arising and a continuous evolution of the industry, the competition for specialized

AMPIP

Mexican Association of Industrial Parks

human talent has reached a new peak. Areas like

ANPACT

National Association of Bus, Trucks, and Tractors Manufacturers

Guanajuato are filling up with new companies, and other regions like Nuevo Leon are expected to experience

ANTP

exponential growth in the near future. Therefore, it has

B-segment The subcompact car segment

become a priority for every player in the industry to

BIW

develop technicians and engineers with the right abilities

CANACAR National Trucking Chamber

to enter the automotive sector, as well as continuously

CANACERO National Chamber of the Iron and Steel

National Association of Private Transport Body in white

Industry

train and retain these skilled workers. The German-born dual-education program is now gaining ground with

CBU

Complete Built Up

several companies in the industry, with CONALEP as one

CIDESI

Center for Engineering and Industrial Development

of the main institutions devoted to educating the next generation of technicians. Additionally, this has attracted

CIIAM

International Congress of the Automotive Industry in Mexico

the attention of universities like UVM that are now working on professional technician programs to address the

CKD

needs of the industry at a more specialized level. At the

CONACYT National

Council

for

Science

and

Technology

same time, several automotive clusters throughout the country are directing their strategies toward education.

Complete Knock Down

CONATRAM Mexican

National

Confederation

Transport

In collaboration with the Ministry of Education, these associations are now helping to create new and more

C-segment The compact car segment

effective education plans, so newly graduates need less

DEF

Diesel Exhaust Fluid

training when they start working. States like Queretaro

Electric Vehicle

are planning to build their own universities purely focused

FTA

Free Trade Agreement

on the automotive sector, while others like Chihuahua

Hybrid Vehicle

are focusing their efforts on structuring their education

IMMEX

Maquiladora Manufacturing Industry and Export Services

programs according to the strongest manufacturing areas in the state. Furthermore, AMIA has founded the National

INA

National Auto Parts Industry

Group of Academic and Research Institutions for the

INDEX

National Council of the Manufacturing, Maquila, and Export Service Industry

Automotive Industry, which is committed to promoting national and international research projects in the country,

KPI

Key Performance Indicator

as well as proper education for the automotive sector.

MPV

Multi-Purpose Vehicle

“This is the perfect moment for Mexico considering the

NAFTA

North American Free Trade Agreement

average age of our engineers is 27 years. Our economically

NOM

National Mexican Norm

active population is expected to double, translating into a

OEM

Original Equipment Manufacturer

brutal opportunity,” claims Solís.

PHV

Plug-in hybrid vehicle

PHEV

Plug-in hybrid electric vehicle

RESEARCH & DEVELOPMENT

PLM

Product lifecycle management

Mexico will continue promoting itself as a strong R&D and

PROTRAM Program to Support Federal Urban Mass Transportation

engineering destination for automotive companies. Mexico currently produces 80% of the total high-tech exports from

REPUVE

Vehicular Public Registry

Latin America, and the country has more than 30 R&D

SAT

Tax Administration Service

centers managed by the public and private sectors, as well

SCT

Ministry

Communications

and

Transportation

as several educational institutions. This is one of the four main directives where the Ministry of Economy is placing

its efforts, as it collaborates with PROSOFT and CONACYT

SEMARNAT Ministry of Environment and Natural Resources

in order to develop the right strategies for incentivizing these projects.

Ministry of Economy

VIN

Vehicle Identification Number

| VIEW FROM THE TOP

THE PILLARS OF THE MEXICAN AUTOMOTIVE INDUSTRY JOSÉ ROGELIO GARZA Undersecretary of Industry and Commerce

Q: What have been the Ministry of Economy’s strategies

proposition for potential investors, preparing the country

to attract new investments in the Mexican automotive

for any economic eventuality we might face. Finally, the

industry?

fourth pillar has been the Energy Reform. This has added

A: 2014 and 2015 have been really good years for the

incentives to reduce Mexico’s energy costs, making us

automotive industry, given that we have managed to

more competitive in the international market. During 2014,

complete investments that we started working on a few

industrial electricity decreased from 20% to 15%, which

years back. In general, there are four main factors that

had huge repercussions on the image that new companies

make Mexico an attractive destination for these and

have of the country. These four pillars have made Mexico

many other projects. Firstly, we have our extensive FTA

the ultimate automotive destination, offering investment

network. The fact that Mexico is a gateway to other global

security and promising potential for international business.

economies gives manufacturers the opportunity to place their products in 45 countries, making Mexico a truly

Q: How have programs to develop the local supply chain,

attractive option in this globalized industry. Secondly, we

such as ProAuto, evolved in the country?

have developed a successful strategy for the development

A: ProAuto is the specific program we have developed for

of human capital. We are currently producing close to

the automotive industry, aligning several public policies to

100,000 engineers annually, and we have structured our

help SMEs develop in the automotive sector. However, this

education plans to address the needs of the automotive

program has evolved substantially. We have moved past

industry. The backbone of this program was to transform

our initial efforts and are now focusing on the industry’s

Mexico from a low-value manufacturing location into a

most important demands, identifying possible areas of

high-tech production hub for both the automotive and

opportunity for our local players. This strategy has led us to

aerospace industries. We have already started to manage

focus on seven main segments, namely forging, stamping,

design, engineering, and innovation processes, as well as

machining, plastic injection, molding, pressing, and die

working closely with the industry through technological

forming. We now center our attention on these areas, while

institutions. The third factor has been the promotion

searching for and developing specific suppliers within the

of engineering and R&D activities in the automotive

local network. The Ministry is working with big players in

sector. This has allowed us to create a stronger value

the industry that are looking to increase the local content

TOTAL FDI SECTOR 2000-2014 (US$ million) Total FDI byBY Sector 2000-2014 (Million Dollars) 200,000

745.70 Entertainment

923.20

187.90 Health

13,103.50

332.30

6,384.50 Business Support

Education

7,908.30 Professional Services

13,972.50

66,247.40

15,527.80

5,891.40

12,495.80

4,649.60

50,000

1,025.60

100,000

22,015.20

150,000

31,003.60

173,286.20

Total US$375.7 billion

Fuente: Ministry of Economy Source: Ministry of Economy

Other

Temporary Housing

Real Estate

Financing

Mass Media

Transportation

Commerce

Manufacturing

Construction

Water and Electricity

Mining

Agricultural

in their production. We are looking for mutual gains by

For that reason, the automotive industry was the most

encouraging supplier development. Given that most OEMs

supported sector by CONACYT in 2014. The biggest

have an established supplier base, it is difficult to develop

challenge is to encourage the industry to keep investing

a new Tier 1 company. However, we are in touch with all the

in engineering and high-value manufacturing operations.

OEMs and Tier 1 suppliers coming to the industry, and we

In order for companies to create a stronger bond with the

are focusing our efforts to support Tier 2, Tier 3, and Tier

country, we need to convince more of them to bring their

4 suppliers. Additionally, if OEMs or Tier 1 companies need

R&D operations into Mexico, which also makes it more

larger production volumes from smaller suppliers, we can

difficult for them to withdraw their operations in the event

work with Bancomext to offer them financing solutions for

of an economic crisis.

expanding their operations. Once we identify the need, we can determine the areas of opportunity in terms of labor,

Q: How will the Energy Reform, and the increasing role

capacity, or even certification and engineering processes.

of natural gas, influence the development of the Mexican automotive industry?

Q: How does the Ministry of Economy incentivize engineering

A: We see natural gas as a really attractive alternative to

and R&D processes in the automotive industry?

make the industry more cost-competitive. As we move

A: We establish all the industrial policies for the country and

toward combined cycle power generation processes, we

are working closely with Program for the Development of the

are able to offer better electricity tariffs. Even though we

Software Industry (PROSOFT) and National Council for Science

have already reached a 20% decrease in energy costs, we

and Technology (CONACYT) to develop the best strategies to

expect to achieve further reductions in the future.

help these companies settle in Mexico. The Ministry of Economy (SE) manages all different industries vertically, while promoting

Q: How is the government working to develop the

local supplier development, clustering and regionalization,

infrastructure needed to bring electric and hybrid vehicles

innovation, and human capital horizontally. In order to incentivize

to the market?

engineering processes, we first need to develop the proper human

A: The Energy Reform states that the government must

talent for these operations. There are several companies that

work on all the necessary projects to incentivize the use

already have innovation centers in Mexico, and we can proudly

of these new technologies. Hence, the SE is working to

say that they are filled with young Mexican engineers developing

develop the best conditions to promote investment in

the components that will be used in future operations. In terms of

these areas. We have created several incentives to promote

human capital, together with the industry and with the Ministry of

the introduction of these technologies and the creation of

Public Education (SEP), we have developed technical universities

the required infrastructure. As this process evolves, more

in the Bajio, creating specific programs for the automotive sector,

companies will consider Mexico to be an attractive location

as well as in Puebla and every other automotive-oriented state.

to market their products. We have already visualized what needs to change in the country, and we are working on the

Our job is to create proper incentives to encourage more

best projects for the network and the public infrastructure

companies to bring their R&D operations to the country.

the industry needs.

Total FDI (Million TOTAL FDIby BYCountry COUNTRY (US$Dollars) million) 200,000

2,080.60

1,968.10

1,409.40

1,046.30

Korea

Singapore

Panama

1,356.70 Sweden

Brazil

1,836.50 France

7,866

2,066.40 Denmark

Japan

5,678.60 Luxemburg

8,409.50

9,020.70 Germany

Switzerland

9,570.90 UK & N. Ireland

15,998.80

48,121.40 Spain

Belgium

49,513.70

50,000

Canada

22,780.70

100,000

Netherlands

171,543.30

150,000

Total US$375.7 billion

Fuente: Ministry of Economy

Source: Ministry of Economy

| VIEW FROM THE TOP

MEXICO’S EXPONENTIAL AUTOMOTIVE PROSPERITY CONTINUES AS PLANNED EDUARDO SOLÍS Executive President of the Mexican Association of the Automotive Industry (AMIA) Q: Following record OEM investment in Mexico, what is

Q: What must be done for Mexico to become the number

your perspective on how the automotive landscape has

one light vehicle exporter to the US?

shifted over the last 12 months?

A: If Mexico is able to continue its double-digit growth,

A: Mexico exports 82% of its manufactured products,

we will of course meet that goal, but the key element to

making it the fourth largest exporter in the world. In 2014,

analyze is how Canada performs. Currently, Mexico is the

the country became the largest producer of vehicles in Latin

number two supplier of new vehicles to the US thanks to

America for the first time, and the seventh-largest producer

us passing Japan on the charts in 2014. Of all the vehicles

of vehicles worldwide, overtaking Brazil. When NAFTA was

sold in the US, 11.5% were manufactured in Mexico, which is

negotiated in the early 90s, Mexico was producing around

a huge increase in volume. The country is growing at more

6-7% of the total vehicles in the region. Today, that figure

than twice the pace of domestic sales growth in the US.

is closer to 19%, exceeding Canada’s production of 16%. In

Incidentally, our volume of exports to Canada has grown

six years, around 27-28% of total NAFTA vehicles will be

at a pace exceeding 11% from January to July 2015, making

produced in this country. Mexico will definitely continue

this country our second largest export destination.

to be a key automotive player, and will perhaps scale one or two more positions in terms of global production,

Speaking of other markets, Mexico consolidated its Pacific

depending on what other countries do.

Alliance in 2014, including the markets of Peru, Chile, and Colombia. Colombia has become Mexico’s second largest

The overall light vehicle production figures for the country

export destination in Latin America, as well as our fifth

will certainly exceed 5 million units by the end of 2020.

largest global export destination. Given the extensive volume

2014 was a year in which new plants were established

of Mexico’s exports, entering into new trade agreements is

in the country, by OEMs such as Mazda and Honda. The

a vital part of the country’s DNA, so expanding preferential

growth rate from the beginning of 2014 to the end of 2020

access to other countries will remain key.

will reach nearly 70% as a result of higher investment in existing plants in Mexico, combined with the greenfield

Q: The first half of 2015 has seen the best domestic sales

investments that we have been witnessing over the last

figures since the same period in 2006. What are the main

few years. We are going to see the arrival of new brands

factors that have allowed Mexico to achieve this sales

over the next 4-5 years, ensuring that AMIA’s forecast of 5

success?

million units is a sure bet.

A: This statistical success during the first half of 2015 has been influenced in some way by the comparison with more

Q: To what extent are major OEMs collaborating on

depressed figures. For example, Q1 2014 was a terrible

initiatives to boost the Mexican automotive industry, or is

period for domestic sales; we even saw negative growth in

there a predominant focus on competition?

some of those months. The other aspect of this success has

A: The OEMs are absolutely at a level of competition. Our

been our work with the government to mitigate the import

domestic market is growing, but it is still at least 600-700,000

of used vehicles into Mexico. A decree that is part of NAFTA

vehicles below the level at which it ought to be. We are going

allows Mexico to prevent the importation of used vehicles

to end 2015 with a domestic market close to 1,280,000

that are restricted or prohibited from circulation due to

vehicles when it should be closer to 1.9 million. With those

their technical or physical condition, as well as those that

kind of statistics, it is clear that competition will be fierce, with

have been reported stolen, while it also regulates emission

those same brands competing all over the world. In terms of

standards of imported vehicles. The applicable legal

exports, 71% is directed toward the US market, which reaches

provisions set by the Mexican federal government define

82% when combined with the Canadian market, so all the

which vehicles qualify for importation, but injunctions were

brands located in Mexico understand that this is one of the

used as a way of circumventing this decree. In the years prior

single most competitive industries in the world.

to 2015, 95% of the units were imported through injunctions,

but during the first six months this year, the importation

A: This is more a result of Mexico’s success than AMIA’s.

of used vehicles dropped 69.6% after the Supreme Court

Mexico has a demographic pyramid that translates into

(SCJN), in October 2014, gave its jurisprudence to establish

opportunities because of the youth of the population.

the decree as being constitutional. This also paved the way

Mexico has more engineering graduates than countries

for fighting the current injunctions that were in place, as

like France or the US. The average age of research center

well as preventing new ones from being filed. It took some

employees in the US is 55 years old, while in Mexico it is 27.

months for the federal government to fight the injunctions

The problem for the US is that within the next five years

that were already in place, but the last one was dropped

20% of the country’s engineers working in engineering

by mid-March 2015. As a result we no longer have imports

centers will retire. This gives Mexico a tremendous

taking place through injunctions, meaning that everybody

opportunity to grow in the R&D area, which is why we

now has to comply fully with the decree. This development

created a national group of higher education and research

is tremendous good news and will jumpstart the movement

centers in Mexico called Grupo Nacional de Instituciones

of Mexico’s secondary vehicle market, reinvigorating the

Academicas y de Investigacion de la Industria Automotriz.

renewal chain all the way up to new vehicles. Even with this good news, we have to continue to focus on expanding the

We believe that if we work together on an agenda that

domestic market.

would better prepare Mexico to grasp these opportunities, we are going to better position ourselves in areas like

According to NAFTA regulations, starting from January

human resources, infrastructure, and the linkage between

2009 the Mexican government could not outlaw the entry

global and national universities. These are common areas

of used vehicles older than ten years. Since then, every two

that higher education centers and research centers ought

years the regulation is updated, reducing the age of cars

to be discussing together. The group is open to any

that cannot be blocked from importation by increments of

universities and research centers that are currently related

two years, until in 2019 all age related import restrictions

to the automotive industry and want to be involved, and

will be removed. In 2015, vehicles that are older than four

currently consists of higher education institutes, such as the

years can enter the country, only requiring a 10% duty

National Autonomous University of Mexico (UNAM), the

payment and 16% value-added tax (VAT).

Monterrey Institute of Technology and Higher Education (ITESM), and the National Polytechnic Institute (IPN), as

Q: How has the Fiscal Reform helped to accommodate

well as research centers from OEMs, Tier 1 companies,

the increasing demand for new car financing, and how

and the National Council for Science and Technology

are companies beginning to capitalize on the resulting

(CONACYT). The creation of this group represents the

new opportunities?

first time that these institutions are working on a common

A: There are two areas that need to be worked on in

agenda, and it will allow us to assess what we need to do

regards to this subject. One is the substantial amount of

to develop research and innovation activities in Mexico.

informal jobs in Mexico. More than 60-65% of the active economic population is informal today, making it very

Q: Within the ProAuto program, how can AMIA utilize

difficult to reach them, and even more difficult to offer

its resources to help bolster SMEs within the Mexican

credit to them. With this huge chunk of the population

supply chain?

not being part of the formal banking system, we need to

A: There are certain aspects that will need to be in place if

do something to allow us to offer them credit when they

the ProAuto program is going to succeed. Any companies

need it. Once we have worked on improving this, it is a

that are working to further expand the supply chain will

question of how we then deal with those who default on

need to coordinate within a single-window operation

their payments. Mexico is not very efficient when it comes

that will enable this to happen. There also needs to

to returning vehicles to the creditors. It can sometimes

be enough budget to develop the automotive supply

take up to a year to repossess a car, working against the

chain, especially in the Tier 2 area. Tier 1 suppliers are

financing companies and the banks. These companies are

currently importing close to 90% of their needs from Tier

not as prone to expanding credit to a certain segment of

2 companies in other parts of the world, so we have to

the population when this challenge is a reality, so we must

translate that into opportunities for Mexico. The ProAuto

continue to push for changes that will allow creditors to

program will of course help to develop more suppliers,

operate under a little more security and haste.

but they do not have to be Mexican. It would also be beneficial if ProMexico could bring the right investors into

Q: How successful has AMIA been in convincing companies

the country, as this would further develop Tier 2 suppliers

of the value of Mexican Research & Development (R&D)?

that were already importing products.

| VIEW FROM THE TOP

CONTINUOUS PROMOTION OF QUALITY SPURRING LONGTERM GROWTH OSCAR ALBÍN Executive President of INA Q: While the production of vehicles in Mexico advances to

China, India, Mexico, and Brazil, automobile manufacturing is

4 million units, the production growth of auto parts has

still an engaging career path, and automotive corporations

been slower. What are the main reasons for this difference?

are more accessible than other industries.

A: Mexican auto parts production does not grow at the same rate as vehicle production, mainly because the

Q: In the case of Mercedes-Benz, which will be sharing

new OEM manufacturing plants are already facing many

production with Nissan, do you expect it to use local

variables that may threaten their overall success, such as

suppliers like Nissan or import its own auto parts?

new facilities, new suppliers, labor, and all the pitfalls that

A: Mercedes-Benz already manufactures buses and trucks

come with operating in a new country. This explains why

in the country, but this production is very different from the

they prefer to use a large proportion of components that

vehicles fabricated in the Nissan plant. For this reason, there

are imported from their home countries, at least for the

is a high probability that Mercedes-Benz will use strategic

first generation of automobiles. Once vehicle production

suppliers from its home country. The first generation of

advances, more auto parts from local suppliers are

vehicles will be closely watched by Stuttgart and Tokyo to

introduced. It is expected that between 2013 and 2020,

ensure the quality and status of the Mercedes-Benz brand.

the automotive industry will grow by 50%, with auto parts

For the second generation, or even for half of the first,

production increasing by 30-35%.

Mercedes-Benz may start to consider national suppliers. There is no problem with sourcing Mexican auto parts in

Q: What are INA’s strategies to encourage OEMs to use

the luxury segment, given that 60% of them are already

local suppliers?

exported to the US for manufacturers like Mercedes-Benz,

A: It is important to present Mexico’s manufacturing

BMW, Cadillac, and Lincoln. Many Mexican auto parts are

capabilities to OEMs entering the country, since they do not

already used in premium automobiles, but the difference is

yet perceive Mexico as solid ground in terms of component

that now they will be assembled in Mexico.

production, despite the fact that we are the fifth largest

auto parts producer internationally. Essentially, INA has

Q: How does INA work with the government to both

to promote the quality of Mexican production. OEMs that

support the development of Mexican manufacturers and

have been in the country for 50 years have strategic local

attract international companies?

suppliers, and they are producing their cars with Mexican

A: INA is working alongside the Mexican government

auto parts. Currently, the challenge is to increase the

to help suppliers develop while offering them support,

proportion of local auto parts used by new market entrants

especially those that are not ISO, TS, or VDA certified. By

like Mazda, Honda, KIA, BMW, and Mercedes-Benz. INA

doing this, we intend to incorporate them into the OEMs and

organizes 15 events a year to meet with the purchasing

instruct them on processes like molding and injection. The

directors of each OEM and learn about their purchasing and

Ministry of Economy is promoting such projects through

supplier development strategies for Mexico. Normally, the

the National Institute of Entrepreneurship (INADEM), and

sourcing decisions are centralized, which means that the

its main focus is the growth and certification of Mexican

supplier designation is not made in Mexico but in Germany,

companies. In the last three years, 150 corporations have

Japan, or the US. We therefore invite the company directors

received instruction and certification by the Automotive

from these countries to give them firsthand experience

Industry Action Group (AIAG), which certifies many North

with Mexican quality products. The crucial factor for foreign

American companies. INA offers economic aid for up to

OEMs is the availability of engineers in Mexico. Globally,

50% of the cost of these processes. We are also working

young people are no longer interested in pursuing a career

with ProMéxico to attract foreign investment since not all

in engineering, and prestigious automotive companies have

the products that are imported can be produced in Mexico.

lost their technological appeal, except when it comes to

If we want to use local products, we need to attract

communication technologies. However, in countries like

companies that specialize in certain types of technology.

Q: What has led automotive companies to migrate from

Q: As executive president of INA, what are your ambitions

the North Region to the Bajio?

until the end of your term?

A: Ten years ago, 85% of the vehicles produced in Mexico

A: Our main objective is to develop more effective public

went to the US, which is why manufacturing plants were

strategies and create opportunities for the automotive

being established in the north, further capitalizing on the

industry. There needs to be an entity that can motivate the

region’s logistical advantages. Now the percentage has

government to focus on the need for roads, ports, security,

dropped to 65%, and automobiles are increasingly shipped

and education, making Mexico a more attractive place for

by sea to Europe and South America, through ports like

foreign investment. This is the goal that INA, along with

Veracruz, Altamira, and Lazaro Cardenas, which are closer

AMIA, ANPACT, and AMDA, is striving for. We need to

to the Bajio region. Auto parts, on the other hand, travel

make sure that the government seizes this opportunity by

by truck and train, making it possible to export 95% of the

demonstrating the benefits that the automotive industry can

production to the US and Canada. However, assemblers in

bring to the country in terms of technology, economy, and

the Bajio need to have their suppliers close by in order to

development, as well as the possible areas of improvement

reduce costs.

to both Mexican industry and the internal market.

PRODUCTION OF AUTO PARTS

SALES OF AUTO PARTS

0.4% 0.7% 1.3% 1.4% 1.4% 1.5%

0.4% 15.7% 0.7% 1.3% 1.4% 1.4% 1.5%

2.3% 2.5%

0.4% 21.1% 0.7% 1.4% 1.3% 1.4% 1.5%

15.7% 21.1%

2.3% 2.5%

4.1%

11.8%

2.2% 2.8% 11.8%

4.1%

4.5%

4.1%

4.5%

6.8%

Electrical parts electrical parts

9.4% 6.8%

8.5%

Electricalaccesories parts

2.2% 2.8%

21.1%

11.7%

4.5% 9.4% 6.6%

6.6% 6.9%

8.5%

Carpets & seats automotive Carpets & seats automotive carpets & seats automotive prints

15.7% 21.1%

4.1%

4.5%

9.4% 6.6%

6.6%

15.7%0.4% 0.7% 1.4% 1.3% 1.4% 1.5%

8.5%

6.9%

9.4% 8.5%

Brakes and parts

Brakes and parts brakes

rubber products

Automotive and tire

Automotive and tire automotive & tire

glass & windshields

Bodies Transmissions, clutches Transmissions, & parts clutches & partsBodies suspension & steering transmissions & clutches bodies Oils, lubricants & fluidsOils, automotive lubricants & fluids automotive Engine parts Engine parts engine parts oils, lubricants & fluids diesel engines Automotive rubber products Automotive rubber products Gasoline engines Gasoline engines

cooling other

gasoline engines Glass, automotive glass Glass, & windshield automotive glass & windshield Accesories and parts for Accesories automóviles and parts for automóviles Prints and Parts

Prints and Parts

Suspension, steering &Suspension, parts steering & parts Diesel engines

Cooling

Other

Source: INA

Diesel engines

A LONG-TERM AUTOMOTIVE COMMITMENT

Ildefonso Guajardo Villarreal, Minister of Economy

While most of the focus

segment and what it has done for the automotive industry.

lies on the development

“Fifty years ago we were planning to build an auto parts

and

industry in the country, but we could have never imagined

OEMs within the Mexican

large

suppliers

what all these companies have achieved,” he explains. “The

automotive industry, it is

history of this sector began in 1962 with the Automotive

important not to overlook

Decree, and its companies succeeded in manufacturing

the

that

individual auto parts for vehicles that are distributed to 120

the auto parts industry

significance

countries all over the world. Nowadays, 51% of auto parts

and

automotive

are exported, with the sector showing an approximate

also

play

annual growth of 9% since 2007, which gives us an idea of

the

aftermarket

in this growth. In April

the segment’s growth potential. Currently, the auto parts

2015, during the opening statement for the 5th edition of

segment represents 7.4% of Mexico’s manufacturing GDP,

Expo INA, the Minister of Economy, Ildefonso Guajardo

11.8% of the total exports, and 18% of the total jobs in the

Villarreal, conveyed his recognition for the auto parts

manufacturing industry.”

| VIEW FROM THE TOP

OVERCOMING BARRIERS TO BOLSTER DOMESTIC MARKET GUILLERMO ROSALES ZÁRATE Director General of AMDA

Q: While Mexico’s mass market has commonly viewed

inching closer to the 1.139 million units sold in 2006. This does

price as being more important than quality, what

not necessarily reflect industry growth, but rather a recovery.

alterations to this trend has AMDA seen in recent years?

That is why we expect sales to increase to 1.2 million units by

A: Even with the extreme competition in all market segments

the end of 2015, which will be equivalent to 5.4% or 6.4% of

in Mexico, the market is still oriented toward consumer

growth, but we should continue to take into account some

needs and demands. Price is the dominant factor, as shown

limiting factors in relation to the domestic demand.

by subcompact cars claiming 33% of the total sales in the country, as well as compact cars reaching 27% at an average

Q: What are the main factors hindering the growth of the

cost per car of MX$250,000 (US$16,667). However, the

domestic market today?

competitiveness of the domestic market has forced OEMs

A: The primary issues affecting the industry have remained

to increase the quality of their cars substantially. It is now

static for some time. Mexico is faced with a massive amount

no longer enough to compete on price because further

of used vehicles that are illegally imported from the US, as

reductions are impossible, which only leaves the alternative

well as insufficient options for credit and financing, and a lack

of raising the quality of the vehicle and offering a better sale

of fiscal incentives. The main topic that we must take into

and post-sale service. Maintenance services, complementary

consideration in the short term is access to credit. In 2013,

financing services, insurance, and extended warranties are all

56% of cars were bought with bank credit, rising to 60% in

part of a wider range of products now on offer.

2014. Even though this is an improvement, it is still below the 70% expected for the industry or the 90% seen in the US.

Q: What factors led to the growth prediction of 6.1% in

One of the barriers that block the accessibility of credit is the

domestic sales in 2015, and why was there a decrease

informal economy. Even if clients in this segment have the

from the 6.8% predicted in 2014?

necessary resources to apply for financing, they cannot prove

A: Despite the final figure of 1.135 million vehicles sold and

their income without engaging in formal employment. In the

6.8% growth, the development of the market in 2014 was

case of imports, the problem is much more complicated.

complicated. There was irregular behavior throughout the

Given the oversupply of imported used vehicles, the domestic

year, with a drop of 0.8% that was closely related to the

market is not able to compete, breaking the chain of vehicle

implementation of the Financial Reform, which included

renovation and keeping old cars in circulation.

a value added tax rise from 11% to 16% in northern frontier

states and a reduction of deductibles for new vehicles.

Q: What is AMDA doing to make sure that the government

Its impact was directly reflected in Mexico’s Consumer

applies the necessary changes to future regulations?

Confidence Index, as it dropped from 93.6 in December 2014

A: As for vehicle imports, improved regulations are now

to 90.3 in February 2015 according to Banco de México. In

being implemented. In 2014, the Ministry of Economy,

macroeconomic terms, there was no real explanation for the

the Ministry of Environment (SEMARNAT), and Tax

market variations. The drop in sales appeared due to fiscal

Admnistration Service (SAT) joined forces in order to

changes that were expected to have deeper and longer

make the regulation lineaments constitutional, preventing

repercussions. In order to turn things around, strong measures

the use of injunctions as a means to violate commerce and

were taken to move inventories, to reassure consumers about

emissions regulations. SAT now requires the expedition of

the long-term value of automobiles, and to involve financial

export certificates from the US, helping to avoid the sale of

corporations associated with the automotive industry. As a

stolen vehicles. Separately, SEMARNAT is now demanding

result, we were able to achieve the sales goal that was set

a current emissions certificate no older than six months.

at the beginning of the year, gaining an increase of 13.1%

Additionally, the hours for automobile importation have

from July to December and compensating for the drop in

been reduced from 09:00-12:00, Monday to Friday,

the first quarter. Now, after five years, Mexico has returned to

resulting in a reduction in the number of imported vehicles

the sales levels that were seen before the 26% drop in 2009,

from 644,209 cars in 2013 to 455,372 in 2014.

| VIEW FROM THE TOP

HEAVY VEHICLE MARKET LOOKING FOR GROWTH OPPORTUNITIES MIGUEL ELIZALDE LIZÁRRAGA Executive President of ANPACT Q: Mexico’s truck sales are currently 37% below its record

companies will be able to improve their services, quality

year 2007. What conditions have to be met in the market

and revenue. Around 47% of these companies are already

in order to return to that sales level?

in the process of being certified, and we will continue

A: The importation of used trucks from the US is an issue

this program throughout the year. Our associates, and

that can be improved, and is moving in the right direction.

their respective financial areas, will look into reducing the

Additionally, the scrapping program could help us achieve

credit requirements for companies, or give them a more

this by increasing the destruction of old vehicles and

competitive interest rate. Focusing on credit availability,

incentivizing the purchase of pre-owned vehicles. The

Financial National (NAFINSA) has told us that it could

professionalization of owner operators will be another

reduce the requirements to apply for a loan or credit for

important factor for us. Providing SMEs with the right tools

companies that have obtained their certification. There is a

to enhance their administrative processes is one of the

strong possibility that we will accomplish this soon.

industry’s main challenges, as 50% of all trucks registered at a federal level are owned by this segment. Most small

Q: How will the Energy Reform influence the Mexican fuel

transport companies cannot obtain credit loans, and we

market and transportation industry in the coming years?

must figure out the mechanisms for them to do so. More

A: Next year, multiple dispensers will be selling gasoline and

than 80% of Mexico’s transport companies own between

diesel. The following year, the brands will be able to import

one and five trucks, representing huge market potential for

their product, and by the third year, they will be able to set

us if they renew their fleets.

the price of their gasoline and diesel. This could directly improve the opportunities for the diesel consumer to obtain

Q: Which role can leasing play in the development of the

better prices. The Energy Reform is also destined to result in

heavy vehicle segment?

an increase in foreign investment in the energy sector, which

A: It is common for owner-operators to possess better

will have a direct positive impact on the heavy duty vehicle

equipped trucks than fleet owners, but without necessarily

market. Wherever there is infrastructure development, there

purchasing them. They usually have a leasing program, and

is a demand for new trucks. We are yet to measure the

they renew the truck every couple of years. The Mexican

impact the Energy Reform will have on our market, but we

environment does not facilitate companies in obtaining

believe it will increase the possibilities of selling new trucks.

leases because many of them are not able to get credit.

When it comes to the implementation of new policies to

Alongside that, there is the cultural misconception that you

stimulate the development and implementation of proper

need to own the truck. It is not about passing on a truck

technology, the Mexican government has to approve any

to your children, but rather them inheriting a small running

adaptations to NOM-044. This norm defines emission limits

business. The program alliance for the professionalization

and engine characteristics, which have to comply with

of small transport companies will help us reach this, with

the NOXs and the particle matter restrictions. However, in

the participation of CANACAR, CONATRAM, and ANTP.

order to improve industry regulations, we need to move to ultra-low sulfur diesel, in addition to diesel exhaust fluid

Q: How are ANPACT and its associates supporting the

(DEF). NOM-086 regulation defines the characteristics

development of SMEs in Mexico?

of this diesel. These aspects work toward ultra-low sulfur

A: We are helping 100 small companies in Mexico City by

diesel availability, and as a result a reduction in Mexico’s

providing them with 40 hours of business management

emission levels. Whenever there is a change in regulations,

training sessions and 20 hours of onsite consultation and

there also need to be incentives for the acquisition of new

training. We will give them one computer, some fleet

technologies. The age of the vehicle will not matter if there

management software, and a certificate that will prove

are no incentives to buy new trucks; people will continue

the course compliance. This experience is focused on

to import old trucks and buses from abroad, making

improving the management of the company, and, as such,

competition contingent on cost.

| VIEW FROM THE TOP

SUSTAINING THE STRONG MOMENTUM OF THE AUTOMOTIVE INDUSTRY GUIDO VILDOZO Manager of Latin American Light Vehicle Forecasts for IHS Automotive Q: What are the most in-demand services that IHS

Additionally, since AMIA only focuses on retail sales without

Automotive provides to the Mexican automotive industry?

any differentiation regarding engine or body type, we are

A: The range of forecasting services that we offer includes

not able to get the coverage depth that we need. Eventually,

sales and production for light and heavy commercial

the goal is to apply these legacy services globally, but we

vehicles, as well as syndicated services that focus on

are also looking to expand throughout the BRIC countries.

sales, production, powertrain, and components. We also offer customized solutions catered to the particular needs

Q: What are some examples of how automotive companies

of our clients, encompassing anything from an entry

apply IHS’ services?

strategy to new export destinations in the automotive

A: From an OEM standpoint, we help determine if companies

sector. When it comes to automotive market insight, our

will be able to reach their annual sales target or the market

acquisition of Polk in 2013 has given us a new perspective.

share they have in mind. From a production point of view, we

We are now starting to look at how we can support

help both OEMs and suppliers establish how to modify their

national sales companies with short-term products. In

production according to the demand from the local and the

line with this strategy, IHS is in the midst of releasing a

international market. We look at OEM’s market shares and

new service called the Sales Operations Forecast, which

volumes and aid them in determining potential competitors,

is released on a monthly basis within days of the actuals

as well as advising them on volume planning for suppliers.

becoming available. The forecast looks at the next three

IHS adheres to five business development pillars, namely

years in the industry and enhances an automaker’s ability

customer satisfaction, corporate sustainability, shareholder

to adapt its short- to mid-term plans, enabling it to better

value, bottom-up growth, and colleague engagement.

achieve future sales targets and benchmark against its

These core priorities are the root of the IHS culture.

competitors. While our previous core business was to look solely at the initial stage of production planning, we are

Q: More than half of the Tier 1 suppliers in Mexico are clients

now also focusing on sales, distribution, aftermarket, and

of IHS. How did you achieve such a large market share?

recalls, touching upon virtually every stage up to when the

A: This is more of a global situation. In fact, 92 of the 100

vehicle exits the market.

largest global suppliers are our clients. We have a long history in the forecasting side of our business, which

Q: What key benefits has IHS drawn from the acquisition

started with the automotive services offered by DRI,

of Polk?

eventually evolving into Global Insight. This company was

A: Polk has a unique capacity for tracking every vehicle’s

later purchased by IHS along with CSM, which was Global

Vehicle Identification Number (VIN) and determining

Insight’s main automotive competitor at the time. In the

whether it was registered privately or as part of a fleet. The

end, the acquisition of these companies has allowed us

company possesses the most comprehensive database of

to achieve full coverage with Tier 1 suppliers around the

vehicle registrations around the world, which has allowed

world.

us to provide insight into areas like aftermarket, dealer

development, and other customized solutions. For Mexico,

Q: Mexico is rapidly replacing other countries as a

this now means we offer the most complete, up-to-date

manufacturing hub. What key aspects led to this

view of the vehicle market in this country, enabling parts

development over the last decade?

suppliers to determine the true potential of this vital NAFTA

A: Many people have said that Mexico’s labor cost was the

market. Another element that is not usually mentioned is

cause for all these investments, but we always like to highlight

CARFAX. This division allows us to access the history of

the knowledge and expertise behind the Mexican automotive

each vehicle to check for previous accidents and review

industry. As the world experienced new challenges with the

its maintenance records. Mexico is probably not a good

yen and the euro, Mexico became a natural location for OEMs

market for CARFAX due to the country’s current database.

and suppliers to establish their operations. The other factor

is the amount of free-trade agreements that Mexico has with

to larger vehicles. As a result, we are still uncertain if the

other countries. There is also the quality of the Mexican labor,

customers are going to prefer a small premium vehicle or

with workers possessing a certain pride in the quality of their

an SUV, which is also a growing segment in the country.

assembly. The combination of all these factors is what makes

Looking at Audi and the success of the A1, it would indicate

Mexico the powerhouse that it is today.

that the market is willing toward move to a smaller vehicle, but Mexico has always been a country with large families,

Q: In what ways could the Mexican supplier base be

meaning that vehicles need to cater to this particular need.

further developed?

This could lead to SUVs taking on a role of higher purchase

A: The country has a robust presence of Tier 1 companies,

consideration. There are some premium models that

but there are gaps in Tier 2 and Tier 3 supplier bases, as well

had significant success in their launch year, but we must

as in R&D, that need to be filled over the next few years.

consider if this was a result of product novelty or if the

Mexico is highly specialized in building competitive vehicles

brand itself was successful. Moreover, it is still not clear if

for the rest of the world. In fact, Nissan takes pride in the

this success can be sustained, given the competition from

efficiencies of its facility in Aguascalientes and how it has

regular brands that are now offering more luxury in their

served as the blueprint for other plants around the world.

products.

The challenge is in the product development area. The moment production loses competitiveness, R&D is essential for staying ahead of the game, understanding the changes in the industry, and assimilating them into the manufacturing process. Right now, Mexico is not proactively targeting this particular area, since it has focused on expanding its production blueprint. By the end of 2015, Mexico will be manufacturing twice the volume it achieved ten years ago, causing concern about how to ramp this up. From a sales standpoint, Mexico has to quickly figure out how to move things forward, since global demand is growing at a much slower pace than the countryâ&#x20AC;&#x2122;s automotive expansion. Looking at where production is headed, the next sales priority is going to be powertrain. This is a critical situation given the global legislative changes, but IHS is committed

Q: What are your predictions for Mexicoâ&#x20AC;&#x2122;s automotive

to ensuring our clients are prepared to face these changes

future?

in a suitable fashion. In Brazil, IHS was a key contributor to

A: From a sales point of view, our critical challenge is to

INOVAR-AUTO, the automotive policy that is currently in

determine if the strong momentum of Q1 is going to be

use, and IHS will continue to work on similar projects around

sustained. Currently, there is a strong disconnect between

the world. However, as far as Mexico is concerned, IHS needs

what is happening economically and what is happening

to make sure its clients understand the impact of the CAFE

with consumer confidence. We have detected a push from

legislation, and how they need to transition into the future

OEMs that resulted in around 1.25 million units moving

from a sales-based powertrain perspective.

during the first quarter of 2015. If this continues, we should have the best year ever for the Mexican market. However,

Q: How will the arrival of premium OEMs into Mexico

that is a concern for us because it would mean that OEMs

impact the industry over the coming years?

would have to provide a lot more in the way of incentives,

A: This situation can be viewed from either a production

which would result in lower profitability.

or sales standpoint. From the manufacturing side, there was the announcement of the joint venture between

In terms of production, our goal is to try to understand

Mercedes-Benz and the Renault-Nissan Alliance. The

how quickly OEMs can ramp up a second and third shift

project is succeeding and has plans to cater least to the

at the new plants that just started operations. Our priority

Americas, if not the world. From a sales point of view, there

is to understand which export destinations are going to

is still some uncertainty on how to promote and market

be added to these plants, in order to determine the future

new products locally. There is a significant appetite for

production volume for the country. There are going to

premium vehicles and it is one of the segments that has

be issues, but the region is certainly not in a crisis. The

grown the most. However, our concern is that many of

investments are in place and the industry will need to take

the new entry vehicles have a price range that is too close

things one day at a time.

| VIEW FROM THE TOP

NURTURING SMES AND HUMAN TALENT VITAL STEPS TOWARD EVOLUTION ANDRĂ&#x2030;S LERCH Partner, Advisory Services / Performance Improvement at Ernst & Young Mexico Q: How are companies collaborating in order to improve

if companies offered a career plan to new recruits, they

their production and manufacturing processes?

would be more likely to retain them. Although Mexico

A: Due to a lack of the necessary capacity to serve Tier 1

is one of the top countries in the world in terms of the

clients, Tier 3 companies are starting to work together to

number of engineers it produces, there is still a deficit. The

improve efficiency. They have found that if they buy raw

industry needs a particular amount of engineers each year,

materials together, they can make significant savings, and

but the country cannot produce them quickly enough.

if they share technologies, they can boost productivity.

If R&D centers do not start to merge, the demand for

Ultimately, if they work together across the entire value

engineers and talent will not be met.

chain, they will provide better products and obtain better margins. As a result of these collaborations, the Tier 1s and

Mexico should share technology and research throughout

the OEMs will also see savings. However, while the Tier

the whole industry in order to meet demand. This will not be

3 companies are well-prepared, their reach is not quite

easy. For instance, OEMs will not share technology, but they

broad enough. They have the knowledge, the capabilities,

will share their needs. R&D departments will begin to look

and the vision, but they do not yet have all the hardware

at the local market to find the companies that could evolve

that they need. Most OEMs have development programs

to meet their needs with some assistance. If they do not do

for small companies in order to ensure future production.

that together, the HR requirements will not be met. There is a

Once they find a small company that meets their standards,

trend arising in which these R&D centers are merging, with the

the OEMs can help them with financing long before the

Center for Engineering and Industrial Development (CIDESI)

production programs actually start. Initially, it may not be

being a good example of a research center that is doing this.

too profitable, but the OEMs are betting on the future by

There is also a manufacturing and automotive university in

preparing these companies for the rising tide.

Queretaro. Everybody is going to keep their secrets, but the industry needs to start sharing more information.

SMEs are already working on cost reduction programs that cover various different aspects, such as labor costs. While

Q: What does Mexico need to do to become a viable R&D

there is not much to cut in this field, they can merge tax

hub?

savings and logistics savings in general terms with their

A: The country has demonstrated that it is very well-

supply chain costs. This is the secret to success. If salaries

prepared. There are several needs and requirements,

are cut then people will migrate to the next company and

such as more highways, more railroads, more ports, more

they will be welcomed with open arms because of their

general infrastructure, and more R&D centers, but the

skills. Companies have to focus on reducing costs in the

country is working toward that. This is by no means a

supply chain arena, especially in terms of logistics. When

new trend; our capabilities have been in development for

importing goods, if companies comply with certain tax

over 80 years. Finally, the country needs more attention

requirements, they can cross the border much faster with

from investors. I recently visited ITESM and witnessed

no restrictions. If companies are able to boost efficiency

that they are building the future. The institute has its own

in the supply chain, they will save a considerable amount

mini R&D center as well as several campuses, and all the

of money.

engineers that graduate from ITESM are absorbed by the industry straight away. I think that if Mexico offers the

Q: How will the availability of skilled human resources

right incentives to foreign investors, they will see that the

affect the development of Mexico as an R&D hub?

country is ready to become an R&D hub. VUHL is a good

A: To understand this, we must first analyze the human

example of the promise of Mexican R&D. While VUHL is

capital aspects. There is a major human capital concern

not a brand that Mexico particularly needs, the country is

in the industry because companies are fighting to attract

destined to have its own brand for the local market in the

and retain talent. Industry employee turnover is high, and

near future, provided that the right investments are made.

| VIEW FROM THE TOP

NEW STRATEGIES NEEDED FOR SUSTAINING AUTOMOTIVE GROWTH J. ARTURO ZAPATA President of Corporación Zapata Q: How would you summarize the current state of Mexico’s

these services, our response to such challenges should be

automotive industry, and how can the country continue its

significant. Perhaps we should begin thinking of ourselves as

momentum in this sector?

part of the solution and not part of the problem.

A: The automotive industry in Mexico is one of the most competitive in the world. The country is already playing

Q: What can be done to get the industry to support a

host to all of the world’s leading automotive companies,

more forward-thinking approach, even while potentially

except for some Chinese companies. Everybody is aware

damaging profit in the short term?

that vehicle prices are extremely competitive. There are

A: The government must spearhead this new approach

also many models of cars that compete here in Mexico,

and rally civil society as support. The reality is that all

but not in other markets. Additionally, Mexico has become

of us, businesses and communities, realize that we must

a true automotive manufacturing hub, with companies

do something about it. For example, some of our work

intending to sell Mexican-made vehicles in various parts

colleagues spend up to two hours driving to and from work

of the world. The quality of Mexico’s labor force is second-

every day, which is clearly not sustainable. People cannot

to-none, and a lot of the auto parts companies that

embrace their jobs with the same energy and excitement

manufacture for OEMs have also settled here, making the

when so much of their time is taken up simply commuting

decision to expand into Mexico a lot easier.

back and forth. All of us in business are truly competing with companies around the world, so if our employees are

Q: In terms of the government, businesses, and the

exhausted, we cannot expect them to contribute actively

community, what should be their respective roles in this

and creatively enough in order to take our businesses to

time of change?

the next level. Therefore, we must start working together to

A: The government should be looking to the future and

tackle this challenge. In light of this need for collaboration,

focusing on addressing problems ahead of time. While the

we at Corporación Zapata have developed a dynamic with

country may have certain advantages today, this may not be

our business partners, which is a distinct evolution of the

the case in 10-15 years, which is something that most citizens

traditional relationships we previously held. We no longer

are aware of. Companies are driven by their profits, so if there

simply distribute other companies’ products, but we

is a new market initiative where companies can serve their

partner with them in order to build the brand and develop

customers, and do so achieving an acceptable Return on

long-term and rewarding business partnerships. In that, we

Investment (ROI), then they will likely invest in it. If new car

differ from most of our colleagues.

sales help to replace older vehicles, as has partially happened

over the past 15 years, the potential benefits in terms of

Q: In terms of domestic sales, what differentiates Mexico

pollution reduction are massive. Overall, as a business

from the rest of the world from a buyer’s culture standpoint?

community, we must seriously begin to analyze how we

A: The Mexican market is unique in many ways, but the

can help bring about positive change. Another key element

consumer’s quality expectations in Mexico are exactly the

is the citizens themselves; they, indeed we, must welcome,

same as those held by consumers in Western Europe and

applaud, and reward initiatives that will lead to a more

the US. This is unlike any other developing market in the

sustainable lifestyle. Even though the overall automotive

world. In South America, you will see that these expectations

industry is excited that the market is finally starting to grow

are lower and the quality of the cars reflects that. In Asia,

at an accelerated rate, and that we are going to place over

the difference is even more dramatic. In Europe and the US,

20% more vehicles on the roads than in the previous year,

consumers are demanding vehicles that are almost perfect.

I am not sure that this alone is a sustainable way of doing

The good news is that Mexico, partly out of serendipitous

business. There are several new opportunities available,

circumstances, and also as the traditional export hub to the

such as ride sharing, which is a service that will continue to

US and Canadian markets, has managed to evolve in exactly

improve. As people begin to recognize the convenience of

the same way.

| VIEW FROM THE TOP

HOW TO ADDRESS MEXICO’S MOBILITY CHALLENGES RUFINO LEÓN TOVAR Former Minister of Mobility of Distrito Federal

Q: How has Mexico City’s vision for mobility evolved over

law requires a certain number of floors within buildings to

the past few years?

be designated for parking. Instead, we want contractors

A: Mexico City is a city that was built for cars and that has

to apply these resources to public transport solutions,

evolved around cars. Previously, our mission was to make the

especially if the building is near a metro or a Metrobús

roads more efficient, building overpasses and infrastructure.

station. Construction permits do not consider the traffic

The new administration has taken a different approach,

impact that new buildings could have on the city, which

centered on a more structured mobility plan. Our ultimate

is why we are creating a study to determine how much

goal is to invert the mobility pyramid currently in place,

property developers must contribute to the city’s mobility

making pedestrians and cyclists a priority, followed by public

fund.

transport, motorcycles, and then cars. The government is not opposed to car ownership, but it does seek to regulate

The latest revision to our Mobility Law was published in

the use of cars. We want universal access, which means

June 2014. Just 180 days after the enactment of the law,

having main roads with a bicycle lane, pedestrian access,

all the regulations were passed and we are currently in

and safe crossings for people with special needs. Metrobús

the process of creating new mobility laws, new traffic

is a perfect example of this, displacing microbuses in favor

regulations, and a new vehicle control regulation. We

of bigger and more comfortable bi-articulated buses. This

want to deliver an integrated public transport system

system has its own lane and we recovered the central

with enough quality for people to leave their cars at

island we had previously lost, reducing traffic considerably.

home. Furthermore, we aim to articulate door to door

We also added bicycle lanes, and we recovered spaces

trips, making public transport accessible and safe. In the

occupied by informal commerce to let pedestrians walk or

city, 50% of the 13 million trips taken are less than 8km,

run freely. To improve mobility with fewer vehicles, we have

meaning there is great potential for those trips to be made

implemented a stricter parking network, which has brought

by bicycle. The global parameters for these kinds of trips

huge benefits for the city. Certain neighborhoods are even

are between 8-10km, with travel times between 20 and 30

asking for parking meters, given that the time required to

minutes. Our Ecobici network has 3,680 bicycles, and we

find a parking space has been reduced from 20 to only

have recently announced that we will double the amount

three minutes in certain areas. We have also implemented

of bicycles and the areas where people can have access

a government program to promote carpooling among our

to Ecobici.

workers. For bigger corporations, we encourage the use of private buses to transport people to and from the nearest

Q: Which other innovative plans is the Ministry working on?

public transport stations.

A: We have recently created a program to improve mobility for people with special needs called Taxi Preferente. We

Q: How can Mexico’s legal framework support measures

conducted a survey along with IPN that showed close to

to address Mexico’s mobility challenge?

500,000 people with special needs in the city, meaning that

A: We presented the Mobility Law in December 2013,

we need approximately 1,500 specially designed taxis on

which included all the ideas related to our 24 different

the streets. This service was inaugurated with 150 vehicles

proposals in a single document. We constructed this bill

that have proper wheelchair access, parked at six of the

over approximately 18 months, and it took seven more to

most important hospitals in Mexico City. To complete the

be approved. In Mexico City, around 13 million trips are

program, we plan to incorporate 120 additional units every

made daily, 70% of them made through public transport.

three months, as well as incorporating a specially designed

Nonetheless, the other 30% occupy 90% of the roads. It is

app for these vehicles. Essentially, we are trying to

inappropriate for cars to occupy more space than people,

revolutionize the city. Another one of our projects is Noche

so we are working on new construction regulations that

Bus, which already has 11 structured routes throughout the

will change the current parking paradigm. Right now, the

city, for these buses to circulate all night.

| PLANT SPOTLIGHT: NISSAN AGUASCALIENTES A2 After just 19 months and with the effort of 7,000

Furthermore, combining the production of Nissan A1 and

workers, Nissan started operations at its second plant

Cuernavacaâ&#x20AC;&#x2122;s production from Nissan CIVAC, the company

in Aguascalientes on November 12, 2013. The new A2

is able to manufacture a new car every 38 seconds.

facility has a total area of 222,000m , a functional space 2

of 184,000m2, and it currently employs close to 3,000

A2 is currently solely focused on manufacturing the Nissan

people with an average age of 24 years, divided between

Sentra for export markets, with most vehicles going

administrative and manufacturing operations. The plant

to the US while the rest are shipped to Puerto Rico and

operates 23 hours a day, six days per week, while the

Brazil. The manufacturing process in this plant starts with

robots in the production line only rest 5% of the total

stamping the raw material. The press in the plant is one of

operation time. With a total investment of US$2 billion

the fastest Nissan has globally, capable of producing 575

during its initial phase, this new facility was designed to

parts every hour. After that, the components move to the

produce 170,000 units annually, and it reached its full

body warehouse, to then be sent to the painting process.

capacity just 103 days after its inauguration. As a result,

Subsequently, the cars go to the final assembly line and

the plant hit a daily production of approximately 630 to

then every single one is tested in a test track of 880m.

640 units, reaching a total of 32,770 by the end of 2013.

Apart from these facilities, A2 includes plastic injection

operations, training rooms, administrative offices, a data

POSCO, TACHI-S, Sanoh, Vantec, Nitco, Jatco, and Calsonic

center, and a complete vehicle distribution center.

Kansei, are located less than 200km away from Nissan’s facilities, which allows them to support the production

In terms of automation, Nissan A2 works with top-of-the-

operations of A1 and A2 while reducing logistics and

line technology. The 190 robots in the body warehouse are

production costs. A2 is considered one of the most efficient

automating 72% of the process, excluding mainly quality

facilities in Nissan’s network and throughout the world. The

inspection operations. Additionally, once the body is fully

whole facility is ISO 9000 and ISO 14000 certified, has noise

constructed, vehicles are moved to one of the 120 individual

levels lower than 90dB, and has received Clean Industry

platforms that are equipped with every tool and material

and Environmental Excellence recognitions thanks to the

needed to complete its construction. All of the extra

efficiency of its operations. Furthermore, A2 has a water

components are supplied in a fully synchronized way, so

treatment and waste recycling plant where it treats 100% of

there is no inventory in the process whatsoever. That means

the total waste from the manufacturing process. In addition,

that all the suppliers must work at the same rate as Nissan,

A2 has 68,500m2 of green areas to compensate for the

being able to deliver exactly the right amount of components

environmental impact of its operations, leaving 70,000m2 of

at exactly the right time. The plant’s main suppliers, namely

extra space for future expansions.

Investment in the Mexican automotive industry is becoming increasingly competitive, with global companies capitalizing on the potential Mexico holds as an advanced manufacturing hub. In their competition to attract foreign direct investment, Mexicoâ&#x20AC;&#x2122;s automotive states are determined to offer the optimal operating environment that is essential to attract large industry investment that can ignite rapid economic and social development. With a combined foreign direct OEM investment of US$7.86 billion between 2014 and 2015, the industry is becoming a hotbed for fierce competition at the national and international level.

This chapter outlines the primary investment strategies being implemented by the key players in the automotive industry, not only to ensure their operation and financial success, but also to boost Mexicoâ&#x20AC;&#x2122;s economic development. Real estate companies expose the advantages of each major automotive region in Mexico, while primary manufacturers and suppliers share their reasons for establishing in their respective locations. Finally, experienced law firms offer their knowledge about the sector, examining the investment strategies that continue to propel the country toward the forefront of the global automotive industry.

INVESTMENT & COMPETITIVENESS

CHAPTER 2: INVESTMENT & COMPETITIVENESS 30

VIEW FROM THE TOP: Carlos Lozano de la Torre, Governor of the State of Aguascalientes

MAP: OEM Plants - Locations and Investments

PLANT SPOTLIGHT: Daimler and Renault-Nissan Alliance JV

VIEW FROM THE TOP: Marco Antonio Ribera, Nissan Mexicana

INSIGHT: Fernando Macias Morales, Secretary of Economic Development for San Luis Potosi

VIEW FROM THE TOP: Celina Villarreal, Secretary of Economic Development for Nuevo Leon

VIEW FROM THE TOP: Jorge Jiménez, Russell Bedford México

PLANT SPOTLIGHT: KIA Motors Nuevo Leon

VIEW FROM THE TOP: Rodolfo Balmaceda, AMPIP

INSIGHT: Ernesto Hernández, General Motors Mexico

INSIGHT: Luis Lozano, PricewaterhouseCoopers

INSIGHT: Ildefonso Guajardo Villarreal, Minister of Economy

INSIGHT: Volkswagen, Think Blue.

INSIGHT: Kosuke Takeo, NHK Springs Mexico

VIEW FROM THE TOP: Víctor Manuel de la Cruz de los Santos, Bancomext

VIEW FROM THE TOP: Lorenzo Barrera Segovia, Banco BASE

VIEW FROM THE TOP: Miguel Jáuregui, Jáuregui y Del Valle

VIEW FROM THE TOP: Esteban Gutiérrez, Formula 1 Driver for Ferrari

VIEW FROM THE TOP: Sergio Pérez, Formula 1 Driver for Sahara Force India

| VIEW FROM THE TOP

THE LITTLE GIANT OF THE MEXICAN AUTOMOTIVE INDUSTRY CARLOS LOZANO DE LA TORRE Governor of the State of Aguascalientes Q: Aguascalientes has become one of the main states

managed to attract an OEM, we were able to build the

for the Mexican automotive industry. How has the state

entire business for the suppliers. Aguascalientes is one

evolved in this sector and what new projects have you

of the safest regions that offers high quality labor, and

started?

has an effective service infrastructure unmatched by any

A: The automotive industry arrived in Aguascalientes in 1980

other location. Furthermore, we have strengthened our

when Nissan established its second plant in the country.

relationship with local labor unions, which has allowed

It has been a process based on results, and it has helped

us to attract companies from 27 countries around the

Aguascalientes consolidate as the fastest growing state in

world and to be a strike-free state for the last 45 years.

Mexico and as a pioneer in the industry. The results Nissan

Aguascalientes offers a superior quality of life and

has obtained with its plant in our state have made it the most

costs of living that are below the regional average. The

productive manufacturing site of the company globally.

local inflation rates are lower when compared to the national indicators, and we have important infrastructure

In 2014, we had 130 established international companies,

projects planned for the future. In terms of electricity,

and now we have grown to 142, because we market the

Aguascalientes is probably the only state with no energy

state as the best option for the automotive industry. We

fluctuation whatsoever thanks to the grid encircling

have been successful thanks to our ability to determine

the region, completely interconnected and with triple

what companies need from the state. Nissanâ&#x20AC;&#x2122;s decision for

redundancy. It is a state with a really clear vision of staying

its new plant was taken four years ago, and we endeavored

attractive for foreign investment.

to make this happen for Aguascalientes. In the end, we won the project because of our previous results and thanks to

Q: With all these new companies arriving to the country,

our negotiations with Carlos Ghosn, CEO of the Renault-

how much growth are you expecting for Aguascalientes?

Nissan Alliance. By 2019, Nissan expects to manufacture

A: What we are seeing is just the beginning and more

close to 1.1 million vehicles in Mexico of which 850,000

opportunities will appear in the years to come. We have

units will be produced in Aguascalientes. Right now, this

already reaped some benefits, perfectly shown by the 12.4%

plant is considered a pioneer throughout the world, and

growth we had in 2014, according to the National Institute

Carlos Ghosn has promoted Nissanâ&#x20AC;&#x2122;s relationship with the

of Statistics and Geography (INEGI). However, the forecast

state as an exemplary collaboration. Because of that, we

that Banamex offers for this year places us as the fastest

have been the fastest growing state in the country for

growing state in the country with a GDP increase of 7.8%.

three years now.

Our goal is not just to attract automotive OEMs, but to bring along all their major suppliers. Many Japanese companies

Q: What advantages did the state offer, and how did it

were already established in Aguascalientes, but more of

become the most attractive region in the country?

them are now arriving from all levels of the supply chain.

A: Aguascalientes offers many opportunities, including

Therefore, what I can predict is a continuous growth with

the natural advantage of its geographical location, which

large revenue for the state and job generation.

is fairly close to both the Pacific Ocean and the Gulf of

Mexico. It is also at a short distance from the border, and

Q: What were your specific strategies in bringing

it is less than 500km away from the largest markets in the

Aguascalientes to its current positioning?

country. In addition, we have all the necessary public and

A: Nothing that is happening in Aguascalientes right now is

private infrastructure for welcoming investments of this

circumstantial. The state needed to prove that it was ready

kind, including schools, roads, restaurants, and hotels. In

for new challenges, and it was important to show that even

this area, we have seen a lot of collaboration from private

when there were no new investment plans, we still wanted

investors who have developed their own industrial parks

to maintain a healthy relationship with Japan. Before being

to a total of 19 different complexes. Once the government

elected, I visited Carlos Ghosn and many other directors to

tell them that we wanted to work with them once again. At

supplier development program and implemented various

that time, there were rumors about a new Nissan project

strategies to develop local companies and include them in

in America, and I immediately proposed Aguascalientes

the automotive supply chain. The financing program Fondo

as a viable location. We developed a program based on

Progreso has developed new options for these companies,

the six strategic areas of economic and social progress,

and we have connected 50 local companies with major

justice, legality, safety, efficient government, education,

automotive players.

sustainability, and proper services, as well as quality of life. Currently, we are the state with the most advantageous

Q: How is the government promoting environmental

financial position in the country, the second safest state, and

practices among the companies in the state?

state with the third lowest corruption perception according

A: Our education plans are now including these practices, and

to the Mexican Institute for Competitiveness (IMCO) and

we have created an environmental culture in Aguascalientes.

the Center of Research and Economic Teaching (CIDE).

Aguascalientes is a leader in water treatment processes,

We restructured Aguascalientes to become the primary

waste disposal, recycling, and energy management, with

state in environmental strategy and the leading state in

programs that provide solar water heaters to senior citizens,

urban development and housing. All these factors have a

for example. Alongside Mexico City, Aguascalientes is the

strong effect on companiesâ&#x20AC;&#x2122; results, and because of that

only state with electric taxis, and has the largest amount of

we have mastered our ability to administrate success. There

green areas per inhabitant.

have been companies that want to establish in the region, but we have learnt to say no when we could not handle it.

In terms of our electric vehicles project, we are still in the

The most attractive place for the automotive industry is

early stages and it is still an expensive technology. The

Mexico, but that does not mean that we can oversell our

cars are currently recharging from the Federal Electricity

capacities. States that have stretched themselves too far

Commission (CFE), but we are planning to generate solar

will face problems in the future. To avoid this, we have a

energy. Aguascalientes has some of the largest solar

group of industrial players, including the most important

exposure in the country, so we are turning this into an

international and local companies, working together to deal

opportunity. CFE has already presented its proposal to us,

with the sectorâ&#x20AC;&#x2122;s concerns. Finally, we have worked on a

and we want to launch the project in the next six months.

OEM PLANTS - LOCATIONS AND INVESTMENTS 1 Tecate

3 Hermosillo

2 Chihuahua

Ram

2 1 Aguascaliente Ford

Nissan

1 1964

1 1966

2 1983

2 1982 - 2013

3 1986

Toyota

El Salto

4 2015

1 2002

General Motors

2 2019

1 1965

Mazda

2 1981

1 2014

3 1996

Audi

4 2008

1 2016

Honda

Kia

1 1995

1 2016

2 2014-2015

Renault - Nissan Alliance - Daimler

Volkwagen

1 2017

1 1964

BMW

2 2013

1 2019

FCA Group 1

1981 - 1995 - 1998 -2010 -2013

2 1964 - 1968

Sila Irapua

IMPORTED USED HEAVY VEHICLES JAN 2009-FEB 2014 1-5 years Year

Company 11-15 years

Investment (US$)

2010

16-20 years FCA Group

18,180 550 million (Fiat 500 Production)

21-25 years Volkswagen

6,543 550 million (New Engine Plant)

Silao

26-30 GM years

2,981 500 million (Plant Expansion)

Ramos Arizpe

31-35 years Nissan

716 600 million (New Model Production)

Aguascalientes

years 2011 36-40 Honda

Pesqueria

2014

4 San Luis Potosi 1

2015

Guanajuato Guanajuato

46-50 years Volkswagen

550 million (New Engine18Plant)

Guanajuato

FCA years Group 51-55

620 million (Plant Expansions) 11

Saltillo and Toluca

Toluca 1

1 540 million (Engine Plant Expansion) 4 2 billion (A2 Plant) 52,242 1.3 billion (Fusion and Lincoln MKZ 72 Expansion) 52,314 420 million (Plant Expansions)

Toluca Aguascalientes Hermosillo San Luis Potosi and Silao

Audi

1.3 billion (New Assembly Plant)

San Jose Chiapa

Ford

60 million (Engine Plant Expansion)

Chihuahua

Volkswagen

838 million (Golf VII Prodution and Engine Plant Expansion)

Puebla and Silao

Honda

470 million (New CVT Plant)

Celaya

691 million (New Transmission Plant, Transmission Plant Expansion, and Toluca Plant Expansion)

Silao, San Luis Potosi, and Toluca

Nissan

220 million (New AT Plant)

Aguascalientes

FCA Group

1.25 billion (Van Plant Expansion and Engine Plant Expansion)

Saltillo

Mazda

270 million (New Engine Plant)

Salamanca

BMW

1 billion (New Assembly Plant)

San Luis Potosi

Mercedes-Benz / Infiniti (Daimler / Renault-Nissan Alliance)

1.3 billion (New Assembly Plant)

Aguascalientes

KIA Motors

1 billion (New Assembly Plant)

Pesqueria

Ford

2.5 billion (Engine Plant Expansion, New Engine Plant, and New Transmission Plant)

Chihuahua and Irapuato

Villa de Reyes

3 2 ao ato Salamanca 4 1 Celaya 2 2

Toluca

106 Plant) 770 million (New Assembly

Saltillo

City

41-45 years Mazda

Total GM

2013

14,302

284 Plant) 800 million (New Assembly

56-60 years GM More than 60 years 2012 Nissan Subtotal Ford Not identified

mos Arizpe

OEM 6-10 PLANT (2010-2015) years INVESTMENTS IN MEXICO 9,080

Volkswagen

1 billion (Tiguan Production)

Puebla

Toyota

1 billion (New Assembly Plant)

Celaya

Nissan

60 million (Plant Expansion)

Cuernavaca

TOTAL INVESTMENT: MORE THAN US$22 BILLION Cuautitlan 1

Puebla 1 Cuernavaca

San Jose Chiapa 1

| PLANT SPOTLIGHT: DAIMLER AND RENAULT-NISSAN ALLIANCE JV It has been five years since Daimler and the Renault-Nissan

COMPAS will offer easy access to the US, which will be the

Alliance established their first joint investment. Now, 12

main market for both brands. The plant is well connected

projects later, both companies have decided to establish

to the US by rail, as well as to Mexico’s Atlantic and Pacific

a new venture in Aguascalientes. The Cooperation

coasts. Furthermore, Mercedes-Benz and Infiniti will benefit

Manufacturing Plant Aguascalientes (COMPAS) will be

from Nissan’s experience in logistics, being able to get cars

50:50 owned by Daimler and Nissan, with a joint investment

to the US in a matter of days. There will also be a strong

of US$1 billion. The unique aspect of this undertaking is

collaboration between Daimler and Nissan in terms of

that it will be focused on the manufacturing of premium

technology. “We will work together to see what processes

compact vehicles for Daimler and Nissan. On Daimler’s

could be merged and which others must remain separate.

side, the company has decided to produce Mercedes-Benz

In all our projects with the Renault-Nissan Alliance, one

units, including two or three models of the five to seven

of the three brands is appointed as the project leader. In

cars that will comprise the new generation of Mercedes-

Aguascalientes, Nissan is the appointed project leader,

Benz compact cars to be launched in 2018. Meanwhile,

although Mercedes-Benz will bring its own engineering,

Nissan has determined it will manufacture the new

development, and quality control teams,” says Tabera.

generation of its Infiniti models. When fully operational, COMPAS will have a total production capacity of 300,000 vehicles, equally divided between Mercedes-Benz and Infiniti units. However, the plant will increase its production gradually, starting with an initial goal of 230,000 vehicles. This number will change depending on the capabilities of each company, favoring one or the other according to their specific targets. COMPAS is expected to start operations in 2017, building its first Infiniti models before rolling out the new Mercedes-Benz line by 2018. This Daimler and Renault-Nissan venture will cover 110 hectares and will be constructed adjacent to Nissan’s A2 plant. The project is expected to generate 3,600 direct jobs by 2020. Contrary to Nissan A2, this plant will rely less on automation given the high quality standards required for

these vehicles. Pedro Tabera, President and Director General

The COMPAS plant will be designed to accommodate the

of Mercedes-Benz Mexico expects that the production

same chassis for both product lines, while being able to

of 150,000 new Mercedes-Benz units will require 2,800

include different bodies. Given that Mercedes-Benz has a

employees trained in specialized processes. “Although this

lifecycle of seven years for its cars, this strategy will offer

might be more expensive, it is what gives us an advantage

ample flexibility to make any changes based on the needs

in the market,” he explains. “There will be Germans involved

of the US market. Furthermore, the plant will be structured

in the project at first, but we have strong ties with the

to allow Mercedes-Benz to manufacture any model the

government to prepare local students from Aguascalientes

company chooses. “To some extent, we will be adopting

and Guadalajara. Recruitment will begin in the summer of

Nissan’s JIT approach to make our plant modular, in order

2016 and we will bring some Mexican engineers to Germany

to lower our stock as much as possible, and make the

for training courses.” COMPAS will be managed by an

production easier,” states Tabera. From a supply standpoint,

international team from Daimler and Nissan, and it will be

COMPAS will have a strong effect on the development

the first plant for Mercedes-Benz in the NAFTA region. “It is

of Aguascalientes. Nissan already has a well-developed

probable that Mercedes-Benz will sell around 80-85% of its

supplier network for its A1 and A2 facilities, while Daimler

production to the US. At the beginning, we expect about 5%

has already created a special procurement division in charge

of our Aguascalientes production to be sold in Mexico. The

of quality control for its new suppliers in Mexico. “NAFTA

difference will be made up by exports to Europe, given the

agreements specify 70% local content requirement for our

FTAs in place to facilitate exports there,” Tabera explained.

production, which we will achieve by developing Mexican

“The biggest priority is to reach Mercedes-Benz’s quality

suppliers and convincing our German suppliers to build new

standards, which are the highest in the industry, and to have

plants in the country. Some of our new providers will have

our factory in Mexico match the quality level found at any of

to change their processes to be part of our supply chain but

the other nine Daimler passenger car plants.”

we are confident of reaching the 70% target.”

| VIEW FROM THE TOP

GREEN PRACTICES THAT INCREASE COMPETITIVENESS MARCO ANTONIO RIBERA Senior Corporate Manager of Environment, Safety, and Energy at Nissan Mexicana

Q: How is the adoption of green practices increasing

the Nissan Green Procurement strategy, which is a global

Nissan Mexicana’s competitiveness?

initiative to select suppliers according to special criteria. For

A: When you consider the whole lifecycle of a vehicle you

instance, if the seats and front end modules of the vehicles

see the impact it has on the environment. There is no OEM

are manufactured right next to the plant, this reduces the

today that does not incorporate themes of sustainability

logistics, emissions, and lead times. The main objective is

in its manufacturing processes. Within our Nissan Power

to take suppliers to the next level of efficiency, because

88 business plan there are several pillars of growth, one of

no supplier can be competitive if they generate too much

which is Zero Emissions Leadership, a major component

waste or consume too much electricity. In the vicinity of

of the company’s DNA and vision. This strategy includes

Aguascalientes’ A2 Plant, Nissan has a supplier park called

the Nissan Green Program, which allows us to incorporate

Douki Seisan Park, with companies such as POSCO MAPC,

green practices in the lifecycle of our vehicles. Nissan

TACHI-S, and Sanoh that each promote synchronized

Mexicana has stood out in reducing the carbon footprint

production processes. Suppliers in this park are certified,

and raw materials used in manufacturing processes. This

have efficient systems, and follow the same environmental

is remarkable considering the manufacturing capacity of

practices as Nissan. Sustainability gives suppliers continuity

Nissan Mexicana and the fact that in 2014 it assembled more

in their operations and makes them more competitive in the

than 800,000 vehicles, of which almost 70% were exported.

market.

Q: How has the incorporation of renewable technologies

Q: What steps has Nissan Mexicana taken in order

increased

to improve its manufacturing processes and waste

Nissan

Mexicana’s

local

and

global

competitiveness?

management strategies?

A: We are leaders in reducing the energy consumption of

A: Nissan Mexicana has a global benchmark in water and

every vehicle assembled, and we are more competitive

waste management strategies. The plants in Mexico take the

than our plants in Japan. A significant percentage of

lead by assembling vehicles using less water. For instance,

the energy we consume comes from renewable energy

the Aguascalientes A1 Plant uses 1m3 of water per vehicle

sources. In the case of the Aguascalientes A1 Plant,

assembled, while Aguascalientes A2 Plant uses 1.4m3, and

Nissan’s biggest manufacturing complex in Mexico, around

the CIVAC plant uses 1.5m3. To achieve sustainability there

66% of electricity consumption comes from renewable

must be a balance between green practices and economics,

energy and the rest from combined-cycle plants using

because as you generate less waste you immediately lower

clean fuels like natural gas. Among the 58 plants held by

costs and increase competitiveness. Regarding recycling

the Renault-Nissan Alliance worldwide, Nissan Mexicana is

we have made progress in the assessment of residues. For

the only one that incorporates biogas generated from a

example, the stamping process generates residue of the

landfill. The waste to energy project falls under the self-

metal sheets, which is now offered to suppliers to use for

supply scheme and the three parties involved are the city

manufacturing small parts. One of the areas of opportunity

council, which manages the landfill and is certified with ISO

we have identified is the scrapping of vehicles once they reach

14000, ENER-G, a British developer with the technology

the last stages of use. We have invited and supported the

and experience, and Nissan, which is the off-taker and

Ministry of Environment and Natural Resources (SEMARNAT)

provided the financial certainty to the project.

to visit our manufacturing sites in Japan in order to learn how the recycling process works and bring this knowledge

Q: How is Nissan making its supply chain more

to Mexico. Nissan Mexicana is taking active steps to identify

environmentally friendly, while supporting suppliers in

and minimize the direct and indirect impact of its business

their sustainability goals?

on the environment. It is through the implementation of

A: Leadership in sustainability and efficiency can be claimed

these strategies that Nissan has been able to increase its

only if the suppliers cooperate. For this reason, we have

competitiveness and stand out from the crowd.

LABOR FORCE AVAILABILITY AND R&D CLOSE THE DEAL WITH BMW San Luis Potosi is at the center of the growing automotive

injection molding toolmaker and a stamping toolmaker

industry in the Bajio region and saw its neighboring

into the state and to develop a technical school oriented

states announce various large OEM investments over

toward these processes. Through this R&D project and

the past years. Fernando Macías Morales, Secretary of

collaboration

Economic Development of San Luis Potosi, explains

Macias hopes to develop a plan for the next ten or 15

that his state has focused on strengthening the

years for the automotive industry. San Luis Potosi is also

region as an automotive center rather than competing

investing in tool-making activities, for which there is

head on with other states to attract high profile OEM

considerable demand in Mexico. Companies such as 3M

investments. “It is better to be a central state in the best

and A. Schulman have R&D centers in the state, and air

automotive region, than an isolated state that excels at

conditioning companies like Daikin have shown interest in

attracting flagship investments,” says Macías Morales.

building their R&D facilities there.

with

various

educational

institutions,

Nevertheless, the announcement of BMW’s decision to build a new plant in the state was received with

The metropolitan area of San Luis Potosi has a population

great pride by Fernando Toranzo Fernández, Governor

of 1.2 million people and an unemployment rate of 5.7%

of San Luis Potosi. The ceremony was held at at Los

of the entire economically active population. In 2015,

Pinos and attended by President Enrique Peña Nieto,

approximately 11,500 new graduates will enter the labor

Minister of Economy Ildefonso Guajardo Villarreal, and

market, of which 3,000 or 4,000 have an engineering

Harald Krüger, a member of the BMW AG Board of

background, while 2,400 migrants from other states and

Management. Following the announcement of BMW’s

other cities are expected to come to San Luis Potosi

new plant, San Luis Potosi will hosts two OEMs, GM has

in search of work. Macías Morales estimates that 1,800

been operating an assembly plant since 2008, creating

people will be retiring during the same period and 5,000

an opportunity to develop a comprehensive supplier

jobs are expected to be created in the industry, leaving

base to supply the local OEMs and possibly to supply

a total of 7,000 people still looking for a job. BMW’s

activities in other states, as well as developing Tier 2

plant is expected to create 1,500 direct jobs and GM has

and Tier 3 companies.

announced an increase in production at its assembly

“The Secretary of Economic Development is certain that San Luis Potosi is ready to receive more investments and expansions from automotive companies” Fernando Macías Morales, Minister of Economic Development of San Luis Potosi

After a lengthy site selection process, BMW decided to

plant, presenting opportunities for both jobseekers and

locate its plant in San Luis Potosi based on the proximity

manufacturers to support each other. Given the labor

of a city providing a high quality of life and healthcare

availability, the Ministry of Economic Development is

facilities for the labor force, appropriate energy, water and

certain that San Luis Potosi is poised to attract more

logistics infrastructure, the presence of a strong supplier

investments and expansions from local companies.

base within a range of 250km, access to more than 70 million consumers in a 500km radius, and the availability

Macías Morales explains that one of the main reasons

of a skilled labor force. Having an industrial history and

for

an active automotive industry base for over 50 years, the

representatives were able to say no when they could not

San Luis Potosi workforce is highly skilled, while a non-

commit. “Trust is pivotal to professional relationships

aggression agreement with the labor unions in the state

and Governor Fernando Toranzo Fernández was able to

has ensured a peaceful and strike-free environment since

be open and honest about areas that would need to be

2005.

improved, and had the courage to say no to requests

successfully

convincing

BMW

was

that

state

that were not realistic, which was taken positively by the

The state’s Research & Development (R&D) plan has also

company,” says Macías Morales. “BMW saw an honest

been an attraction, with Macías citing a new tool and die

government with limitations, but also one that could

project as an example. This is aimed at bringing a large

make a good business case.”

| VIEW FROM THE TOP

NUEVO LEON TAKES ITS AUTOMOTIVE AMBITION TO THE NEXT LEVEL CELINA VILLARREAL Secretary of Economic Development for Nuevo Leon Q: What were the main factors that enabled Nuevo Leon

the rest of the supply chain will create an estimated 22,000

to attract KIA?

indirect jobs. It is an important number that may lead to

A: KIA’s decision was mainly determined by human capital

Nuevo Leon becoming the premier state in the creation of

because we were the only state that could guarantee a pool

new jobs. Moreover, Nuevo Leon receives a lot of people

of well-educated technicians. Additionally, since the OEM is

from other states who are looking for career opportunities.

producing in Mexico and distributing to the US and Central America, Nuevo Leon was one of the best locations for KIA to

Q: What are you doing to help the Mexican SMEs make the

establish operations. They settled in Pesqueria, an important

most of this opportunity?

municipality in the state, which allows easy access to the

A: We are working with the Korean organization Kotra, and

domestic market and US exports. Another advantage that

are receiving state funds to help companies strengthen

Nuevo Leon offers is the possibility of importing natural gas

their competitiveness. For 12 years now, we have had a

from the US at a preferential price. The next step for Nuevo

unique program to develop suppliers and to identify SMEs

Leon is to deliver on its infrastructure promises, which will

that are ready for this process. Nuevo Leon is home to 200

keep us busy until KIA starts production in May 2016. We

companies that are active in the automotive industry, 50 of

have managed to bring everyone to the table, including the

which are Tier 1 suppliers. There are plenty of companies

government, Gas Natural, and CFE. We also have all the

in Mexico that would like to expand and come to our state,

necessary support from the private industry. In late 2014, we

which is why the federal government has asked us to

held the first seminar between Mexican and Korean Tier 1 and

emulate the Bajio cluster’s model and from that exercise

Tier 2 companies. It was an opportunity to attract foreign

we concluded that we need to strengthen the supply chain

investment, but also to integrate local companies into the

by enabling companies to become more competitive.

supply chain. Q: What is being done to encourage the transition of the Q: Has it been difficult to coordinate a project with people

industry from low-tech to high-tech engineering?

from two different cultures?

A: Nuevo Leon registers the most patents in the country, and

A: We are not that different. Koreans are very firm and

the state and federal authorities have numerous incentives

punctual with their commitments. We have managed to

to establish more R&D centers. We have an ambitious

communicate correctly and everyone understands that the

project with the automotive cluster and with Katcon, which

deadlines are not flexible. Additionally, KIA has international

already has presence in the Research and Technological

experience in Brazil, which has a similar culture to Mexico,

Innovation Park (PIIT) R&D Center. The automotive cluster

making it very easy to work together.

has created the first master’s program in automotive design in Mexico, in coordination with ITESM, UDEM, and

Q: What is being done to ensure the availability of human

the University of Nuevo Leon. There has been engineering

capital labor, on paper and in practice?

development activity in the state for many years, but with

A: For more than 150 years, education has been linked to

this new PIIT project I see new companies getting on board.

private industry, with its most important companies having representatives on the boards of universities and technical

Q: What new opportunities have you detected to bring

schools. For several years, we have been making sure that

Korean companies from other sectors to Nuevo Leon?

students attend the best technical and professional classes,

A: We have had an impressive response in the months

and clusters play a fundamental role in this process since

following the announcement of KIA’s arrival. We have

they allow the triple helix of the academia, public, and

received 48 companies from all industries, especially

private sectors to communicate. Universities in Nuevo Leon

within the energy sector, which are looking for business

are producing 8,000 engineers a year. We anticipate that

opportunities in Mexico. We expect to announce the arrival

KIA and its in-house suppliers will generate 9,000 jobs, while

of approximately 13 Korean companies.

Ternium, proud to grow with Mexico Ternium, the leading steel company in Mexico, recently inaugurated the most modern industrial center in Latin America. Since 2013, this center has become a regional leader producing high-end steel for high-demand industries, such as automotive and home appliances. Based in Monterrey, Mexico, Ternium employs over 9,000 people, and owns 26 production facilities throughout the country, including service and distribution centers. Ternium is committed to exceptional quality, environmental awareness, and worldwide safety standards.

| VIEW FROM THE TOP

EXPERIENCED, CULTURAL APPROACH TO PROFESSIONAL SERVICES JORGE JIMĂ&#x2030;NEZ Managing Partner at Russell Bedford MĂŠxico Q: How is Russell Bedford evolving in order to fit the

A: In the supply chain, there are many layers between the

dynamic tendencies of the automotive sector?

first supplier and the customer. SMEs that want to supply

A: We have developed two main strategies. The first is

Tier 1s need to understand that they must have the best

to hire people with the cultural and language experience

quality in all their processes, including their finances. They

to suit the needs of companies entering Mexico. For

need to show that they are solid, of high quality, and can

example, Japanese companies and individuals are more

produce financial results in accordance with international

comfortable speaking in their native language, which is

regulations. Normally, SMEs do not know how to show their

why it is important to have people who can communicate

financial results to clients to show that they are healthy

with them. The second strategy is to take advantage of our

and that they possess a solid financial position. We can

international experience and network. We need to be able

help them prepare for that in accordance with national or

to receive input from any expert in the world on the best

international regulations.

international practices and trends. Q: With the arrival of many important OEMs to Mexico, Q: How can Russell Bedford help OEMs and Tier 1

what incentives are states offering in order to secure their

companies that want to enter the country?

investments?

A: When an OEM decides to enter the country, many of

A: In some cases, the states offer tax-free land and discounts

its suppliers follow in its footsteps. This is the market that

in payroll for a certain amount of time. However, this is

we want to attack, so we have created a division that

minimal when compared to the total investment that these

specifically helps with that. We can assist these companies

companies make in the state. For example, Guanajuato has

during their creation process and then support them right

offered a local tax incentive to certain companies, as have

up until they form their own accounting and financial

San Luis Potosi and Nuevo Leon under a different structure.

departments. Once they no longer need our help, we can

However, incentives are not the main reason to settle in a

continue with them as advisors or auditors for accounting,

certain state; the real reason is how easy it is to enter the

tax, legal, and payroll services.

market from there. For example, Puebla does not offer any incentives and Audi decided to establish its plant there.

Q: In order to attract more foreign investment, what

The real reason for this is the proximity to Volkswagen and

advice would you give the Mexican government on how

its suppliers. Guanajuato offers some incentives but the

to improve the financial environment?

real attraction is the specialized labor in the state, just as

A: The Ministry of Economy (SE) needs to work on many

in Queretaro, while KIA decided to locate in Nuevo Leon

modifications that will ease business processes in the

because of its proximity to the US. From a federal point of

country. A construction license, for instance, can take up

view, there are no incentives so it is really a matter of location

to 90 days in any state, not to mention the amount of

and labor.

documents that would be needed to obtain it. This is a real challenge for SE, but one that must be overcome if

Q: What unique advantages distinguish Russell Bedford

Mexico is to become a better business destination. Also,

from its competition in the automotive industry?

there need to be improvements to the tax return system

A: We apply three important methods. The first one is

that favor foreign investors. However, since investors need

personal attention from the partners. The second one is

to consider a 16% increase in their investment, and the

our rates, which, according to many surveys, are highly

fact that this process could take up to a year, the whole

competitive when compared to the bigger companies.

situation could create a cash flow problem.

With 80% of our clients hailing from countries like Germany, Japan, China, and Korea, among others, the last method

Q: How does Russell Bedford support lower-tiered

we adopt is to try to optimize our cultural understanding

companies in providing services to the bigger players?

to build a strong sense of trust and loyalty.

| PLANT SPOTLIGHT: KIA MOTORS NUEVO LEON On August 27, 2014, KIA Motors announced its first Latin

plant and with its direct suppliers,” says de la Torre. “This

American plant in Pesqueria, Nuevo Leon, representing an

investment will bring huge development to Pesqueria in terms

investment of more than US$2 billion in the region, US$1

of schools, housing, and all the necessary services to take

billion of which will be contributed directly by KIA, while the

this region to the next level.” In addition, KIA is expected to

rest will be invested by its suppliers. According to Manuel de

boost the entire business network in Nuevo Leon, generating

la Torre, General Counsel and Institutional Relations Director

approximately 40,000 indirect jobs.

at KIA Motors México, Pesqueria was the best location for this investment, given its high-quality and certified labor,

The new facility has a current area of 179 hectares, with the

large number of automotive component suppliers, and a

potential to expand another 155 hectares. Furthermore, six of

well-developed logistics and distribution infrastructure.

KIA’s direct suppliers are positioned right next to the plant,

“KIA’s investment in Nuevo Leon will have a huge impact on

which will be the largest and cleanest plant in KIA’s global

the social and economic development of the region, creating

manufacturing network. The project started in October 2014

a total of 13,000 new jobs directly in the manufacturing

and it is expected to be concluded by October 2015, with

production of the new KIA Forte officially scheduled for May

automated, with 300 robots focused on welding, sealing,

2016. The plant will have an annual production capacity of

painting, measuring, and component handling. Regarding

300,000 units, 60% of which will be destined for the US.

sustainability, the company is increasing its use of ecologic

The other 40% will be divided between the Mexican market

materials, and has moved to a high-temperature combustion

and other locations in Latin America. “This production will

process to eliminate all toxic emissions to the environment.

strengthen our presence in the US, where we registered a growth of 8.4% by the end of 2014,” says de la Torre. “In

KIA has to develop the proper infrastructure to transport its

terms of technology, KIA’s new plant will have state-of-the-

vehicles to the US, and is currently working on a logistics

art equipment, guaranteeing high-quality standards in our

project with Kansas City Southern to lay the proper rail

production. We are investing US$75 million in a new stamping

infrastructure. KIA also received help from the Ministry of

press coming all the way from South Korea, and we will be

Communication and Transportation, the government of

using seven different stamping technologies patented by

Nuevo Leon, and the municipality of Pesqueria, to develop

our company.” KIA’s assembly line will also be completely

access roads to the northern and southern part of the plant.

| VIEW FROM THE TOP

PURPOSE BUILT INDUSTRIAL PARKS AND INFRASTRUCTURE RODOLFO BALMACEDA President of the Mexican Association of Industrial Parks (AMPIP)

Q: How has the cooperation between the public and

location choices reflect this in that they are dependent on

private sector in the development of industrial parks

a combination of factors, including infrastructure, logistics

changed over time?

and the availability of human resources.

A: In the past, state governments used to make decisions about infrastructure development in industrial parks, but

Q: How does AMPIP help private investors to find the best

now, the development of industrial parks tends to be

location for their industrial parks?

undertaken by the private sector. AMPIP, as an association,

A: Initially, when providers establish operations in a

is not considering investing resources in renovating old

given

infrastructure, but instead we want to construct modern

provide support in terms of infrastructure development.

parks that are purpose built. Admittedly, there have been

Nevertheless, AMPIP promotes the association abroad at

instances where we have capitalized on the infrastructure

industry events in order to create a network of international

of an existing industrial park because it already had the

providers, providing information regarding the services

necessary facilities.

we can offer subsidiaries in Mexico, such as logistics and

state,

the

government’s

own

representatives

human resources. Sometimes providers enter the market The government’s National Program of Infrastructure

with broker representation, or having been advised by

(PNI) is ambitious, especially since its budget was recently

ProMéxico or state governments. AMPIP can connect with

reduced because of the drop in oil prices. Although states

companies through any of these three channels or act as an

with established OEM plants have already developed

adviser should this be required. Moreover, AMPIP has a close

infrastructure in response, further investment will be

alliance with the National Council of the Manufacturing,

necessary to support distribution and logistics. Although

Maquila, and Export Service Industry (INDEX) and 70% of

road freight is a relatively expensive mode of transport in

our affiliates are incorporated in this program.

Mexico, it tends to be the most frequently used, meaning that PNI investment in developing distribution methods,

Q: How are AMPIP and its members preparing the terrain

including highways, railways, and ports is crucial. OEM

for OEMs investing in R&D in Mexico?

EIGHTY YEARS AND MORE TO COME General

has

GM represents 15,000 direct jobs in Mexico and more than

gained a strong place in

105,000 indirect jobs in all industries that the OEM operates

the Mexican market after

within. The company has four manufacturing complexes in

80 years of presence in

the country with 14 production plants where it assembles

the country. In April 2015,

vehicles, engines, transmissions, and performs different

the company celebrated

operations like stamping. “Last year, we produced almost

its 80th anniversary in

680,000 vehicles and sent more than 550,000 of them

Mexico

50th

all over the world, making us the number one automotive

anniversary of its Toluca

exporter with 21% of the transactions in this category,”

plant. The celebration was

Hernández clarifies. “In terms of our presence in the local

held at the International

market, last year we sold 217,000 units of our Chevrolet,

Congress of the Automotive Industry in Mexico (CIIAM)

Buick, GMC, and Cadillac brands, representing 18% of the

2015 inauguration dinner, with President and Director

current market share.” He continued by pointing out that

General of General Motors Mexico, Ernesto Hernández.

the Chevrolet Aveo has been the most sold vehicle in

Ernesto Hernández, President and Director General of General Motors Mexico

Motors

and

the

A: We have a vested interest in this trend since the three

Q: Besides satisfying this demand, what are AMPIP’s

sectors that contribute to bolstering the R&D environment

priorities for 2015?

in Mexico are academia, the public, and the private sector.

A: Firstly, being a country with high export volumes, we must

Companies like Nissan and GM are establishing design

create an environment that is conducive to security in terms

facilities here and are recruiting heavily for these projects.

of transport. In the US, this is achieved through collaboration

We have excellent design capabilities in Mexico, and

with the Customs-Trade Partnership Against Terrorism

overhead costs are low, but there is still a considerable

(C-TPAT), in Europe the World Customs Organization

need to improve our R&D capabilities. The government,

(WCO), and other countries follow the Authorized Economic

with the help of the National Council for Science and

Operator (AEO) model. In this way, Mexico has implemented

Technology (CONACYT), has some interesting projects

the New Scheme of Certified Enterprises (NEEC), an

in development, and an increasing number of companies

organization that grants secure company status to those

entering the country are requesting AMPIP’s expertise.

foreign and domestic companies that export from Mexico and that comply with operational, security, and customs

Q: What are the main challenges for new market entrants

requirements. Mexican companies that are part of the INDEX

in terms of service, infrastructure, or workforce?

are currently able to obtain the NEEC certification through

A: Without a doubt, there will be challenges. Audi, for example,

the Service Tax Administration (SAT). As industrial park

built a plant in San Jose Chiapas, an isolated town, but much of

developers we identified which companies, carriers, customs,

Audi’s workforce came from a small town called Huamantla. The

and ports were obtaining these certifications, and since many

types of qualifications required by OEMs are extremely specific

of those companies are based within our industrial parks,

and as a result, lack of qualified labor can be problematic for

there was a need to become NEEC certified.

human resources, as under these circumstances, OEMs must spend considerable resources training their workforce. Other

We are also working with the Ministry of Economy (SE)

challenges include infrastructural issues, with the government

to revise the Official Mexican Norm (NOM) with the hope

making unfulfilled pledges for the construction of highways

of generating more frequent revisions and adjustments to

or railroads. An expansion of highways connected to ports,

regulations, with a view to aligning the NOMs to the NEEC

the creation of more freight airports, and development of

certification. On October 2015, the Ministry of Environment

the railroad infrastructure will soon be essential. The energy

and Natural Resources (SEMARNAT) and AMPIP will hold

reform is a vital tool for keeping electricity and gas costs at

an event for Sustainable Industrial Areas with the support

a reasonable level. Several factors make Mexico an attractive

of the SE, ProMéxico, and GIZ, a German agency that

investment site, including our geographic proximity to the

promotes sustainable technological shifts and provides

largest automotive market in the world, 12 FTAs that cover

sustainability training. Our parks must be truly sustainable,

45 of the most important global markets, and a cheap and

but not only in terms of their environmentally friendliness,

capable workforce.

also to create added benefits.

Mexico for three years in a row, while the Chevrolet Spark

for interior, electric, and thermal systems and subsystems,

was the most sold vehicle in the economic segment, and

generating an aggregated value of more than US$6 billion.

the Chevrolet Camaro had the largest sales volume for a

Our national engineering is growing and will continue to

sports vehicle. Hernández also stated that the Chevrolet

do so as the industry expands.”

Trax was the SUV with the most sales in Mexico, and the largest pickup and leader in its segment was the Chevrolet

“The strength we have achieved in the country in the

Silverado 2500. The absolute leaders in large and luxury

past 80 years has allowed us to position Mexico as one

SUVs were the Chevrolet Suburban and the Chevrolet

of our key locations for GM International.” Because of

Tahoe, complemented by the GMC Yukon and the Cadillac

that, GM continues to invest in Mexico, announcing last

Escalade. “Without a doubt, our achievements have only

year that, between 2013 and 2018, it will invest more than

been made possible thanks to a team that works to satisfy

US$5 billion to modernize and increase its capacity in its

our clients’ needs every day. An example of this is the

manufacturing plants, as well as introducing new models

Regional Engineering Center in Toluca where we employ

like the updated version of the Chevrolet Cruise. “I am

more than 800 Mexican engineers,” Hernández proudly

sure these investments will benefit the Mexican auto part

points out. “Our people design components for vehicles in

industry, especially if we consider that GM has become

more than 20 plants in North America, China, and Europe,

the biggest auto part purchaser in the country.”

CREATING ECONOMIC MOMENTUM By Luis Lozano - In recent years, Mexico has been

that domestic steel production currently supplies only 30%

consolidating as one of the world’s top countries for

of the requirements for automotive manufacturing, while

both vehicles exports and vehicle production. Since the

the rest is imported from countries such as China, Sweden,

nation recovered from the 2009 global recession, which

France and Germany. This has led to Mexico becoming the

sent significant shockwaves throughout the automotive

number one buyer of steel in Latin America. In terms of auto

industry, Mexico has been rapidly becoming a permanent

parts, by 2020 the industry is expected to have a production

leader in the manufacture and export of light vehicles. This

value of US$100 billion, which would make Mexico the

growth is mainly the result of recent investments to increase

fifth largest producer globally, according to projections by

the production capacity, particularly from companies like

INA. The North region recently received 20 new auto parts

General Motors, Ford, Nissan, Honda, and Mazda in the Bajio

companies as part of the KIA supply chain. Additionally,

region, and Volkswagen and Audi in Puebla. Additionally,

Canadian auto parts suppliers have recently been coming

Toyota recently announced a US$1 billion investment for

to invest and start their production in Mexico in order to

the construction of a new car assembly plant in the state

maintain profitable operations. Auto parts companies have

of Guanajuato, where more than 2,000 jobs will be created.

had to refocus and reorganize their production processes,

These dedicated OEMs have been manufacturing several

standardizing many of them in order to comply with the

of their well-known models here at high volumes, helping

demand of different clients.

them to target the largest and most rapidly growing markets without leaving the others behind.

The increase in R&D centers in Mexico will result in a significant increase in local content. Therefore, growth in

The level of new car sales in Mexico at the end of the 2015

auto parts production and exportation will be higher than

fiscal year is estimated at around 1.4 million units, the

expected for the light vehicles segment. The forecast is

highest level in the last ten years. If we analyze the size

to achieve sales above US$90 million by the end of 2015.

of the market and consider that more than 40 brands are

To meet this goal, ProMéxico has developed a number of

present here, one of them having a 25% market share, this

investment projects, 100 of which are already underway,

fierce competition can actually attract new players, which

with many more under evaluation. The use of alternative

generates even larger market growth. In 2014, Nissan was

propulsion technologies for vehicles has opened a new

the market leader with annual sales of 291,729 units, a 10.7%

chapter in the industry. Sales of hybrid or diesel technology

increase over the previous year, with which it gained 25%

cars are increasing, and Electric Vehicles (EVs) have been

of market participation. General Motors sold 216,958 units,

available since the end of 2014, when they were introduced

with the resulting year-on-year growth of 7.6% and a market

by companies such as Nissan, BMW, Renault, and GM. This

share of 19%. Last year, Volkswagen’s sales grew by 2.8% to

forward momentum is creating significant expectations

reach 195,332 units, representing a 17% market share.

for sustainable transportation in Mexico. There have been innovative proposals to increase the autonomy of vehicles

The arrival of OEMs and their supply chain was responsible

in order to minimize the use of fuel and the generation of

for the rescue of electromechanical contractors in the

pollutants. Nevertheless, those technologies pose great

Bajio region, which previously saw little to no activity in

challenges, such as their adaptation to a society that has

this segment. The construction industry also saw benefits,

always been gasoline dependent, not to mention making

namely in the development of new industrial parks, which are

technology prices accessible and competitive in the current

greatly increasing the importance of nearby cities for foreign

vehicle market. The first challenge would seem easier,

investors. Similarly, other regional vocations, such as food,

although the autonomy of EVs continues to be one of the

glass, steel, oil, and chemicals are growing in a significant

key factors to bear in mind, as well as the establishment of a

way. In this sense, it is no surprise that all industries are

charging network in the main cities of Mexico.

reacting to the urgency that automotive is generating, as it is the engine driving the manufacturing industry of Mexico.

In conclusion, the Mexican automotive industry is one

AMIA has mentioned that steel is a key component for

of the most important sectors in Mexico. It generates

automotive production and that pressure from steelmakers

favorable foreign exchange, economic growth, direct

could endanger its competitiveness. The automotive industry

and indirect employment, training program investments

accounts for 10.6% of Mexico’s total steel consumption, with

for workers, and many other benefits, and with each new

demand growth estimated at around 7.1%. As a result, the

step comes new objectives for maintaining this growth in

National Chamber of the Iron and Steel Industry (CANACERO)

the competitive worldwide automotive market.

announced last year an investment of US$3 billion between 2014 and 2016 to expand steel production capacity and meet

Luis Lozano, Legal and Tax Services Partner, and Lead Partner

the growing automotive demand. Even so, estimates show

of the Automotive Industry at PricewaterhouseCoopers

NEW PROJECTS AND MORE COMPETITION In April 2015, the federal

Two days later, the government held a second press conference

government

two

at Los Pinos, where Ford announced the construction

major

announcements.

of two new facilities in the country, one in Chihuahua and

The first one was delivered

another in Guanajuato, as well as the expansion of its existing

on the 15th in the Adolfo

engine plant in Chihuahua. Even though Mexico is now an

López Mateos Hall at the

international hub for the automotive industry, Ford was the

presedential

first company to establish in 1925. This has allowed it to help

of Ildefonso Guajardo Villarreal, Minister of Economy

made

Los

Toyota

residence

Pinos, disclosed

where

the entire sector grow, supporting the industry’s development

the

at all stages. Once again, Ildefonso Guajardo took the floor of

construction details of a

the López Mateos Hall, congratulating Ford and Toyota for

new manufacturing plant

both of these projects. “Today, we are closing a perfect week

in Celaya. At the event, the Minister of Economy, Ildefonso

for the Mexican automotive industry, receiving more than

Guajardo Villarreal, stated that after establishing its first

US$3.5 billion in foreign investments that will strengthen

plant in Baja California in 2004, Toyota had finally made the

various different segments of the automotive sector.”

decision to participate more actively in the Mexican industry. The total investment for this facility will be US$1 billion and

At the moment, Ford produces around 500,000 vehicles for

this will be Toyota’s third manufacturing center in Mexico

the national and international market, breaking records in

after its plants in Tijuana and Salamanca. Apart from its

local distribution with the Ford Fusion, which is the most

obvious significance in terms of investment and employment,

exported model in the country. Additionally, the company

its most relevant implications will be in terms of technology

has four manufacturing plants in Mexico, one of which

and innovation. The Minister of Economy informed about the

exports more than 500,000 engines. With its new facilities

Toyota New Global Architecture program which intends to

in Guanajuato, Ford will manufacture 800,000 transmissions

elevate the company’s global standards of production and,

annually. Meanwhile, it will have an increased production

moreover that Mexico will be one of the first countries to

of engines in Chihuahua of one million units, transforming

receive this technology, along with China.

this facility into the biggest engine plant in the country, and globally one of the most important plants for Ford. The three

In Guajardo’s opinion, this venture is strengthening

projects will receive a total investment of US$2.5 billion and

the bonds with Japan, especially since the economic

will generate close to 3,800 jobs. “This will help to develop

agreement established ten years ago. “Our relationship

the entire Bajio region, it will promote the growth of the

with Japan goes back almost 400 years and since we

national auto part industry, and it will strengthen our bonds

built this arrangement, our bilateral commerce has grown

with the three main US automotive companies. After this

more than 70% with a commercial relationship of almost

week, there will be no question that the industry is in the

US$20 billion in 2014. In these last ten years, the Japanese

most important process of evolution in Mexico. The country

automotive production in Mexico has escalated by 325%,

is a safe destination for every automotive company and,

manufacturing 35% of the total new vehicles in the country

after 90 years, Ford has also been a standard for the growth

and 45% of the exported units.”

of the Mexican industry,” concludes Guajardo.

ACTING GREEN AND THINKING BLUE Apart from the ongoing competition between automotive

entire operation, meaning water and energy consumption,

companies to be the largest producer with the best

waste generation, and greenhouse emissions.

technology,

another

fundamental

aspect

driving

innovation among the key players is sustainable practices.

As part of this initiative, Volkswagen de México signed an

With that in mind, Volkswagen has established clear

agreement with Mexico Power Group for the annual supply

goals through its Think Blue. concept. This initiative was

of 290 GWh of renewable energy, generated at the wind

launched in 2010 with the objective of making Volkswagen

farm currently being built at La Bufa, Zacatecas. When in

the most ecologically sustainable car manufacturer in

full operation, this park will have a total installed capacity

the world by 2018. To do so, every one of its plants must

of 180MW, 130MW of which will be used for Volkswagen

reduce its environmental impact by 25% throughout its

plants, covering 60% of the electricity consumption at the

NHK APPLIES COMPACT LINE PHILOSOPHY IN IRAPUATO Like a snowball rolling down a mountain, when the

bar production line in Mexico is still less automated than in

industry’s biggest players show their faith in a country, the

Japan, so training has been a key focus during the plant’s

growth that follows is inevitable. As investments continue

establishment.

to flood into Mexico, international automotive OEMs are paving the way for their most trusted suppliers to follow

NHK has applied a new concept to its production line

their lead. The Japanese Tier 1 supplier, NHK Springs, has

in Irapuato. While it still uses thermal treatment and

answered that call by establishing a new manufacturing

industrial ovens, it is much shorter than the traditional

plant in Irapuato in 2014.

production line. The company’s spring production line in Mexico only measures 76m in length and 10m in width.

Situated on the Castro del Rio industrial park, NHK’s new

Comparatively, in Japan, the traditional line measures

plant has been constructed to focus on the manufacture and

around 120m in length and 13m in width. Industrial ovens

sale of coil springs and stabilizer bars for OEMs throughout

in particular are usually very large, resulting in some

the country. Production at the plant began in December

production lines reaching more than 100m in length as

2014, with the objective of producing two million springs

a result. Such long production lines inevitably hinder

and at least one million stabilizer bars annually. According

expansion, so NHK’s approach is designed to address

to Kosuke Takeo, CEO of NHK Springs Mexico, Castro del

the low market demand that it faces. “Since we do not

Rio’s conditions are exceptional in terms of location and

have that much business in Mexico, the company has

water availability. “We concluded that Irapuato was the

focused on innovations in the production system,” says

best choice as it would allow easier access to more OEMs.”

Takeo. “Previously, we could only open a new plant if half

Before the decision, NHK had been studying the possibility

of its production was pre-assigned, but under our new

of coming to Mexico for a while, but did not have the clients

philosophy, we can offer exactly the same product with

or the supply contracts that would justify investing in a new

more efficient production processes.”

plant. “Formally acquiring Mazda as our client in Mexico acted as the catalyst that allowed us to ignite our operations

NHK sees a real opportunity in the design of lighter

here, but now we must find other clients if we are to get any

products, which is an area that its competitors are also

Return on Investment (ROI) on the plant.”

tackling. “Throughout the company’s history, we have used harder, more resistant, and lighter materials,” recalls

While Mazda was NHK’s first and primary customer in

Takeo. “We use a surface treatment to prevent the metal

Mexico, the company was soon approached by Nissan to

from breaking, utilizing a combination of different steel

become a supplier, and also aims to secure the business of

alloys and thermal treatments to achieve this. However, we

Honda, Toyota, and Ford. “Previously, our sister company

have not moved to use another metal base; we are still in

in the US was selling components to Ford’s plant in

the era of steel.” NHK’s focus on applied and fundamental

Hermosillo, but now we can supply these components

R&D combined with its innovative production techniques

locally,” states Takeo. The Irapuato plant is almost entirely

are aligning the supplier with some of the industry’s most

automated, with manual labor only comprising a small

coveted requirements, outlining a recipe for continued

percentage of the operations. However, NHK’s stabilizer

success for the brand.

plants in Puebla and Silao. Furthermore, Andreas Hinrichs,

includes the Izta-Popo program in Puebla and the Sierra

President of Volkswagen de México, stated that this project

Lobos project in Guanajuato. Izta-Popo’s objective is to

shows the brand’s commitment to the implementation of

protect the groundwater in the Sierra Nevada through

more productive and efficient eco-friendly processes. This

the reforestation of 750 hectares, the conservation of

arrangement will prevent the emission of close to 140,000

the indigenous fauna, and erosion prevention activities in

tonnes of CO2 every year.

the region. On the other hand, the Sierra Lobos program focuses on restoring 114 hectares of land, ensuring filtering

Volkswagen has also gained a lot of recognition thanks

of more than 68,000m3 of water in the region. These

to its new program, Por Amor al Planeta. Since 2006, Por

strategies are also communicated to every worker in the

Amor al Planeta has supported academic research directed

plant, promoting a strong connection between employees

to environmental and conservation strategies within Mexico.

and a better understanding of how these initiatives impact

This is the biggest project of its kind in Latin America, and

the environment, and ultimately Volkswagen’s operations.

| VIEW FROM THE TOP

NEW DAWN OF FINANCIAL SECTOR COLLABORATIONS WITH AUTOMOTIVE INDUSTRY VÍCTOR MANUEL DE LA CRUZ DE LOS SANTOS Automotive Director of Bancomext Q: How is the rise of the Mexican automotive industry

presence and resources in order to reach as many SMEs

changing its prominence in the portfolio of Bancomext?

as possible. However, 100% of the credits are provided by

A: Bancomext is involved in different sectors that were

Bancomext. OEMs that have contracts with Tier 1 companies

defined after the economic crisis of 2008. The three

from their home countries could get the same components

major

were

from a Mexico-based supplier. However, due to a deficient

extremely affected by this crisis and Bancomext was

financing program, most Mexican Tier 1, Tier 2, and Tier 3

forced to enter the automotive sector, offering support to

companies cannot compete with the production levels of

manufacturing plants, as well as suppliers. Nowadays, we

foreign companies. Bancomext is helping local companies

have a more extensive client list including Tier 1, Tier 2,

to commit the necessary resources to any business that

and Tier 3 automotive companies, and we are promoting

they contract. The negotiations began in 2013 with the joint

the use of Mexican auto parts and components in vehicles

efforts of Ministry of Economy (SE), ProMéxico, National

manufactured in Mexico.

Institute of Entrepreneurship (INADEM), INA, AMIA, and

North

American

automotive

companies

Bancomext, seeking to increase financing for national For 2015, we have an expected growth of above 40%,

automotive SMEs. The final ProAuto agreement with

especially in the automotive sector. In comparison, the

Santander was presented before the Ministry of Finance

average commercial bank grows about 5%. Out of the MX$38

and Public Credit (SHCP) in August 2014 in Queretaro.

billion (US$2.85 billion) total investment in the automotive sector, Bancomext represents 33% between national

Q: Does Bancomext have a way to make sure that the

companies and the only OEM with Mexican funding. This

funding is used appropriately?

company received special support from Bancomext during

A: Santander makes an internal analysis of each company that

a critical time, and now it has recovered enough to ask for a

determines how much credit will be offered, and then sends

more comfortable credit. In the commercial banking sector,

its conclusion to us for approval. After that, Bancomext revises

the two most important banks have an 18% and 9% share

the information and checks in periodically with the company.

respectively. During 2014, we offered a total direct credit

It is a win-win situation for Bancomext and Santander, as we

of MX$12.5 billion (US$940 million) and an economic flow

both increase our customer line and we both get a share of

of MX$17 billion (US$1.28 billion). The difference between

the interests. The program started last November and, to this

Bancomext and the commercial banks is that we offer

day, at least ten companies have received financial support

longer term credits of 10-15 years, compared to the six or

from us. The strategy of our Director General, Enrique de la

seven years that the commercial banks offer.

Madrid Cordero, is to establish agreements with ministries in every state. Bancomext also has regular meetings with all the

Q: What are the foundations of the collaboration between

automotive clusters, both individually and collectively.

Bancomext, Santander, and the automotive industry?

A: ProAuto is the union of educational, governmental,

Q: Aside from ProAuto, what other strategies is Bancomext

and banking institutions that connect SMEs with foreign

implementing in the automotive industry?

companies, and support suppliers with SME credits below

A: Bancomext has three different credit strategies for the

MX$40 million (US$2.67 million). INA and AMIA provide the

automotive sector. Direct credits of more than MX$40

knowledge of the industry, ProMéxico offers insight in the

million (US$2.67 million) to fund any kind of operation,

best places to locate certain businesses while introducing

factoring lines for OEMs than do not need a line of credit,

SMEs to the automotive industry, and Bancomext provides

and the ProAuto program for SMEs. The automotive

the necessary funding along with Santander. Bancomext has

industry is currently one of the most important sectors in

enough resources to support SMEs throughout the country,

the Mexican economy, and a large recipient of foreign direct

but we only have branches in Mexico City, Guadalajara, and

investment. For this reason, Bancomext expects to increase

Monterrey. For this reason, Santander offers its geographical

its activities in the automotive sector by 50% in 2015.

| VIEW FROM THE TOP

ELECTRONIC BANKING SHAPING FUTURE OF FINANCIAL SERVICES LORENZO BARRERA SEGOVIA Director General of Banco BASE Q: How is Banco BASE’s business model structured and

initiatives, offering access to many more of the services that

what kinds of financial services does the bank offer?

we provide and making us a much stronger choice for any

A: We operate based on a business to business model, but

automotive company. Judging from our 29 years in business,

we also serve individuals related to those companies. Banco

this has proven to be extremely successful. Our derivatives

BASE is divided into three business categories: foreign

and foreign exchange products are the most popular among

exchange and derivatives, which is a service that we have

our clients as we have been offering them for a long time,

been offering for the past 29 years, diversified investments,

but nowadays many clients are moving toward our electronic

which we started eight years ago, and our lending arm,

account and loan services too. For example, one popular

which is the newest part of the bank. The latter provides

product is the FxLoan, which is a flexible online product that

products such as simple loans and financial factoring for

meets our clients’ needs in terms of payback schedules.

suppliers, which can be granted thanks to our relationships with development banks, such as Financial National

Q: What is the main reason for the growth of the Mexican

(NAFINSA), Bancomext and Instituted Trust in Relation

automotive sector according to Banco BASE?

to Agriculture (FIRA). Over the last two years, we have

A: Opportunity. The US was producing vehicles in China

invested a large amount of funds in improving our electronic

and other countries, but stopped expanding production

platform. After exhaustive research among the most

in those regions and identified Mexico as a competitive

successful electronic platforms already on the market, we

production location with a capable, intelligent, hard-

identified ten areas for improvement. Subsequently, with the

working, and cost-competitive labor force. When this is

help of our IT department, we turned those opportunities

combined with the country’s proximity to the US, it creates

into a reality. The result, BASEinet, allows our clients to

the perfect storm. In addition, OEMs from other countries,

operate with seven different currencies, such as US dollar,

such as Japan, began to recognize our country as a viable

Mexican peso, Canadian dollar, British pound, Euro, Swiss

option, while the Mexican government is doing its part to

franc, and Japanese yen. The accounts we offer through

attract and anchor these investments.

BASEinet are completely online and electronic, innovating the way people access their financial services, and leading

Q: What are your goals and objectives for 2015, and how

to an increasing appetite to use them. We were authorized

do you envision moving Banco BASE forward?

to become a financial group in February 2015, namely Grupo

A: I intend to increase the workforce in our Mexico City

Financiero BASE, which is constituted by Banco BASE and

office by building new teams for personal finance and

Casa de Bolsa BASE, our brokerage firm. At least 25% of our

investment, as well as continuing growing the loans and

customers are Tier 1, Tier 2, and Tier 3 companies, as well as

credit parts of the bank. We have reached a total of MX$1.6

many other manufacturers. We are constantly researching

billion (US$106.7 million) in lending at this time, and we

and analyzing information that helps us to understand

expect to reach MX$2.4 billion (US$160 million) by the end

growing sectors, which includes determining which ones

of 2015. With more than 13,500 clients and 595 employees,

are neutral and which are stagnant. The automotive sector is

we are still planning to grow by at least 15-20% before the

one of the top three sectors in the country right now, so it is

end of 2015, especially in Mexico City, but also in Leon,

highly sought after by our commercial department.

due to the growth of the automotive industry in this area. We really want to make all of our services internet-based,

Q: Considering the global roots of many OEMs and Tier 1

instead of being branch-based like many large banks.

suppliers, to what extent do these clients take advantage

This is key to reducing overhead costs and being able to

of your specialized foreign exchange services?

offer more competitive rates to our clients. Many younger

A: Our 200 executives only serve 40-60 clients each, offering

customers already have the mindset that internet banking

a personal approach that many of the larger banks in Mexico

is the way forward. This new generation wants a faster,

cannot offer. It also allows us to execute our cross-selling

more efficient and completely accessible service.

| VIEW FROM THE TOP

FAMILIAR CHALLENGES STILL PLAGUING DOMESTIC MARKET MIGUEL JÁUREGUI Founding Partner at Jáuregui y Del Valle

Q: What obstacles do you see within the Mexican

each state has its own system to recognize and transfer

market in terms of automotive manufacturing and local

car titles and issue license plates.

consumption? A: The domestic car market lacks liquidity. More

Q: What are the most effective incentives that states

consumption ability is desirable, but disposable income

and municipalities currently offer OEMs to attract their

in Mexico has to increase in order to drive an increment

investment?

in cars sales in the domestic market. The solution is

A: Upon arrival into Mexico, OEMs generally require

two-fold, involving both public policy to promote

infrastructure,

consumption in the Mexican car market, and improving

Incentives for OEMs range from land contributions to

access to affordable credit.

the provision of infrastructure, such as roads, electricity,

security,

qualified

labor,

and

land.

water, and waste management. Additional incentives The potential increase of car sales in Mexico will also

can range from public transportation for employees, to

depend on legal protection that enables credit providers

the reduction or waiver of real estate transfer taxes.

to repossess vehicles if necessary, in order to recover the value of leased cars and outstanding loans. The fragility

Unfortunately, accelerated depreciation of investments

of the Mexican car market in these areas negatively

is no longer available, while salary subsidies are lacking

impacts car sales.

and must be directly negotiated with the federal government. Local payroll taxes may be also exempted,

Q: What measures have to be taken to improve the

but we advise our clients to keep three main points in

situation of illegal used vehicle imports?

mind. Firstly, they should not partake in any corrupt

A: Car registration must improve in Mexico, as well as

activity, secondly, regulations must always be followed,

public policies regarding property enacted by the federal,

and thirdly, it is vital to understand and respect the

state, and municipal governments. Demonstrable and

conditions of the Mexican market and its environment.

reliable car ownership is a requisite to avoid situations

Knowledge of Mexican history and of the operating

where consumers lack protection against illegal car sales.

region, as well as an understanding of the political climate, is also necessary.

Consecutively, the importation of poor quality second hand cars from the US must continue to be avoided, as

Q: How has Jáuregui y Del Valle developed over the

they negatively impact consumer rights and threaten

last year, and how do you see it moving forward in the

safety in the used car market, not to mention the fostering

automotive industry?

of unfavorable competition. The approval of these imports

A: Jáuregui y Del Valle is a full service law firm and its

has damaged the second hand car market in Mexico, since

aim is to provide a high-quality comprehensive service,

most of them are sourced from scrapyards in the US, and

offering expertise in all areas of practice that are essential

in many instances are bad for the environment.

for successfully operating a business. These divisions can include corporate, mergers and acquisitions, tax,

Fortunately, there is an increased awareness of the dangers

intellectual property, labor, energy, telecommunications,

in allowing the importation of poor quality cars from the

competition, regulatory compliance, anticorruption and

US; but conditions are yet to be improved through a well-

money laundering.

funded and transparent used car market, combined with

affordable new cars and efficient maintenance services.

Jáuregui y Del Valle has the necessary capacity to

OEMs should provide Mexican consumers with the ability

successfully

to buy affordable used cars with legitimate legal titles.

marketplace, with a view to provide clients with excellent

Rules and processes are not standardized in Mexico, as

services at affordable prices.

operate

within

Mexico’s

competitive

| VIEW FROM THE TOP

WORLD CHAMPIONSHIP AMBITIONS DRIVEN BY IMMENSE DETERMINATION ESTEBAN GUTIÉRREZ Formula 1 Driver for Ferrari Q: What have been the major achievements during your

A: The Grand Prix is supported in many ways by the

career, and what ambitions do you have for the 2015

government, which is bringing a lot of promotion to our

Formula 1 season?

country. When the racing begins, Mexico will benefit from

A: My greatest achievements have been placing first

the fact that Formula 1 was interested in having a Grand

in the 2008 FBMW Europe and in the 2010 GP3 series

Prix in Mexico.

championships. My ambition is to become a world champion, which is going to require a lot of commitment

Q: What relation, if any, does the return of Formula 1 have

on many levels, but I am ready to do whatever is necessary

with the booming automotive market here?

to achieve my goal.

A: It has a significant impact on the market. The first factor is that we will have a top level racing track in Mexico. Secondly,

Q: How have your experiences with Sauber and Ferrari

it will naturally ignite peoples’ interest in motorsports in

each helped to shape your driving style and technique

general. New categories and track projects are already

over the years?

starting to be developed, which is something that comes

A: The tough years in Sauber have helped me to dissect the

from having top-level drivers and a Grand Prix in our country.

details of my driving technique, enabling me to understand and adapt my style to any kind of circumstance. Ferrari’s

Q: How much Formula 1 technology trickles down for use

greater amount of experience provides me with the

in the mass market, particularly in terms of safety systems

right tools to keep practicing, also benefiting from the

and environmental protection innovations?

knowledge of two world champions.

A: Most technology and innovation is first developed in Formula 1 because top competition always pushes the

Q: What are the major differences between driving for

technological boundaries, together with safety. After that,

Sauber and Ferrari?

the technology is adapted naturally into the mass market.

A: There is a big difference between the teams. For instance, Ferrari is a team with a remarkable structure that

Q: Which brand of passenger car do you most enjoy

can provide me with more tools than I have ever had before,

driving, and why?

which is amazing for my overall development. The workload

A: Ferrari. The cars are a work of art; they reflect the

is also much higher because you need to interact with more

passion, dedication, and innovation of the people that

people around the team, but this is a brilliant experience.

produce them in Maranello, Italy.

With Sauber, things were more limited; the team was smaller and had fewer tools available, shifting the approach to working from a more driver-focused point of view. Q: Formula 1 has been absent from Mexico for 23 years, so what does its return signify for the country? A: The return of the Grand Prix has huge significance in Mexico. After such a long hiatus, people have become very enthusiastic about it. Considering that motorsport has been growing in Mexico throughout the years, the presence of a Grand Prix was definitely the natural next step. This triumphant return is a dream come true for many Mexicans. Q: What efforts are being made by the government and Formula 1 itself to help develop track racing infrastructure?

| VIEW FROM THE TOP

CHECO EXPRESSES OPTIMISM ABOUT MEXICO’S MOTORSPORT FUTURE SERGIO “CHECO” PÉREZ Formula 1 Driver for Sahara Force India Q: What were the reasons behind your comment that

you are ready to move forward with the racing. It is a great

Force India was in for a “painful start” to 2015?

experience to repeat more than a year with the same team

A: Well, as everybody knows now, our new car was not

because you get to know each other quite well, making it

ready in time. We were only able to run the VJM08 in one

really easy to work together.

of the pre-season weekends, so it was quite evident to us from the start that we were going to have some trouble

Q: In terms of growing the next crop of Mexican F1 drivers,

catching up with the evolution of other teams. I am not

what advice would you give to help aspiring young people

sure if we are going to have enough time to get to the

follow in your footsteps?

place we want to be, but we will keep working as hard as

A: The priority is to never stop dreaming. When we are

ever, and I think the team is doing quite well right now.

children, we all have dreams and we think about what we

If we continue to work as hard as we have been over

want to be when we grow up. However, once we actually

these past few months, the team will be able to move in

become adults, it becomes common to let those dreams

the direction it wants to go, allowing us to keep working

slip away. My advice is to hold on to those dreams and

toward our goals.

work hard to achieve them because they are not going to magically become a reality. Sometimes you can get lucky,

Q: What efforts have been made by both you and Force

and you may find great people along the way who want to

India to acquire more sponsors, particularly from Mexico?

help you, as I have, but a big part of turning your dreams

A: Fortunately, this is something that has come naturally

into reality is work. You cannot let one day pass without

to us. The fact that F1 will come back to Mexico after more

taking a step toward your goals. Finally, be thankful for

than 20 years of absence has created big expectations,

what you achieve and be glad about the people that

and it is the event that everybody wants to attend. From

support you: your family, your fans, and your sponsors.

fans to brands, we have been very thankful for all the support we have been receiving.

Q: How common and accessible are the necessary training and available race tracks for upcoming drivers in Mexico?

Q: How have your experiences with McLaren, Sauber, and

A: Motorsport is certainly not the most accessible sport to

Force India each helped to shape your driving style and

be a part of, especially in a country like Mexico where there

technique over the years?

tradition for the sport is not as a big as in some European

A: The time you spend in the cars and on the tracks are

countries. Even so, there are good tracks available. There is

even more important than the teams you race for. Every

a lot of work to be done in order to expand that accessibility,

minute you spend in the car provides an invaluable

but I am optimistic about the future of motorsports in

experience, from the feelings you get to the information

Mexico. The return of the Mexican Grand Prix has been

you can collect. All of this knowledge can then be analyzed

made possible by the government and the private sector. By

with your engineers, which is an extremely important part

bringing the sport closer to the people, we are increasing its

of the process. At the end of the day, it has to be a balance

exposure and therefore giving it a real chance to grow. In

between the features of the car and your own driving style.

that respect, the first steps have already been taken.

That balance is what we are always striving for. Q: How much Formula 1 technology trickles down for use

Q: What were the major challenges of switching from one

in the mass market, particularly in terms of safety systems

team to another?

and environmental protection innovations?

A: The major challenge is becoming comfortable with your

A: These technologies have a big impact. The sponsors that

teammates as soon as possible. Getting to know each other

are making large investments in Formula 1 have to attempt

and establishing efficient channels of communication is

to get a return on that capital, and applying that technology

the lifeblood of a good team. Once you have achieved that,

to their commercial cars is one effective way of doing so.

Q: What does the return of Formula 1 after an absence of

have many races to run this year so we cannot yet know

23 years signify for the country?

for sure how we are going to finish the season or what will

A: The news of Formula 1â&#x20AC;&#x2122;s return has created a huge

await us in the years to come.

amount of hype around the country. F1 has a lot of fans in Mexico who have been patiently and expectantly waiting

Q: What do you think Formula 1 will bring to Mexico over

for its return for a very long time, so now is an exciting time

the coming years?

to enjoy it once again. For the country, and, indeed, for us as

A: Formula 1 is the most technologically developed

Mexicans, it is a great opportunity to show to the world who

category of motorsports in the world, besides all the

we are, where we come from, and where are we going as a

glamour and exclusivity that it represents. With only 20

nation. As a country, Mexico is continuously growing. There

cities chosen to host the races, Mexico has been placed

are still a lot of efforts to be made, but we are growing

in the spotlight by being part of that exclusive list. I am

in a clear direction and the automotive market is a clear

sure that the world will be delighted by our culture and the

reflection of that. The biggest brands are moving to Mexico

kindness of the Mexican people.

which can only be good for the country and its people. Q: What are your future ambitions as a Formula 1 driver? Q: With Formula 1 back in your home country, what

A: I am proud to say that this is my fifth year as a Formula 1

ambitions and aspirations do you have for the Mexican

driver. While it has not been easy to stay in the sport, I have

Grand Prix?

managed to do it, but just being a part of it is not enough

A: I know people are excited about the Mexican Grand Prix,

for me. I am determined to become the world champion

and we are going to give it our best, for sure, but we want

and I am dedicated to achieving that goal. Standing on

to avoid creating false expectations. We know the position

those podiums was a really enjoyable experiences that I

in which we stand as a team right now, and to promise pole

was proud to have accomplished, but I want to go further.

position or a victory would be irresponsible. My goal for

Even so, for reasons that are already evident, this will not

this year is to continue working hard with the team. We still

be the year for me to claim the world championship title.

Mexico’s total production of more than 3.2 million light vehicles in 2014, placed the country as the seventh largest car manufacturer in the world. On its way to reaching an annual production volume of 5 million units by 2020, the light vehicle segment is breaking records month after month. Eight automotive groups are now manufacturing in Mexico, collectively operating more than 20 facilities throughout the country, while Mexico’s competitive investment environment recently attracted four premium vehicle manufacturers, with the first one scheduled to start production in the country no later than 2016. With production is setting new records, also domestic light vehicle sales are reaching levels not seen since 2006, a record year for Mexico. As the competition for market share is intensifying, the growing portfolio of models offered by the wide range of brands active in the market is slowly transforming the country’s market segments.

This chapter focuses on how the leading manufacturers of light vehicles are evolving in the country, exploring their ambitions to contribute to Mexico’s rapid development as a light vehicle manufacturer impacting both the domestic and the international market. Leading OEMs are offering an insight in their strategic priorities, while sharing their perspectives on industry trends and presenting solutions to the remaining challenges that the Mexico automotive industry is facing.

LIGHT VEHICLE OEMS

CHAPTER 3: LIGHT VEHICLE OEMS 58

VIEW FROM THE TOP: Eduardo Solís, AMIA

VIEW FROM THE TOP: Pedro Tabera, Mercedes-Benz México

VIEW FROM THE TOP: Walter Hanek, Audi México

VIEW FROM THE TOP: Airton Cousseau, Nissan Mexicana

VIEW FROM THE TOP: Gabriel López, Ford de México

VIEW FROM THE TOP: Raymundo Garza, General Motors de México

VIEW FROM THE TOP: Andreas Hinrichs, Volkswagen de México

PLANT SPOTLIGHT: Volkswagen Puebla Expansion

VIEW FROM THE TOP: Edgar Estrada Ceballos, SEAT México

INSIGHT: Hiroshi Shimizu, Honda de México

VIEW FROM THE TOP: Miguel Barbeyto, Mazda de México

VEHICLE SPOTLIGHT: Mercedes-Benz GLE Coupe

VIEW FROM THE TOP: Helder Boavida, BMW de México

VIEW FROM THE TOP: Bruno Cattori, FCA México

VIEW FROM THE TOP: Pedro Albarrán, Hyundai Motor Corporation

VIEW FROM THE TOP: Manuel de la Torre, KIA Motors México

VIEW FROM THE TOP: Philipp Heldt, Infiniti Mexico and Latin America

VIEW FROM THE TOP: José Luis Montiel, Renault México

VIEW FROM THE TOP: Luis Gerardo Sánchez, Volvo Auto De México

VIEW FROM THE TOP: Antonio Barceló Garza, Subaru

TECHNOLOGY SPOTLIGHT: Henkel Material Treatments

PLANT SPOTLIGHT: Honda Celaya

| VIEW FROM THE TOP

VITAL DEVELOPMENTS SPEARHEADING THE FUTURE OF AUTOMOTIVE INDUSTRY EDUARDO SOLÍS Executive President of AMIA Q: Mexico is experiencing a perfect storm in terms of

helping them to better approach the areas of common

investment, but how long can this last, and what needs to

interest, such as standards, domestic market development,

be developed or maintained in order to sustain it?

and any issues that affect that domestic market. AMIA is

A: As a result of the singularities that Mexico has presented as

wholly focused on developing the industrial aspects that

its prime credentials for attracting investment, the country is

are in play in the automotive sector. Over the last year,

definitely going to continue its rise as a high roller in the world

we had two new arrivals, one of which is Hyundai, which

of vehicle manufacturing and exports. These credentials are

is already a full member of AMIA, and the other is KIA, a

measured by location, human resources, and the network of

member of AMIA since July 2015.

free-trade agreements (FTAs) that the country holds, giving Mexico a real edge in the global market. Human resources

Q: With Mexico’s domestic sales in 2015 showing

in particular are vital for OEMs, Tier 1 suppliers, and for the

significant growth over the previous year, what role has

overall development of our country, as well as having a

financing played in this success?

robust supply chain and a preferable business environment.

A: Financing has been growing quite nicely in Mexico. It used to be the case that the country would sell 50% of

Over the years, we have had a tremendous alliance with

its total vehicles through financing, when the international

the Mexican government, which has managed to sustain

benchmark is around 80%. Today, around 62-64% of total

economic stability, as well as further promoting our

sales in Mexico occur through financing.

industry. Even so, to achieve Mexico’s target of producing 5 million units by 2020, the country has some very important

Q: How is AMIA helping to create a more structured

challenges to overcome, especially in logistics and human

second-hand sales environment, ensuring that buyers can

resources. Provided that we continue to work with the

be more confident about buying used vehicles?

federal and state governments in these areas, we should

A: Mexico’s Congress is discussing a change in the law

arrive comfortably at this target.

called the Ley de Caminos y Puentes Federales. Passed in the Lower Chamber at the end of April 2015, this law

AMIA is an institution that groups all OEMs that

will make the verification of the physical, mechanical, and

manufacture or commercialize light vehicles in Mexico,

environmental condition of used cars a mandatory process

TOTAL PRODUCTION BY BRAND (JANUARY TO JULY) Total Production by Brand (AMIA) 500,000

0.6%

Year 2014

-4.9%

400,000

300,000

Year 2015

0.7%

-0.20%

1.8%

200,000

78.1%

100,000

215.1% 21.6%

Source: AMIA

FCA Mexico

Ford Motor

General Motors

Honda

Mazda

Nissan

Toyota

Volkswagen

LIGHT VEHICLE SALES BY BRAND (JANUARY TO JULY)

25.2

Light Vehicle Sales by Brand (Fuente: AMIA)

Year 2015

38.3

31.0 Porsche

11.9

10.0

10.1 6.9 Audi

20.7 Smart

6.9

-1.1

-22.2

Renault

4.7

20.6 Peugeot

Suzuki

37.2 Mini

Subaru

20.7 Mercedes-Benz*

5.8 Lincoln

46.1

-6.7 Land Rover

-22.5 Jaguar

n.c.

14.8 Isuzu

Kia

32.4 Infiniti

28.7

350.2

11.2 Ford Motor

13.4 BMW

15.8 12.7 Acura

100,000

FCA MĂŠxico

150,000

50,000

Year 2014

19.2

200,000

Volvo

Volkswagen

Seat

Volkswagen

Toyota

Nissan

Mazda

Honda

Hyundai

General Motors

on federal highways. The law is now at the Senate where

vehicles that are still in circulation. Once this is fine tuned,

it will be analyzed in September 2015. We really have to

it should prove to be an invaluable tool for the industry and

monitor this change in the law because it is the type of

its customers.

thing that will make the secondary market grow. We need to make sure that any garbage cars in the vehicle stock

People tend to think that the only way to increase

are replaced. The country has one of the oldest vehicle

domestic sales is by increasing per capita income, but

stocks in the world, with close to 17 years average age, so

we have to remember that Mexico sells less than ten new

we need to work with the federal authorities on changes

vehicles per 1,000 inhabitants, while Argentina or Brazil

to the law that will allow us to filter our secondary vehicle

were respectively selling 19 and 21 new cars prior to their

stock. AMIA is pushing for a world-class public registry of

financial crisis. There is no real explanation hiding in the

vehicles. The Vehicular Public Registry (REPUVE) is a tool

statistics for per capita income that can account for this,

to create more certainty, allowing consumers to search its

not even in the distribution of income. According to the

online database before purchasing a car. It was created

GINI Index, we have a more equal distribution of income

due to the law that pertains to the mandatory public

than Brazil, yet they were selling almost 20 cars per 1,000

registration of vehicles. Each new vehicle that we sell in

inhabitants during 2013. The difference is that Brazil is

Mexico today gets an individual chip and is registered in

not allowing one single used vehicle to be imported from

REPUVE, preparing us for the future. Even so, the database

abroad. Today, while I am not saying we will achieve zero

still needs to be improved and updated with the older

imports, we are reaching a more manageable number.

TOTAL EXPORTS BY BRAND (JANUARY TO JULY) Total Exports by Brand (Fuente: AMIA) 350,000 300,000

2.0%

250,000

Year 2015

-1.3%

-9.6%

Year 2014

1.0%

6.5%

200,000 150,000 163.4%

100,000

270.7% 21.6%

50,000 0

FCA Mexico

Ford Motor

General Motors

Honda

Mazda

Nissan

Toyota

Volkswagen

Source: AMIA * Mercedes-Benz does not offer information regarding light trucks since November 2012

| VIEW FROM THE TOP

PURSUING LARGER MARKET SHARE WITH LOCAL PRODUCTION PEDRO TABERA President and Director General of Mercedes-Benz México Q: How is Mercedes-Benz progressing toward its goal

our older clients. The new generation is well informed, they

of becoming the number one selling premium brand in

are always aware of the alternatives, and they are willing to

Mexico by 2018?

try different vehicles. For that reason, we must continuously

A: The beginning of last year was rough for the entire

strive to maintain the integrity and quality of our products.

market, but also resulted in us having to change the

Mercedes-Benz is the brand with the most diversity in terms

C-Class, which is our best-selling model and accounts

of additional equipment a client can order with the car.

for 40% of our sales. However, since July 2014 things

Nevertheless, we must take into account how our clients

have been turning around and our sales have increased

operate in order to have the right models ready for them.

by 16%. The market’s recovery in the first half of 2015

certainly helped, but our own growth was mainly due to

Q: What factors have triggered the decision to start

our products, our dealership network, and our price range.

manufacturing in Mexico?

Although it only makes up for 3% of our global sales, the

A: There are two main factors, namely the growth of the

AMG has been quite popular in Mexico, representing 6%

luxury car market worldwide and Mexico’s open economy.

of Mercedes-Benz’s sales in the country. Our financial

Even though plants are usually built in Mexico because of

services have been equally important, as nearly one in

its proximity to the US market, Mexico allows its products to

every two customers finances their purchase through

be exported everywhere without tariffs, which is reassuring

us. Furthermore, given that we are now approaching the

if the US market becomes stagnant. Additionally, this

higher segment of middle class consumers, financing has

expansion has caused ample availability of Tier 1 and Tier 2

become crucial to our strategy.

suppliers, offering the best combination of quality and cost.

The C-Class has been the core business for Mercedes-Benz

Q: Why was Aguascalientes selected as the location for the

for a long time because it answers client desires being a

plant, and which other locations were considered?

large and spacious vehicle, offering the best technology,

A: We did consider many other sites; in fact, we even

comfort, and security. In terms of our compact generation,

considered other countries and met with almost every

the CLA and the GLA have had the biggest success in the

governor in Mexico. Ultimately, Governor Carlos Lozano of

market. These lines were launched mainly for the European

Aguascalientes made a good deal with us without having to

market, but they have begun attracting new customers to

offer anything exceptional. Plus, the relationship he already

the brand in Mexico. This is because compact cars are being

had with Nissan made things a lot easier. The other main

well received by younger generations, while they are also

factors that made us choose Mexico were its low production

attracting a higher percentage of female customers. The CLA

costs, truly skilled people, and its logistics given the

has been the most successful, selling 1,300 units in 2013, with

importance that exports have for our operations. Instead of

an expected total of 1,600 units for 2015. The GLA was also

building a plant from scratch, we are using preexisting Nissan

a success with 800 units sold, the A-Class sold 1,000 units in

infrastructure. We exchanged shares with the Renault-Nissan

2014, which is a truly high number for a hatchback, but the

Alliance a few years ago, obtaining 10% of Nissan and Renault

B-Class has not been that popular, as it is not an ideal car

for 3.5% of Mercedes-Benz’s shares. We are now working

for the Mexican market. In early 2015, we launched the AMG

together on different projects worldwide. However, this is

GT, an ultra sports car that will succeed the SLS to compete

our first joint production, so we have been extremely careful

with McLaren and Ferrari. Finally, as well as having a new

to build our premises in Aguascalientes without interfering

SUV model in the pipeline, we will also launch the new Smart

with each other’s work. We expect that by becoming local

ForTwo and ForFour. We are fortunate to have the highest

producers, aside from lowering our production costs, we will

loyalty in the market, which says a lot about our products.

become a main player in the country and create a stronger

However, loyalty among our younger customers, though

presence in the media. That way, we will constantly be in the

higher than that of the competition, is still far lower than with

eyes of potential new customers.

| VIEW FROM THE TOP

DEDICATION TO MEXICO SECURING REPUTABLE IMAGE FOR AUDI WALTER HANEK Corporate Director of Audi México Q: With the premium segment rapidly developing in

called Audi Plus, where the customer receives all the

Mexico, what effects have you detected on Audi’s sales

benefits of a premium brand: three years of warranty, three

performance in the country?

years of maintenance service, five years of road assistance,

A: The premium market has been growing for many years.

and partial theft insurance.

During the eight years I have spent in Mexico, the premium segment has developed three times faster than the total

Q: Which Audi models have had the warmest reception

market. From January to March 2015, that increase was not

in Mexico?

as rapid as it was in the same period in previous years. Still,

A: The A3 sedan is currently one of our bestsellers.

the luxury segment has shown a growth rate of 11%. The

Nevertheless, the A1 and the Q3 are also well-received in the

exchange rate and the reduction of used vehicle imports

Mexican market. Additionally, even in their run out period,

have been beneficial to the volume market, but they have

the Q5 and the A4 are seeing decent sales figures. Audi has

not affected the luxury segment enough to see a real

an international reputation that has been well-established in

impact. Audi is not growing as fast as its competitors in

Mexico. This reputation, along with the new plant, will help

the premium segment, with only a 3.9% increase during Q1

us get the Audi Q5 to our customers in less time.

2015. This is mainly because of the A1 and Q3 runout we experienced, which are our high-volume models. However, a

Q: How many dealerships does Audi have in Mexico and

new shipment of these models arrived in Mexico in May and

how do you decide on the best places to establish these?

June 2015, respectively. With that, we expect higher growth

A: Our national network consists of 38 locations, including

rates between Q2 and Q3 2015. Even so, Audi achieved a

service points. While this is enough to cover the entire

35-month continuous growth record in April 2015. During

country, most of the business in the luxury segment is

2015, Audi will be going through a complete renovation

centered in Mexico City, representing approximately 65%

of its model line-up, which will give us significant sales

of our total market. Furthermore, if you combine the main

potential in the market. We are clearly on a growth path in

markets of Mexico City, Monterrey, Guadalajara, and Puebla,

Mexico. First, we want to increase our sales in all areas of the

that figure reaches almost 90%. We also maintain the

country, and second, we want to ensure that our existing

highest quality of service throughout our entire network

customers remain loyal and satisfied with Audi.

by selecting the right people, who are then put through rigorous training programs at the Audi Academy in Puebla.

Q: How important is Mexico in Audi’s global sales strategy? A: In 2014, Audi México sold nearly 13,000 units out of the company’s global total of approximately 1.74 million. While this may not seem like much in the grand scheme of things, we are the market leader, we have a strong global image, and we are really well-accepted as a brand in México. If you combine this reputation with the arrival of the new plant for the Audi Q5 in San Jose Chiapa, Puebla, then this presents potential for our future in the country. Overall, we are truly pleased with our market position in Mexico. The key to being successful in the Mexican market is to offer attractive products that customers can purchase out of the showroom. Therefore, we offer well-equipped packages for each of our models, focusing on different characteristics of the vehicles including luxury, sportiness, and exclusivity. We also offer a comprehensive maintenance program

| VIEW FROM THE TOP

DECISIVE, TARGET-DRIVEN METHOD FOR MAINTAINING LEADING POSITION IN MEXICO AIRTON COUSSEAU President and Director General of Nissan Mexicana Q: Which critical success factors enabled Nissan to

program through Credi Nissan in 2014 called Súbete. This is

become the best-selling brand in Mexico?

a special financial program for people that have income but

A: Nissan has a rich history in this country, which was the

do not have a way of proving it. Last year, we sold 800 cars

company’s first operation outside of Japan. While Nissan

though this program, but it still has huge potential. The illegal

is the number one brand in Mexico, I am often asked why

importation of used cars from the US is highly detrimental

we cannot duplicate this success in other countries. We are

to the market, but the figure is now dropping rapidly. There

selling the same cars in Mexico as we are in other countries,

are around 25 million cars in Mexico, but almost 8 million

with some of those worldwide sales actually linked to Mexico

of those have been illegally imported from the US. We

due to the 70% of production we export. Our success can be

could still improve the used car segment because it will

attributed to our people and our dealer network. Our people

greatly improve the domestic market. The domino effect

are committed to Nissan and work to their highest potential

of this improvement will dramatically change the sales

every day, while our dealers are some of the best that I have

landscape in Mexico, bringing a new wave of investment

ever had the pleasure of working with. Nissan has various

to the country. In order to double car sales in Mexico, the

committees through which it engages with its dealers in

country would need at least four more manufacturing

areas such as aftersales, digital, and sales and marketing.

plants, as well as 50-60% more dealers than it has today.

Each month, these committees meet to discuss company

This kind of development would have an economic impact

plans and set new goals. For example, in 2013, we set the

by boosting construction, architecture, law firms, and many

goal of selling 300,000 units in the 2014 fiscal year. This

other businesses, including those in the Tier 3 supply chain,

represented a growth of around 17-18%, and we established

which survives primarily on the aftersales market.

how we were going to achieve this in terms of products, positioning, and marketing in collaboration with our dealers.

Q: How have Nissan’s Aguascalientes A2 operations

We agreed on the numbers, we agreed on the goal, and then

developed since the expansion was completed in 2013?

we executed the plan. Today, the dealership groups sell more

A: The expansion in Aguascalientes was great for Nissan as

than 4,500 cars per year per group, around 1,400 per dealer,

it has helped us to meet the current demand. We are now

making them financially stronger. If the dealers are financially

able to focus the production at Aguascalientes I on local

strong, then they will hire the best people to work for them,

supply, while Aguascalientes II covers the export market.

which will better represent our brand. Another reason why

The expansion can produce 170,000 units per year, which

Nissan has achieved these figures is because we made the

made an important contribution to the 308,000 units that

right choices and executed them perfectly. One of these

we produced in 2014. If you combine the production rates of

decisions was to establish the new financial arm Credi Nissan

Nissan Mexicana, the company is producing a new vehicle

around ten years ago. Today, this has paid off, because 55%

every 38 seconds. All of our processes are just-in-time and

of the total vehicles sales in Mexico are now financed, while

have to be extremely precise, but even with that fast pace,

the other 45% are paid for in cash. Our financial arm helped

you will not see inventories on the line floor. Our operations

us to provide financing to our dealers and to offer good rates

are top of the class, globally. On top of that, we finished

and financial programs directly to our customers.

our new distribution center in 2014, further expanding our logistics operations. Six hours after a vehicle is produced,

Q: What are the key strategies that Nissan is adopting in

it is already in our vehicle distribution center. Another six

order to improve domestic sales in Mexico?

hours later and the same vehicle is either at the border to

A: Mexico’s global positon for domestic auto sales shows a

the US, or in Veracruz, ready to cross the ocean.

huge opportunity for the industry. One of the problems that

the country has is access to credit. The informal economy is

Q: The success of the X-Trail and the Pathfinder has been

huge; 60% of the population works but their earnings are not

clear in Mexico, but how is Nissan performing in other

registered. To try to deal with this, Nissan launched a new

segments?

A: Combined, the X-Trail and the Rogue used to sell 500

Q: How would you describe the reaction of Mexican

units a month in Mexico. Today, the new X-Trail is selling

consumers to the Nissan Leaf?

around 1,600 a month. However, during some months we

A: Nissan was the first company to launch an Electric

do not have enough supply to meet the demand, so we are

Vehicle (EV) in Mexico. The company does not just believe

unable to keep the top spot for sales. In the overall SUV

in the future; it creates the future. While the infrastructure

segment, Nissan is performing very well. The Pathfinder is in

was not available in Mexico to support this car, we felt

second place, the Murano is selling less but it is helping the

that it was better to introduce the Nissan Leaf now so

image of the brand within the segment, and the Juke is a

that the future would arrive faster. It is very difficult

smaller SUV which is performing quite well. Fortunately, all

to introduce this technology without infrastructure

of Nissanâ&#x20AC;&#x2122;s vehicles experience good performance rates in

or incentives from the government, particularly when

Mexico. Many think that the Tsuru is the number one car for

nobody cares about zero emissions cars. The Mexican

Nissan in Mexico, which would have been correct six years

government does not currently offer incentives for EVs,

ago, but the Versa is now our best-selling car in this market.

but Nissan believes that these vehicles are the future

The Tiida sells around 2,000 a month, Versa is generally

and is working with the government to make them a

moving around 4,800 but still hits figures as high as 5,200

viable option for the country. Unfortunately, we cannot

occasionally. In March 2015, our performance for the Versa

demand the government to provide incentives for us to

was outstanding; it beat the Chevrolet Spark to become the

sell our cars. What we are asking is for the government

leader in the market for this segment. The Sentra is in second

to do something for the environment, perhaps by

place because we are not willing to enter into a price war

making an exemption to the value added tax (IVA) when

with the Volkswagen Jetta. Whenever we start a new sales

buying an EV. Ultimately, if the cars do not get sold then

campaign, we will not move on the price. Nissan knows

the government does not receive this money anyway. If

that if we reduce the price of the car, we would reduce the

the government agrees to a tax exemption, the impact

value of the car in the eyes of our customers, which would

on the price of the car will be huge at around 16%. This

reduce future sales. Therefore, every month, we measure

money can be used by Nissan to invest in infrastructure

the residual value of our products in order to prevent this.

for the benefit of the country. If other brands can join

All the seeds that we sowed almost a decade ago are now

Nissan and BMW in this mission, then we will be able to

fully grown, and Nissan is happy to be harvesting them.

improve infrastructure must faster.

| VIEW FROM THE TOP

ATTACKING A FAMILIAR MARKET WITH NEW REQUIREMENTS GABRIEL LÓPEZ President and Director General of Ford de México Q: In April 2015, Ford announced an investment of US$2.5

companies take more risks and covering part of the losses

billion for the construction of two new facilities in the

when contracts go south. Even so, this has had limited

country. What factors made Mexico the right place for

impact and most programs have a restricted timeframe, so

this investment?

it has been difficult to pinpoint any sustainable growth. Ford

A: The announcement of this investment is an important

is currently developing alternative programs for customers

step in the history of 90 years of Ford in Mexico. At present,

who do not have a steady income. However, the economy

Mexico is the fourth largest producer of vehicles for the

suffers from an extremely high level of informality, and until

company, as well as the fourth largest producer of engines

that level is reduced, it would be very difficult to achieve

and the second largest country providing auto parts to

the penetration we see in more developed economies.

Ford’s global facilities. By opening this new chapter, we

Financing costs should be lower, but that is determined by

hope to provide even better products, which can now

the risk that financing companies perceive.

include new engines and transmissions, in order to serve Ford customers worldwide.

Nevertheless, financing is growing in Mexico and we think there is huge potential to grow vehicle sales within

Q: How has the last decade of slower sales impacted

the domestic market. Given that 50% of the Mexican

Ford’s vision for Mexico?

population is younger than 25, we need to be prepared to

A: Ford is here for the long run and is as committed to

tackle that challenge. New consumers in the market will be

Mexico as ever. We have not changed our view of Mexico,

looking for affordable ways to buy a car, and that can be

and we still approach the market by scaling our business

achieved through different financial tools. The more banks

to match the trends in demand. The plan is to keep

that go after the same pie, the stronger the competition

producing and growing in Mexico, either through more

will be, which will greatly benefit the consumer by creating

sales, greater production, or a combination of the two. In

lower rates, more available products, and more convenient

line with this strategy, we have made our pricing process

financing schemes. Ford has been in the global market for

more transparent throughout our portfolio. There is now a

112 years, so we welcome any competition.

connection between our incentives, marketing programs, and prices, resulting in an increase in credibility and a

Q: Traditionally, young consumers do not display the same

spike of customer satisfaction. We created this initiative as

brand loyalty as older clients. How does Ford convince

a consequence of several abnormalities in the market, but

these new buyers to choose its cars?

now we intend to apply it to all our near-future releases.

A: The only way to grow our market share and make our business stronger is to build up our brand. Brand

Q: To what extent has Ford been involved in automotive

positioning provides the ability to charge more for the

financing in Mexico, and how could these services help

same product, not only in the automotive sector, but

Ford to grow in the country?

in almost every single industry in the world. However,

A: Our dealers offer financing products from various banks

just being present in the customer’s mind does not

and financial institutions, as well as solutions from our own

make you a strong company; you have to increase the

brand, Ford Credit, which alone covers the vast majority

buyer’s willingness to purchase your product over your

of vehicles that are financed within our dealerships. The

competitor’s. As more competition and brands enter

financing penetration we have seen is currently between

Mexico, Ford needs to work much harder to increase

50% and 55%, while the rest of our sales are usually paid

its brand power. In order to achieve this, we are adding

for in cash or with in-house dealer financing.

more content to our products and offering them at much more competitive prices. As an example, the Ford Fusion

The government has made some progress in this area by

Titanium is more equipped than any other premium

using Financial National (NAFIN), which is helping financing

brand, but at a significantly lower price.

There is a trend toward downsizing, but Mexico is still

for our vehicles. Our Expedition and Navigator models were

behind other countries. In Europe, compact cars represent

recently awarded with the top safety rating in their class in

more than 85% of the market, while Mexico remains at 60%.

the US. We are pleased to announce that Mexican engineers

Nevertheless, compact cars will become more popular,

developed the systems in the Expedition, which makes them

eventually representing 60% of the global consumption.

responsible for this five-star rating. Furthermore, our plan is

Fortunately, Ford has a rather successful small car portfolio,

to manufacture all those components in Mexico, along with

and we are launching new products which will meet the

other plants in our network.

affordable, economical, safe, and high-quality demands of the Mexican consumers.

Q: Not all OEMs established in Mexico have developed a strong relationship with the local supplier network. What

Q: What strategies led Ford to become the Best Global

could be the reasons behind this disconnected attitude,

Green Brand in 2014, and how is this commitment to

and how could Mexico work to change this mindset?

the environment reflected in the company’s marketing

A: This is determined by the amount of time and

strategies in Mexico?

resources dedicated to the network’s development, not

A: One of our global standards is to have the most unique

just by the suppliers, but also by the manufacturers. The

and affordable product, with the best quality and the lowest

level of sophistication in these plants has to be just as

possible fuel consumption, covering the same distance

high as their clients’ in order to deliver the right results.

while protecting the environment. Innovation is critical for

Nowadays, we are investing almost US$12 billion in local

this kind of performance. We were the first company to

auto parts and components, with a large portion of this

produce a system to connect a cellphone to the car, and

dedicated to domestic plants, but the rest is exported

to control the critical features of the vehicle through voice

to different manufacturing sites around the world. The

commands. That was not just for the sake of innovation and

quality of Mexican production is exactly the same as

to be high-tech, but to create a safer environment for the

in the US or Europe, and we are experiencing exactly

driver. We were also one of the first companies to introduce

the same phenomenon with the people we are hiring.

downsizing, which involved producing smaller engines and increasing their power using turbochargers. We are planning to become a leader in innovation and we have just announced the opening of our research center in Palo Alto. Our goal is to have over 150 engineers working on different projects by the end of 2015, most of them directed toward connectivity, V2X, and V2V strategies. These connected vehicles will be aware of the roads, nearby vehicles, and infrastructure, creating a safer drive while reducing traffic,

“Our approach is truly demanding in terms of what we expect from our engineers, but we are quite pleased about the quality of service we are getting from our

and even searching for available parking spaces.

production operations in Mexico”

Q: How is Ford trying to raise safety awareness in Mexico,

Our recruitment process is quite sophisticated and we

other than the safety features included in its vehicles?

have developed strategies to attract only the best talent.

A: Safety is a corporate priority and one of our positioning

We work with universities to create specifically tailored

pillars, as we aim to provide the safest car in the market

programs to develop the best trainees. Therefore, we work

within every segment. We are trying to do what we can

on a very stringent and comprehensive training program

to remain affordable, while simultaneously providing the

for engineers, in order to make sure they are prepared to

highest level of safety possible. Aside from airbags, we have

work in the Ford Product Development department. Some

ABS in most of our products and we are looking to expand

of the innovations that these young engineers have created

that to our entire portfolio. We also invest a lot in Research

are simply incredible and they have even surprised some

& Development (R&D) to ensure that our products are the

of our senior engineers in the US. Furthermore, some of

safest in their class. Additionally, we are working with the

these products are now being implemented worldwide,

government on their recent regulation to make airbags a

including a parametric model to design new components

standard requirement for all vehicles, further enhancing

in approximately 20 minutes, considerably improving our

safety in our country. There is still much to be done in terms

previous timeframe of three to four weeks. Our approach

of infrastructure, education, and law enforcement, and most

is truly demanding in terms of what we expect from our

accidents in Mexico are caused by one of these three factors.

engineers, but we are pleased about the quality of service

At the same time, we will continue to work on the best features

we are getting from our production operations in Mexico.

| VIEW FROM THE TOP

INTERLOCKING PURCHASERS WITH MANUFACTURERS RAYMUNDO GARZA Purchasing Director GPSC Mexico of General Motors de México

Q: General Motors recently announced a US$5 billion

A: The main opportunities for Tier 2 and Tier 3 suppliers

investment, how will this investment be allocated?

depend on the needs of Tier 1 companies. Multiple forums

A: This cash flow injection started in 2013 and, with funding

sponsored by state governments are held at our plant

expected to last until 2018, it will mainly be directed toward

to align the existing demand between Tier 1 companies

renovating and expanding our manufacturing capabilities

and the offerings of Tier 2 and 3 companies. We help

in all four GM plants, namely Toluca, Ramos Arizpe, Silao,

Tier 1 suppliers identify companies from within the chain,

and San Luis Potosi. So far, US$1.4 billion has been invested

alongside the Center of Mexican Automotive Industry

in two principal projects. Firstly, we invested in a new

Development (CeDIAM) at the Tecnológico de Monterrey,

engine plant that manufactures small gasoline engines

as well as offering basic quality tool courses for potential

(SGE), which is one of the most efficient engines on the

suppliers. Many new suppliers will enter the market, while

market. Further resources went toward creating a new

existing ones will expand their production capacities

eight-speed transmission facility in the Silao plant. Of the

within the country. When facing noticeable expansion

remaining US$3.6 billion, we plan to invest US$350 million

efforts, the challenge is to maintain a competitive focus

in Ramos Arizpe to develop the next generation Chevrolet

in terms of manufacturing costs, which include logistics,

Cruze, US$87 million is designated to the expansion of our

technological, and raw material costs.

stamping plant in San Luis Potosi, while the remaining US$3 billion will be invested across our manufacturing complexes.

Q: How has the content ratio of locally and internationally produced components changed in vehicles that are

Q: What kind of new technology is GM introducing to

produced in Mexico?

develop these projects?

A: Between 2013 and 2014 our in-country purchases

A: Our SGEs are highly efficient turbo-charged engines. In

increased by 16.7%. The production of a General Motors

the past, only diesel engines were turbo-charged, but the

vehicle requires an average of 2,400 components, and

development of this feature in gasoline engines means that

40% of these are manufactured in Mexico, including

the metals are smaller but more efficient, providing more

electric components, stampings, and interior and exterior

fuel economy without sacrificing power. In terms of our

parts such as lights, windows, and mirrors. Although the

transmission development, we are constantly improving our

average can vary depending on the vehicle, approximately

products, having started with four speeds, before moving on

70% of our component expenditure is allocated to the

to six, and subsequently eight. This provides a more effective

purchase of locally produced goods, which demonstrates

ratio between gears, which helps with the transmission’s

that the parts that are manufactured in Mexico are of the

efficiency, in turn optimizing fuel consumption. We are also

highest quality. We have plans to expand local content up

establishing two stamping lines that will help us produce

to 90% over the next five years and we are still working

larger quantities of panels and stamped components.

on some products that we do not yet have the capacity to

Although our national production lines are currently running

manufacture, such as forges and braking components. In

efficiently, we are constantly looking at ways to improve

addition, we are developing our existing product base in

manufacturing processes. In an effort to continue mitigating

electric components and interior parts. The combination

the impact of our environmental footprint, we are working

of these efforts will hopefully allow us to reach the 90%

on wind power generation. This project will be developed

mark that we are striving for.

primarily for our Toluca facility, and is being operated in collaboration with Enel Group.

Q: What opportunities are there to use components produced in Mexico for technologically specialized

Q: As the largest auto parts purchaser in the country, how

vehicles, such as electric and hybrid cars?

is General Motors supporting the development of the

A: GM Mexico has no existing plans to manufacture electric

local supplier network?

or hybrid vehicles in the country, but in the first quarter

of 2015 we announced the introduction of the Chevrolet Spark Electric Vehicle (EV) to Mexico, a car designed to run completely on electricity, which will be manufactured by GM Korea. We believe that it is an area that has the potential for development at a later date, but due to the need to develop a component supplier network for the specific market segment, there is unlikely to be any progress in the short term. However some of our local suppliers manufacture components for electric vehicles such as the VOLT from Mexico. The projected sales volume for these vehicles is relatively small within the Mexican market and it is likely that the spare part market would be solely comprised of imports, which may prove costly. Our future plans in this area will be dependent on the way in which the market reacts to our product, but if our predictions of a limited product penetration are accurate, there will not be sufficient demand to justify establishing relationships with this type of supplier in Mexico. Q: What are the priorities of General Motors to reduce

Q: In terms of Tier 1 providers, what companies has GM

costs in the supply chain?

helped to establish in the Mexican market?

A: We can improve the logistics costs when there is an

A: There are almost 30 new companies that have established

increase in product offering from the local market. The larger

plants in Mexico with GM support, and they provide us with

the volume, the more cost effective the logistics will be, and

engine and transmission components, as well as interior

this improved response capability also helps us face industry

and exterior parts. Our supplier development strategy

changes and demand fluctuations. If we possess a strong

consists of balancing General Motorsâ&#x20AC;&#x2122; demand between

production and logistics chain we can increase our product

the Mexican and global market and the increasing supplier

volumes and consequently increase our exports, so we work

offering in the country has meant that we have begun

with our logistics providers to improve our local infrastructure

focusing on maximizing the competitiveness of Mexican

and equipment availability. Additionally, we collaborate

based suppliers. In order to optimize the process, a total

with the state governments to create the appropriate

cost- based approach was implemented, which includes

infrastructure in terms of ports, highways, and railroad tracks.

logistic costs, production competitiveness, local integration

GM seeks providers with a competitive price, lean production

levels, raw material availability, technology, and engineering

systems, robust quality mechanisms, and the ability to offer

and development capability. Our supplier quality division

an unequivocal guarantee that our components will be

oversees compliance with necessary guidelines that will

created with the best quality materials in the market.

allow us to deliver the best possible products to our clients.

| VIEW FROM THE TOP

ADAPTING CORE STRATEGIES WITHIN A DYNAMIC SECTOR ANDREAS HINRICHS President of Volkswagen de México

Q: What new technologies and processes is Volkswagen

Q: Given that part of Volkswagen’s new investment will be

bringing to Puebla with its US$1 billion investment?

directed toward developing a stronger supply chain, what

A: Our new development stage started in 2014 with

challenges are you expecting to face?

the production of the new Volkswagen Golf. This new

A: We have a 50-year history in the country and we have

generation is built with the new Modular Transverse Matrix

several suppliers that have been with us since the beginning.

(MQB) platform, which is a really important step because

However, we are now starting the implementation of

Golf 7 is the main product and the most successful car

our new platform, and we are expanding our existing

for the Volkswagen Group. There have been times when

supplier network. Silao is also starting production of a new

the Volkswagen Jetta has surpassed the Golf, but when

generation of engines, using components from companies

you talk about Volkswagen’s most successful car, people

that will be part of Audi’s supply chain as well. In general,

naturally think about the Golf. This is very similar to how the

our infrastructure is developing quite well, which will

Volkswagen Beetle was perceived in the past. That is why

give us the chance to grow faster than other companies

it was imperative to bring this production to Mexico, and

in the future. For our new production, we are planning

we have been really pleased with its development. Golf 7

to reach a local content level of 90%. Many German and

received the Car of the Year award in the US, which shows

other European companies are coming to assist us, and

the safety and performance of the vehicle, and also our

we might need one or two more years to reach this goal.

competence development. We launched the Golf 7 and the

Nevertheless, it is one of our priorities and a key factor for

GTI version in 2014, and we are now planning to release the

this project’s success.

Jetta GP. In terms of the MQB platform, we are changing our design completely. We are using the newest segment

Q: Volkswagen’s expansion is expected to generate 2,000

of the plant for this model, and we are building another

new jobs in the region. How are you planning to attract

segment for the production of the new Volkswagen Tiguan.

the necessary talent, considering that new competitors

Additionally, having both sides of the plant adapted to

are entering the market at the same time?

the new platform will help to introduce any other product

A: We are concentrating our business in Puebla, where,

based on MQB, with much lower investments. That way, we

fortunately, Audi and Volkswagen are the only OEMs in the

are totally oriented toward the strategies that Volkswagen

region. Queretaro and Guanajuato are attracting a lot of

implements in Europe and China. We are in a preparation

new business, but Puebla remains stable. Nevertheless, it

phase and our production volumes will remain stable until

is an important issue for us, and we have developed strong

we start the production of the Tiguan.

relationships with several universities in the state in order to direct educational programs toward our technical and manufacturing needs. Additionally, we are implementing the same dual education system we use in Germany, and we have discovered that it is the best method to pass on the right knowledge to our employees. To continue improving, we need well-trained workers with the proper skills, and we must invest in their continuous development. In terms of the people working directly on the floor, we need to make sure they understand the new technology we are using, as well as every component and tool they must use to manufacture the high-quality products and engines we require. We are supported by the Volkswagen Institute, which does most of the training. There needs to be an independent entity that takes care of this process, because

if it is coordinated by internal managers and operators,

regarding Volkswagen is that of the Vocho, especially

training and development aspects can fall by the wayside

since it represented the reality of the market for many

as normal day-to-day business is prioritized.

years. As a result, our strategies in Mexico and the US are completely different, considering that our market share in

We offer competitive salaries at Volkswagen de Mexico, and

the US is approximately 2% or 3% and not everyone knows

in many cases they are well over the salaries offered for similar

our vehicles. Our image has evolved in accordance with

positions in other companies. Additionally, we have proper

the Mexican market, and all our models are leaders in their

insurance, in-house doctors to attend all our employees,

segment including the Volkswagen Beetle, with a 70% to

as well as many other benefits. This dedication has made

80% market share in its small segment. We are seeing a

our workers realize they are getting more than just a large

change in our clients’ mindset, which is now more centered

paycheck. There are also several development opportunities

on safety features, fuel efficiency, and equipment; they are

and different paths to choose for a technical career. Our

no longer only predominantly looking for low price.

workers can become specialists, and then move on to a coordinator position or train other specialists. People do not

Q: In terms of Volkswagen’s Think Blue. strategy, the

want to remain in the same position forever, so they are more

company has a goal to reduce its waste and CO2 emissions

attracted to the idea of having growth opportunities.

by at least 25% by 2018. How much progress have you made toward this objective?

Q: What are Volkswagen’s plans for the fast growing SUV

A: We have worked for three years on a complete strategy

segment in Mexico?

involving electricity, water, and gas consumption. We expect

A: The growth of the SUV segment is a global phenomenon,

to reduce our power and water consumption by more than

and in Mexico the SUV A and A0 segments are really

25% by 2018, reaching 30% or 40% in some cases. Reducing

strong. In the past, we also had a large market for Multi-

our natural gas consumption might be a little more difficult,

Purpose Vehicles (MPVs) in the US, but now the customers

but starting in 2016 we will source 70% of our energy from

have moved toward C- and D-SUVs. People are changing,

our own wind farm, which is a far better result than our

so we need to do more to address the needs of our clients

colleagues in Europe are achieving at the moment.

in this segment. In terms of our products, we are looking into electric Because of our international approach, all our new

vehicles, but we only see a significant opportunity in

platforms and engines are designed in our headquarters.

really large cities. For the rest of the market, hybrid cars

Nevertheless, the rest of the car is designed locally, and

will be the best option given that they will still have an

our product development division currently has 800

engine to support the electric motor. However, we are

permanent employees and 300 temporary ones to work on

waiting for the right infrastructure to implement this

those projects. For the Tiguan we are following a different

solution. It will not be developed fast, and it involves a

process, given that Europeans like smaller cars than those

huge investment, but change will surely come. We are

we normally market in Mexico and the US. For that reason,

already producing some hybrid engines locally, and our

we are in charge of making all the necessary adaptations

new Tiguan production will include a hybrid version as

to the original design. We had the same situation with the

well. Electric vehicles are more complicated since they

Volkswagen Touareg. Technically, it is a perfect car and its

require a large investment, so we are only manufacturing

design is really attractive, but for Mexico and the US it is too

them in Germany. If we could lower the production costs

small. Customers expect a larger car for something of that

to equal those of combustion engine vehicles, it could

price, and the streets are designed to receive vehicles of

make sense to bring that kind of production to Mexico,

a much larger size. Therefore, we are currently working in

but currently that is not possible.

Chatanooga on a model even larger than the Touareg. For high-end brands this is not a problem, since their cars are

Q: What are Volkswagen’s priorities for 2015?

centered on image and status, but for volume companies it

A: We are focusing on preparing the plant for its new

is really important to meet the various size requirements of

production, we are building a completely new body-shop

the market.

with enough flexibility to include other products, and we are analyzing which other cars could be successful in the

Q: How is Volkswagen managing its brand image to

Mexican and US markets. We are also working on our cost-

attract more clients in Mexico?

reduction efficiency plan, for which we are already making

A: Almost everybody in Mexico recognizes the brand.

progress toward our 2015 goals, as well as establishing the

Usually, the first thought our Mexican clients have

strategy for 2016.

| PLANT SPOTLIGHT: VOLKSWAGEN PUEBLA EXPANSION Not long after Volkswagen’s 50th anniversary in Mexico and

in North and South America. Joining the Golf VII, the Jetta

the last US$700 million expansion for the production of

4 and 6, and the Beetle Coupe and Cabriolet, the new

the Volkswagen Golf VII, on March 9th, 2015, the company

production line will be dedicated to the latest version of the

announced a new US$1 billion expansion of its plant in

Volkswagen Tiguan. According to Andreas Hinrichs, CEO of

Puebla. This 90,000m2 project will include new logistic

Volkswagen de México, the line will start operations in 2016,

spaces, as well as a new industrial facility for body-exterior

and the new Tiguan will be available on the market by early

construction. Additionally, the projected infrastructure

2017. Just as the Golf VII, the Tiguan will use Volkswagen’s

includes the modernization of the existing facilities,

Modular Transvers Matrix platform MQB, easing the

and the introduction of state-of-the-art technology for

transition process of this new model into the plant.

the manufacturing process and the final product. The combination of all these factors will allow for a total daily

With a combined total of 3 million m2, Volkswagen’s

production of 500 units. While some of these units will

plant in Puebla is the largest manufacturing complex in

remain in Mexico, the rest will be shipped to several markets

Mexico and one of the largest plants of the Volkswagen

Group. It includes all the processes needed for vehicle

new roads and highways, easing the transport of people

fabrication, including stamping, painting, assembly, as well

and resources into the facilities.

as production of engines, axles, and catalytic converters. Previously, the plant employed 15,800 people, but it is

The new Tiguan production will also be in line with

now expected to generate an additional 2,000 direct

Volkswagen’s Think Blue. factory strategy, and its goals of

jobs. The new industrial facilities and assembly lines will

reducing environmental impact in all manufacturing facilities

also increase business for auto parts suppliers around

by at least 25%. The new facility will have the most advanced

the country, as well as bring new investments for these

systems for water and energy consumption, similar to other

suppliers’ own facilities. During the official announcement,

Volkswagen facilities built in recent years. Through this

Francisco González, Director General of ProMéxico, stated

investment, and with Audi’s upcoming production plant, the

that this expansion would bring an estimated US$1 billion

Volkswagen Group is steadily growing its presence in the

in annual auto parts requirements. In response to these

country, and it is now consolidating Puebla as one of the

new developments, the local government is constructing

largest automotive clusters in Mexico.

| VIEW FROM THE TOP

STRUGGLES GIVE RISE TO PROGRESS FOR EUROPEAN BRAND EDGAR ESTRADA CEBALLOS Brand Director of SEAT México Q: How has the market share of SEAT evolved in the

Q: What actions is SEAT taking to consolidate the brand

Mexican market in recent years?

in Mexico, particularly in the secondhand segment?

A: Shortly after the original launch of the brand in Mexico,

A: We have an increasing vehicle park of 255,000 cars

sales peaked in 2002, with 25,000 cars sold. However, in 2011,

in Mexico after 13 years in the market and our presence

the brand was just emerging from a series of very difficult

is still growing. Our market strategy for the used vehicle

years when sales dropped to 13,000 units per year. During

segment involves planning for the future, but it must

that year, we took the company in a different direction,

be implemented one step at a time. We are trying to be

which enabled us to grow sales volume to 18,000 cars,

more professional while improving our aftersales service,

followed by 21,100 in 2012, 18,000 of which were the SEAT

which also requires an increase in used car sales through

Ibiza. The solution was to create an aggressive joint plan with

our dealer network. One of our strategies to achieve this

our dealer network, which helped to determine the growth

is through Volkswagen’s Das WeltAuto used car program.

potential in every sales location in the country. We have also

We aim to offer the best value to the customer in this

been actively working on the evolution of the brand, as we

sector, including an upgraded aftersales service based on

are facing new challenges, new competitors, and are entering

better processes. SEAT is consolidating all of its processes

new segments. The most important part of our strategy is

at the dealer level, as well as training its staff to deliver the

extending our product range, with a prime example being

best experience to the customer.

the upcoming introduction of a new SUV in Mexico. Q: Are there any plans to establish a SEAT manufacturing Q: How does SEAT intend to compete on price points with

plant in Mexico?

rival brands?

A: As of today, there are no plans to do this. However,

A: For SEAT, one of the most important factors in the

depending on the development of the brand in the

Mexican market is the value the customer gets when they

country and in the region, there is always a possibility for

buy a vehicle. We cannot be an expensive brand, but we

the future. Mexico is the fifth biggest market for SEAT

are a brand that gives you more value for money. SEAT is a

worldwide, making it truly important to our headquarters.

high-quality brand, it has German and Spanish genes that

Even if we do not have a plant, our Mexican operations are

combine to provide trustworthy technology and security,

responsible for adapting the product, its equipment, and

yet its cars remain affordable.

its settings to the Mexican roads, as well as matching its pricing to the local market.

The SEAT Leon is our flagship model and our sportiest

vehicle. In the past, the Leon was seen more as a racing

The first priority for the brand worldwide is to fulfill the

car targeted toward young people. The strategy of the car

production capacity of the plant in Martorell, Spain, and

has changed to be more open. It is now seen as a more

with the new line of vehicles SEAT is releasing, there is a

mature car that attracts a wider scope of customers, while

promising possibility we may reach the desired production

still remaining popular among young people. Furthermore,

numbers. Today, SEAT in Mexico is fulfilling 98% of

it has improved its efficiency, reliability, and convenience.

its customers’ needs for spare parts. The high level of

As well as having an invigorating sense of performance,

coordination with Martorell and our large distribution center

it also has a complete security system, including airbags

in Mexico allows us to have excellent logistics, and we have

and ABS brakes, a navigation system, LED lights, alloy

no problems when it comes to backorders. Our Chairman

wheels, sunroof, and subwoofers, all for a very reasonable

Jürgen Stackmann has a deep understanding about the

price. Among the Volkswagen Group brands, SEAT has

strategies needed in the automotive business. In his visits to

experienced the fastest worldwide growth, and this is

Mexico, he is always keen to understand how the situation is

largely due to how well-received the Leon has been since

evolving here in the local market, and he talks directly with

its launch.

the dealers to help elaborate our medium-term strategy.

JAPANESE GIANT BRINGING NEW APPROACH TO YOUNGER MARKET Japanese automakers have been manufacturing in Mexico

and minimize friction, a new combination of high output

since the mid-sixties, when Nissan set up its Cuernavaca

and fuel efficiency was achieved, proving the company’s

plant in 1966. Up to now, the country’s other OEMs have been

commitment to environmental impact. In Mexico, the

relatively slow to follow, but recently the flood of exports

company mostly sells gasoline direct injection engines and

from Japanese brands has skyrocketed. In the early 2000s,

CTV transmissions, but both technologies are the most

Japanese exports only accounted for 12% of Mexico’s total

efficient ones in the market in terms of high power and

amount, but this surged to 23% in 2013. Now congregating

fuel economy, which, when combined, offer huge added

in the middle of the country for easy access to Atlantic

value to consumers. Interestingly, Honda has decided to

and Pacific ports, Japanese companies are clearly taking

bring back its Acura NSX model, but with a number of

advantage of Mexico’s numerous free-trade agreements,

technological advancements. “Honda’s mission is to offer

which have transformed Mexico into a global export hub.

its customers the most enjoyable and exciting experience possible, so we have added to the NSX a direct injection

Since 1995, Honda has been evolving its manufacturing

engine supported by a turbocharger coupled with three

operations in Mexico with two plants in the country, the first

electric motors,” says Shimizu, proudly. “Honda is the only

in Guadalajara, a new US$800 million facility in Celaya, and a

company in the market that can develop these kinds of

new US$470 million transmission plant in the same location.

hybrid vehicles, and we expect them to reach the market

The Guadalajara facility is currently fully ramped-up, with a

by early 2016.”

production capacity of 62,000 units. Celaya is capable of manufacturing 200,000 units, but Honda has projected that

Honda has three S policies, namely sales, service, and spare

for 2015 it will only produce 165,000, due to some unforeseen

parts, which all equally important for the brand’s success.

challenges. Nevertheless, the company is planning to

Since the moment Honda set foot in Mexico, it has never

overcome these hurdles and reach full capacity in the short

modified its service policy, putting as much emphasis on

term. “Canada and the US are waiting for our Fit and HR-V

this as anything else. “Honda keeps breaking sales records

models, so we must work quickly to satisfy this demand,”

at the end of every year, but we always have to keep in

states Hiroshi Shimizu, President of Honda de México.

mind that sales records go hand in hand with a proper expansion of service centers,” states Shimizu. “For those

So far, the Honda Fit has been very well-accepted in

clients that prefer a more traditional way of purchasing

the Mexican market, and it has not been uncommon for

and that still visit dealerships, Honda strategically places

dealers to ask for additional units. However, there are

service centers next to its showrooms. That way, we can

many successful Honda products that are generating a

also capture our clients with extremely affordable and

stronger demand in Mexico, including the City, the HR-V,

reliable maintenance services.” Alongside this philosophy,

and the CR-V. In terms of target customers, the Honda

Honda possesses a strict policy when it comes to safety,

Fit has become quite attractive for young people, while

another “S” it its range of policies. In line with this, the

the Honda City is mostly targeted at families. According

company has recently implemented Collision Mitigation

to Honda’s dealers, the company has found that the HR-V

Breaking (CMBS), as well as blind spot monitors in all of its

is also generating interest among younger generations.

vehicles. In addition, a Lane Keeping Assist System (LKAS)

In the luxury segment, Acura is currently fifth in the

has been recently added to the Acura product lines.

rankings, so Honda is working to improve its position. The company is seeing good demand from Acura’s SUV line, including the MDX and RDX models, with the latter being the brand’s most successful. Additionally, the ILX and TLX models have been recently released, and although it takes time to establish a strong footprint, Honda is striving to

“Honda’s mission is to offer its customers the most enjoyable and exciting experience possible”

achieve this as soon as possible, utilizing a focus on new innovations and technology to reach its goal.

Honda’s commitment to the region is solidified by its recent investments and focus on new technology, preparing the

Honda’s Earth Dreams Technology is a prime example of

Japanese manufacturer to serve an ever-increasing demand

this approach, as it is applied to all of company’s engines,

for modern features and environmentally friendly vehicles.

no matter the fuel they use. By enhancing its original

Year after year, the company keeps improving its technology

VTEC (Variable Valve Timing and Lift Electronic Control

and implementing it into the newest Honda models, so 2016

System) technology to further improve thermal efficiency

could represent a milestone year for the brand in Mexico.

| VIEW FROM THE TOP

PROMISING SALES FIGURES ENCOURAGING CUSTOMERFOCUSED STRATEGIES MIGUEL BARBEYTO Senior Director of Mazda de México Q: Now that Mexico’s auto sales figures are starting to rise

We have our support products, our halo products, and our

after a decade of continuous stagnation, how does this

core products including the Mazda3, Mazda6, and the Mazda

affect Mazda’s overall strategy in the country?

CX-5. What defines a certain product’s category is the

A: When Mazda entered the market back in 2005, the

volume that it represents in the marketplace. Throughout

company was able to overcome the difficulties in the

2014, we sold a total of almost 41,000 units in Mexico,

industry by launching a new generation of products. By

representing a 3.9% market share. Naturally, our objective

investing in Mexico, just as we did after announcing our

for 2015 is to increase that volume to around 47,000 units in

Salamanca plant in 2011, Mazda has been able to negate

order to meet the demand of the region.

some of the effects of recent exchange rate fluctuations. The company is now in the process of launching its

Q: Who would be the ideal customer for each of the new

sixth generation vehicles. We have already launched the

models that you are launching?

Mazda6, the Mazda3, the locally produced Mazda2, and

A: Ideally, we want customers who love Mazda’s design

the CX-5, which is the third best-selling medium-sized SUV.

and have a passion for driving. In terms of its design,

The summer of 2015 saw the launch of the MX-5 Roadster,

this particular factor is what differentiates our brand

which has sold approximately 900,000 units globally

worldwide. Our brand is based upon four pillars. The first

over a 25-year period, making it the best-selling and most

is our SKYACTIV Technology, which involves the engine,

famous roadster in history. Ever since Mazda set foot in the

transmission, body, chassis, and all other developments

Mexican market, the most accepted and successful model

that our Japanese engineers have built from scratch. The

has been the Mazda3. Its design, the driver dynamics, the

second pillar is Mazda’s KODO design (Soul of Motion),

customer satisfaction, and its maintenance costs were

something that has been quite beneficial within the

determining variables for its popularity. At the moment,

Mexican market, tapping into customers’ emotions and

55% of our sales volume in Mexico consists of Mazda3

assimilating with European designs. The third is Mazda’s

models, while, on an international level, the car represents

Connect Technology, which allows users to synchronize

around 40%. Even though the C-segment is not as big

their mobile devices with the car’s features and connect to

for us as the B-segment, our C-segment is growing, now

social media using HMIs. Finally, we have SKYACTIVSENSE,

representing 13% of our sales volume.

a system that incorporates safety mechanisms within an automobile, such as blind spot monitoring, cross-traffic

Q: Given the reputation that the Mazda3 has in the

alert, and dynamic stability control.

Mexican market, has Mazda released a modified version

to satisfy its markets specific needs?

Q: How much room for growth is there for Mazda’s

A: The design has remained the same as its international

dealerships in Mexico?

counterparts, but we have tropicalized it in order to fit

A: There is a lot of room to grow in terms of our representation

climate and cultural needs within the market. We always

in the market. Mazda currently has 54 dealerships across

build our cars in a way that will fit the customers’ needs

Mexico, with presence in virtually every major city in the

and expectations, adapting them based on specific factors

country. However, our expansion mechanisms have been

of a given market, such as weather and altitude conditions.

focused on service rather than sales. For Mazda, customer

In order to tropicalize any product, Japanese and American

satisfaction in Mexico is a big priority, so we understand

engineers are brought in to assess these required

the importance of taking care of our clients. Back in 2005,

differences and apply them. Even though the Mazda3 has

we never imagined our sales expectations to be as high as

a strong presence in Mexico, we have a clear strategy that

47,000 units per year, and to have 230,000 units out on the

consists of a segmented product division. This separation is

streets ten years after launching our brand is just incredible.

made in order to diversify our products and build a specific

Due to the high number of cars out on the streets, we

marketing and communication strategy for each category.

need to build the right installations to keep those units

functioning properly, giving our customers the attention

Q: How do you market your new products to existing

they deserve. In addition, we have been expanding in terms

Mazda owners while encouraging brand loyalty?

of collision centers that take care of body and paint jobs in

A: We see the new MX-5 as a complementary car for

the event of an accident.

someone that already owns a Mazda automobile, as well as being a product that will attract new customers.

Our rate of service retention is 84% within the first five

There are not yet any other roadsters in the Mexican

years of a vehicle purchase, which positions us among the

market, although there are some competitors that have

highest in the market. The reason for this is our competitive

products with visual similarities. With that in mind, it is of

maintenance cost and our quality of service, as well as our

the utmost importance for our sales consultants to fully

competitive warranty and extended warranty options.

understand the information they will need to provide to

Customer experience is of great importance. There is a huge

the customer.

difference in the way people purchase cars compared to the past; most customers will research their cars before they

Each customer will focus on different features depending

buy, so personalized attention is vital. There are almost 40

on their particular interests, and in that regard, the

brands on the market with over 300 total vehicles to choose

dealer must be able to master each concept to provide

from, so companies have to be ready to interact closely with

an easy and effective explanation. Every time we launch

customers, using a number of modern techniques, in order to

a new vehicle, we have an extensive merchant training

obtain new business. The first approach when a prospective

program for that car. This includes product training, post-

customer enters the showroom is to ask them which car they

sales training, customer service, and approach training.

would like to drive. The second step is to understand the kind

The customer experience is vital to our business, so our

of experience they are looking for. Finally, the most important

sales team is just as crucial to our success. In addition, an

step of the process is to have them test the product while we

increasingly important factor is the aftersales service we

explain the values of SKYACTIV Technology, KODO design,

offer at our collision centers and service shops; if this is not

Mazda Connect, and SKYACTIVSENSE. In order to show

as expected, our customers will eventually start looking for

them the kind of experience they can have with a Mazda

different options. To ensure a good aftersales service, we

car, our dealerships are equipped with one test car for each

have a training team based in Mexico with members that

model we carry.

were previously trained in Japan or the US.

| VEHICLE SPOTLIGHT: MERCEDES-BENZ GLE COUPE A new interpretation of the time-honored, traditional

head unit that brandishes an 8-inch screen is resonant

coupe has surfaced. Mercedes-Benz hopes to increase

of Mercedes-Benzâ&#x20AC;&#x2122;s renowned character. The inclusion

its loyal following by attracting new generations with the

of sports seats, a 3-spoke steering wheel, and piano

latest GLE Coupe. With its experimental aesthetics, this is

lacquer as an optional touch highlight the understated

a vehicle that answers their call, without detracting from

elegance that this machine exudes. Simultaneously, its

the brandâ&#x20AC;&#x2122;s expectedly outstanding driving performance.

brushed stainless steel sports pedals with rubber studs,

The new GLE Coupe is encased in a sturdy yet stylish

alongside the AMG carbon-fiber trim and light aluminum

shell,

performance.

trim elements callback to the agile coupe style. The

Muscular curves frame the front grille and smooth into

which

maximizes

handling

and

central console also includes a DVD player and rear

a dramatically minimalist rear, while large wheel arches

seat entertainment system with remote control, with

and a high belt line mount standard 21-inch wheels (or

the option of a Bang & Olufsen BeoSound or a Harman

optional 22-inch wheels) with 4MATIC permanent all-

Kardan system for the audiophiles. The GLE also boasts a

wheel drive. A sophisticated interior fitted with an intuitive

standard AIRMATIC package that includes air suspension

with variable Adaptive Damping Systems (ADS Plus),

to any changes in terrain. These settings are namely

level control, and automatic lowering function at higher

Individual, Comfort, Slippery, Sport and Sport+, managed

speeds, promising a velvety ride, even in when seated on

via a rotary control on the center console. The 9G-TRONIC

the rear seat bench, which is the widest in its class.

nine-speed automatic transmission permits the adjustment of handling control, offering agility at high speeds, as well

For the racing driver in you, the GLE Coupe is equipped

as responsiveness or cruising serenity. Collision Prevention

with a biturbo V6 engine with 362hp and 520Nm of

Assist with braking support protects the precious exterior

torque, which can be fully accessed by the driver within the

as well as the passengers, but further safety equipment

enticing sport setting, reached via the DYNAMIC SELECT

upgrades are also available if required. The combination

multimode drive program. This includes five settings that

of a sporty coupe character with a robust SUV represents

allow for the complete personalization of the engine,

the best of both worlds, particularly for those in search of a

including the option to adjust steering and efficiency levels

vehicle that evokes a self-assured presence without losing

according to the driverâ&#x20AC;&#x2122;s preference, as well as for adapting

the excitement and agility of a sports model.

| VIEW FROM THE TOP

OEM COLLABORATION NECESSARY TO ACCELERATE SUSTAINABLE GROWTH HELDER BOAVIDA CEO & Director General of BMW de México Q: What role did the momentum of the Mexican

success of other models in the years to come?

automotive industry play in BMW’s decision to build a

A: This has been changing a lot over the years, but the 3

plant in the country?

Series is our most important model right now. The models

A: BMW has a strategy that is aligned with production

of the 3 Series and the 4 Series represent around 37%

following the market; if a market is developing, then we

of our total sales. The second most important family of

should have production in place. Globally speaking, our

products is the X Models range, which count for more

sales are quite balanced, with the US market counting for

than 30% of our sales. The 1 Series is still a very successful

around 20% of the group’s total sales. With its position in

model, accounting for around 16% of our sales.

the NAFTA region, Mexico’s location is highly beneficial and the country is a great platform for producing cars for export,

The Mexican market is mainly driven by sedans and trucks,

as well as for local sales. The NAFTA region is currently

so it is paramount for us to have the right products in these

supplying 50% of all parts to the BMW Group, 30% of which

two segments. We launched a new 1 Series in April of this

come from Mexican suppliers. The plant will produce around

year, but we are also launching interesting new models and

150,000 units per year, creating more than 1,500 jobs and

concepts in several niches. We are highly focused on the

representing an investment of more than US$1 billion.

launch of the BMW 2 Series Active Tourer, which is more of an Multi-Purpose Vehicle (MPV) than a sedan. It will be

Q: How has the premium market evolved in Mexico, and

an entirely different concept from what we are known for.

how has that affected BMW? A: The market was really active in 2014, with a 7% growth

Q: In terms of new models and gadgetry, what innovations

rate for the total market and 9% for the premium market.

is BMW bringing into the Mexican market?

BMW followed that trend with its production strategies.

A: The BMW i8 is the best example of the company’s

This year, the market is still very dynamic, with the overall

abilities. The car is completely sustainable, built from

market growing at around 22% and the premium segment

carbon fiber, and is packed with fantastic technology. The

growing at around 12%. The growth of our brands BMW and

i8 has both a combustion engine and an electric engine that

Mini is exactly 12%, with both brands leading the premium

work together to produce 362hp, as well as accelerating

segment. The market is still developing and it will continue

from 0-100 km/h in 4.4 seconds, showing what BMW is

to do so for the rest of 2015. While we do not predict

able to do with very low consumption. The driving pleasure

another 12% growth, we do expect between 6-10% before

that is found in the i8 can also be experienced from the 1

the end of the year.

Series, right up to the 7 Series. If you want to go to the extremes in terms of sheer driving pleasure then the M3,

Brands today have a lot more to offer and have aggressive

M4, and M5 are fine examples. Besides driving pleasure,

promotional campaigns. Access to credit is showing a

engines, and sustainable technology, it is important to

significant improvement in terms of simplicity. A few years

mention connectivity, which is a very interesting subject.

ago, the premium segment represented around 1.5-2%

For example, you can now wirelessly update the car’s

of the total market; today, this is very close to 4%. If we

navigation maps, replacing the old DVD updates. There

compare this to Europe or the US, the premium segment

is also technology that allows the driver to command

normally reaches around 20-25% of the total market.

the vehicle through movement and gestures. These

Clearly, Mexico is a car market; the country produces oil

developments are changing the world of vehicles.

and the main mode of transportation is the automobile, so it is only natural that the industry continues to grow.

Q: How do you see the integration of communication technology shaping the future of the automotive industry,

Q: Which BMW models are the most successful at the

and how is BMW ensuring that it will not be left behind in

moment, and what trends do you expect to influence the

this topic?

A: It is very interesting to see many technology companies

process. While we are focused on big cities for electric

keeping a keen eye on the automotive industry. The

mobility, we also have projects in the pipeline for San Luis

challenges of marrying these two sectors are that we

Potosi. Our dealer network in the state is already involved

must develop the right communication technologies

with this restructuring plan, so we are excited to see what

while developing the vehicle to suit them. It will be a

we can do with the BMW i cars. BMW i is not the only

race to see if the car makers are able to develop better

solution we can provide; we are launching Plug-in hybrid

software and technology in the cars, or if the technology

vehicles (PHV) this year. By 2017, we will have several PHVs

and communications companies are able to build better

available. The X5 is the first PHV that we are introducing

cars. BMW is the leading premium brand in the world; we

to the market this year. This X5 will have a consumption of

create fantastic driving experiences, and we are working

3.3l per 100km, and the emissions level is only 77g of CO2.

toward integrating the most up-to-date technologies in

All of our dealers will be supplying this type of product, so

terms of connectivity. Park Now is a specific example of our

they will need to be prepared for electric technology and

innovation strategy. This system allows you to detect nearby

carbon fiber in their dealerships.

parking spaces and pay for them. Technology such as this needs to be developed with sustainability in mind, which is

Q: What are the key factors that would make 2015 a

something that BMW is employing into its processes.

successful year for BMW in Mexico? A: Clearly, we want to follow the growth of this market and

Q: BMW is investing a lot of time and energy into bringing

we want to conquer a little more market share. We have a

Electric Vehicles (EVs) into Mexico. What are the main

great opportunity to do this based on the range of products

reasons behind this decision?

that we have today. We also want to increase our focus on

A: Sooner or later, Mexico will be faced with the challenge

customer service, and I would be very proud if our customer

of utilizing this technology, so we want to bring the

satisfaction is really improving by the end of 2015. At the end

country ahead of the game. We already have more than

of 2014, and in the first half of 2015, we were considered by

40 charging stations in the Mexico City area, and we have

J.D. Power as the number one brand in terms of customer

asked all of our dealers to support charging stations. We

satisfaction, with Mini being the number two brand. Even so,

are trying to establish partnerships with governments, but

that is not enough for us; we want to provide the benchmark

also with some of our competitors to develop charging

for the industry in this field. This is linked heavily to the

stations that can be used by a common base of customers.

expansion and improvement of our dealer network across

Even though the government is quite receptive toward

the country, which will represent a very important milestone

electric vehicles, there is a lot of work to do because clear

for BMW in Mexico.

policies regarding the facilitation of this technology are yet to be defined. If you look at any mega cities around the world, they are facing huge problems in terms of pollution and air quality, which is the same in Mexico City. Somehow, this needs to be addressed and solved, and I think that we are partly responsible for doing this. BMW Group has the same strategy for reducing emissions across all brands. Over the last six years, we have reduced CO2 emissions by more than 30%. The introduction of our BMW EfficientDynamics technologies has allowed us to make this reduction and was utilized within every single product across our range of vehicles, benefitting all the markets and segments we operate in. Q: How difficult is it to join forces with other automotive companies to develop this area together? A: Everybody is focused on sustainability, so we should be able to work together toward the same goals. People who buy EVs need to have the infrastructure to support them. If the government is not clear about how to incentivize the purchase of EVs, we as private companies have to lead this

| VIEW FROM THE TOP

FOCUS ON EXCELLENCE WILL TRANSFORM MEXICO’S SUPPLY CHAIN BRUNO CATTORI President and CEO of FCA México Q: Which role does Fiat Chrysler Automobiles (FCA)

modern and efficient engine with the MultiAir system offers

México play in the company’s global strategy?

a power range between 101hp and 160hp, and it features

A: Mexico is a strategic country for the FCA Group because

a thoroughly complete security system that includes seven

of its privileged geographical location, quality standards, and

airbags and electronic safety control systems.

labor costs. Furthermore, the large number of automotive suppliers available and its extensive FTA network make it

Q: What are the key pillars of FCA’s strategy to develop a

a really competitive country in the global market. FCA has

strong supplier base in the country?

been in Mexico for 76 years, and in that time we have become

A: We have eight foundational principles to develop a

one of the biggest players in the local automotive industry,

strong supplier base: mutual transparency, proactive

establishing more than 290 dealers nationwide. We now have

collaboration,

seven vehicle and engine manufacturing facilities with more

accountability, long-term mindset, empathy and advocacy,

than 10,000 employees, each delivering our products to the

and continuous improvement. These pillars have allowed

local and the international market. Our combined portfolio is

us to create a good relationship with our providers in the

among the most extensive in the market, and is continuously

country. Mostly, we created these directives to achieve best-

being renovated in order to satisfy client demands. FCA’s

in-class quality and a flawless execution in our operations,

strategy has always been focused on creating attractive

collaborating

products for our customers, with the best quality and

alongside our suppliers. The approach has allowed us to

technology, to remain one of the most important automotive

rapidly adapt to the market’s transformation, aligning the

companies in Mexico. Since 2009, FCA México has been

suppliers’ structures to ours, and embracing a culture of

implementing World Class Manufacturing (WCM), which is

continuous improvement and WCM throughout the entire

a production methodology designed to reduce waste and

manufacturing chain. We have also invested in a supplier

increase productivity in all plants. In December 2012, the

park in the State of Mexico, improving our logistics flow by

Saltillo complex was awarded a bronze status in WCM for

having our suppliers close to the plant. This has allowed us

its results in implementing this new manufacturing approach.

to reduce our inventory costs and packaging investments,

sense

urgency,

implement

integrity,

world-class

personal

innovations

giving us more control over leasing costs normally charged Q: What characteristics have made the Chrysler 200, the

to suppliers. Our suppliers now have excellent expansion

Dodge Journey, and the Fiat 500 the best-selling models

opportunities, as well as advantageous manufacturing

in the country?

flexibility. FCA continues to invest in Mexico, evidenced

A: The 2015 version of the Chrysler 200 can be equipped

by some of our recent projects that include the Fiat 500

either with the award-winning 3.6l Pentastar V6 engine

BEV in our Toluca assembly and stamping plant, the Ram

or with a standard 2.4l MultiAir®2 Tigershark I4 engine.

ProMaster in the Saltillo van assembly facility, and the

This is the industry’s first mid-sized sedan with a standard

Tigershark Engine in the Saltillo North Engine plant.

9-speed automatic transmission, along with state-of-theart technology in electronic shifting with a rotary dial.

Q: How is FCA contributing to Mexico’s transformation

Furthermore, its drag coefficient is 0.27, which gives it

from a low-tech to a high-tech automotive industry?

amazing fuel efficiency and less air resistance. In comparison,

A: In 2005, we opened our Engineering Center, putting us

the Dodge Journey offers the choice of a four- or six-

at the forefront of technological advances for engineering

cylinder engine, and capacity for five to seven passengers.

and product development. Additionally, FCA has created

Additionally, this model has the best storage in its segment

different programs to attract and develop its workforce,

thanks to its fold-flat seats, its second-row in-floor storage,

working directly with several technical schools and

and front-passenger “Flip-N-Stow” in-seat storage with

universities. To continue succeeding in the industry, we

enough space for laptops and other small items. Finally,

must have the best people, which is why we focus on

the Fiat 500 is a vehicle with a wide range of options. Its

people who want to make a difference.

| VIEW FROM THE TOP

UNIQUE GAME PLAN TO COMPLEMENT CUSTOMER MENTALITIES PEDRO ALBARRÁN Managing Director of Hyundai Motor Corporation Q: What are the distinguishing factors of Hyundai’s

before every vacation period. The message we are trying

current strategy in Mexico?

to send is that we are not here only to sell cars, but we

A: After the growth we have witnessed in Mexico and the US

also care for our customers. Clients generally decide on a

over the last 15 years, we felt it was time to recapture our image

product based on two approaches: rational and emotional.

with the customers, so we are now working on redesigning

At Hyundai, we have worked really hard to offer all the

our dealerships. We are implementing a clean approach and

necessary solutions to appeal to the rational part of the

want to convey a premium feeling to customers with a design

customer, and now we have to appeal to the emotional

inspired by nature, so we are adding a lot of green areas in the

side with truly attractive products.

showrooms, which shows that we are a company that cares about the environment. Currently we have 31 dealerships

Q: How have Hyundai’s different models been received in

in the country, including the one we recently opened in

the Mexican market?

Chihuahua. During 2015, we have been trying to establish nine

A: Elantra had a significant market share in the compact

more showrooms, half of which are under construction, and

segment. Compact cars took a hit last year given the

we have already decided on the location of the rest. Hyundai

changes in the tax reform, making them no longer

expects sales of 20,000 units this year, but we recently

deductible. However, we had a competitive product, it

changed our target to 22,000 because of the positive results

was well accepted, and we are confident that it will be

we had obtained in the first five months.

one of the pillars of our future strategy. The ix35 was very successful and our customers really appreciated the size of

Last year, we had a goal of 8,000 sold vehicles, but we

this SUV. Furthermore, the price point was well-received,

were able to reach 12,000. We were extremely pleased to

considering that the trim with the highest price represented

realize that by the end of the year Hyundai dealerships

70% of the model’s sales. For the Grand i10 we do not

were the most visited stores in the country. We had an

have a clear market yet, but it was a really popular model

average of 50 visits per day in certain showrooms, which is

given our former experience in this segment. We started

a considerable difference from the usual 12 in the country.

selling the Sonata in late October 2014 and our sales have

The company underestimated the awareness that Mexico

increased month after month. This is the segment where

had of Hyundai. However, we found that our customers

we are least known, but we are really pleased with the

were truly loyal, and were already waiting for us.

growth we have seen. In seven months we have sold 879 units, and customers are now comparing us with brands

Q: What is the average age of Hyundai customers and

that have been in this segment for a much longer time.

how is the company planning to expand its client base? A: Our global average is 35 years, younger than the rest of

Q: How much is Hyundai pushing its financial services in

the market and slightly more oriented to the male segment.

Mexico and how much of your fleet has been covered with

During the first few months after our inauguration in

this service?

Mexico, we focused on attracting our existing client base

A: In 2014, we reached about 50% of our clients with

and, since then, we have continuously attempted to favor

Hyundai Finance, powered by Bancomer. We are now

these customers. We offered a MX$5,000 (US$330)

looking at continued growth of these services, as they have

discount to previous Hyundai owners to preserve their

performed much better than expected. It is important for

loyalty, and we continuously deliver a five year bumper-to-

Hyundai to promote its own financing arm, as we think it

bumper warranty with road assistance available in the US

offers many advantages and provides us with a much more

and Canada, which no other volume brand provides.

comprehensive client database. We are in the process of transferring our financial services to the used vehicle

This year we are launching a new project called “Before

segment, but in order to strengthen this segment we need

the Service” to offer a free inspection to all our customers

to ease the used vehicle purchasing process.

| VIEW FROM THE TOP

NUEVO LEON REELS IN COVETED KOREAN OEM MANUEL DE LA TORRE General Counsel and Institutional Relations Director of KIA Motors México

Q: Why did KIA select Mexico as the location for its new

is to achieve 100% local content by 2020. In terms of the

plant?

domestic market, we are aware of the needs of our local

A: KIA Motors is a company that has consolidated its

customers. We are doing tests with different configurations,

leadership in the automotive industry globally with more

and we plan to offer engines and transmissions in line with

than 70 years of history and a distribution network that

the Mexican roads and driving conditions. KIA Motors has

covers 180 countries. KIA Motors decided to invest US$1

a solid presence in South America, and the arrival of our

billion for the construction of its new plant in Mexico, which

first plant in Latin America will boost our opportunities in

was mainly based on the competitive manufacturing costs

countries like Chile, Colombia, and Peru.

of the country, as well as the country’s multiple FTAs with strategic markets like Canada and the US. KIA is currently

Our global philosophy is based on innovation. This

the 9th biggest OEM in terms of sales and with this new

means that every one of our business units is oriented to

project the company expects to strengthen its presence

maintaining the highest quality in our products. This is

in the most important automotive markets. Mexico’s

perfectly shown by our results in the Initial Quality Study

geographical position was also a main factor for attracting

done by J.D. Power, which rated KIA as the second highest

this investment, as well as its high-quality production and the

scoring brand just behind Porsche. Furthermore, KIA

talent of the Mexican workforce. Furthermore, the country

was ranked in first place within its own segment, which

offers a really favorable environment for the automotive

highlights the clients’ preference toward our products.

industry, including the most important component suppliers and a well-developed logistics network.

Q: What benefits will being a local manufacturer bring to your market strategy in Mexico?

Q: Will your relationship with Hyundai play a role in the

A: KIA wants to promote and help the automotive sector

Mexican market?

grow in Mexico. In the last years, this industry has become

A: Even though both companies belong to the Hyundai

the engine of the Mexican economy, which is now going

Motor Group, we operate as independent players and

through a historic moment. According to AMIA, from

competitors within the same market. Ever since we

January to July 2015 the country’s accumulated sales

arrived to Mexico, we have worked to establish a clear

grew at an annual rate of 20.9% to reach 721,539 vehicles.

partition between both companies, in order to gain our

KIA’s presence is definitely going to strengthen these

own position as a new brand. We are offering different

figures and having a local plant will undoubtedly help our

products with special characteristics, such as our seven

operations in the domestic market. Our goal is to reach a

year or 150,000Km powertrain warranty, which is the most

market share of 5% by 2020.

extensive one in the Mexican market. Q: How will KIA approach the challenges of attracting and Q: How are you planning to optimize the inclusion of local

retaining a skilled workforce?

content and the customization of your vehicles?

A: We need to train our new Mexican workforce, creating

A: Mexico has become an international automotive hub

specialists in automotive manufacturing and implementing

where practically all the most important OEMs in the

practices already used in our other plants. For KIA Motors,

industry are present. This has been possible thanks to a

high quality standards are essential, which is why we have

solid supplier network that offers both competitive prices

designed all our training programs to last between six and

and high-quality components. Our arrival to the country

36 weeks depending on the process. We have now trained

represents an opportunity for KIA and all Mexican suppliers

more than 500 employees locally, and we have sent some

to grow and develop together, and we are fully committed

of our people to other plants from the Hyundai Group. We

to the development of local providers. Currently we work

are expecting to receive 45 expats from Korea, and close

with 40 suppliers, 20 of which are Mexican, and our goal

to 200 more people from our affiliates and suppliers.

| VIEW FROM THE TOP

INFINITI RELIES ON BRAND DIFFERENTIATION TO CARVE OUT ITS NICHE MARKET PHILIPP HELDT Managing Director of Infiniti Mexico and Latin America Q: At the time you took over, Infiniti held a 2% market

current Q50, the most iconic being the new grille, which

share in the premium car market. With BMW, Mercedes-

will be integrated in all our new models from now on. We

Benz, and Audi all boosting their presence in Mexico, how

also have a distinct LED lighting design that resembles the

can Infiniti compete while improv¡ng its market share?

human eye, providing a unique shape to the vehicle. We

A: With only 25 years in the market, Infiniti is a relatively

are also incorporating interior and exterior technology in

young brand with significant potential in a highly

an intuitive way that enhances the driver experience.

competitive market. This unique position creates an interesting opportunity to improve Infiniti’s market position

The brand and the product itself are vital for the whole

with an aggressive strategy. From the point of view of both

customer experience, but what places us at a higher

the brand and the product portfolio expansion, Infiniti is

level is the interaction that the client has with both these

going through an interesting phase. Infiniti is already

factors in our dealerships. We pay attention to the quality

standing out in the market, and even though market share

of our service, the personal attention we provide, and the

is a useful KPI, it is not a comprehensive indicator for our

hospitality we offer our clients. In Mexico, we have eight

company at this point. We are not looking to become a

dealerships and according to our geo-marketing analysis,

competitor in terms of volume, but we believe there is a

these cover between 80% and 90% of the Mexican premium

niche market for an alternative strategy to those previously

segment. Our distributors are located in the biggest cities

seen in terms of product and customer experience, and we

in the country, such as Mexico City, Guadalajara, and

would like to establish a strong position in the premium

Monterrey, but also in Leon, Puebla and Merida.

segment by capitalizing on this brand differentiation. Q: Since it launched in April 2014, the Q50 has represented At the moment, we are the fastest growing premium

46% of Infiniti’s sales. What has made this model stand

brand, mainly due to the implementation of an aggresive

out so much?

market strategy with our newest Q50 model. This vehicle

A: The success of the Q50 in Mexico aligns with the

is a medium-sized premium sedan, and forms a vital part

importance of the medium-sized sedan segment, which is

of our portfolio since it belongs to the largest segment

the most crucial segment of the premium market in Mexico.

in the Mexican premium market. Due to a combination

Infiniti is providing this segment with a truly attractive car,

of innovative design, cutting-edge technology and high

which stands out due to a bold finish and a sporty, youthful

quality service, we are using this model as our flagship

style. We are pairing this with equipment levels that go

product. Furthermore, starting from the dealership, we

beyond what is normally offered in the segment. We

offer a unique customer experience that enables us to

have become the first company to launch steer-by-wire

stand out against other brands’ distributors. In an effort

technology, where the connection between the steering

to position ourselves against other premium brands with

wheel and the front tires is not physical, but rather through

an established reputation, we provide our premium level

sensors and actuators. We have received a positive

dealerships with a high investment in sales personnel and

response to this technology, as it gives the opportunity to

post-sales personnel to offer a truly personalized and

become attuned with the driving experience of the car.

luxurious service and experience. We also offer an active safety system through a technology

Q: How do you integrate a unique customer experience in

called Safety Shield, which allows the car to brake by itself

the Infiniti models, while building the Infiniti brand itself?

in an emergency situation. By monitoring the cars that are

A: In its 25 years of history, Infiniti has created a series of

driving in the vehicle’s periphery, the sensors register any

iconic cars that constitute the soul of the brand and we are

distance changes, allowing the car to automatically apply

now taking the next step from product to brand. We are

the brakes even before the car directly in front does so,

introducing extremely distinct elements of design to the

which is technology that is unique to Infiniti. Additionally,

we have included lane-changing technology, which will

the automotive industry in Mexico has been evolving

cause the car to brake and switch lanes if it senses another

over time, directed by the volume brands and mostly

vehicle too close. By offering these features in the Q50,

exporting to the US. However, over this time the industry

we have differentiated ourselves as the only company

has expanded to create a skilled workforce and a sizeable

offering such a comprehensive range of technology, and

supplier pool. Macroeconomically speaking, the Mexican

the market is reacting well to that.

authorities, as well as private industry, have made great efforts to generate strong collaborative relationships with

The entry-level Q50 has a 327HP motor, while other luxury

most relevant companies and regions worldwide, setting

brands offer a starter vehicle with an engine well below

up effective partnerships and trade agreements.

200HP and an incomplete equipment level. Prices start at MX$498,000 (US$33,000) for our basic Q50, going up to

As the global automotive market has continued to grow

MX$1.23 million (US$82,000) for the high end QX80, which

in the premium sector, OEMs have been increasingly

is our top of the range full size SUV. Our price scales are

seeking new plant locations, and Mexico constitutes the

aligned with other premium brands, but we are competing

ideal environment due to a combination of factors such

with a different approach that is proving to be extremely

as its growing internal market, its competitive workforce,

successful. Since the new QX80 is also incorporating the

and its stable economy. Additionally, Mexico has a unique

design and technology elements featured by the Q50, we

geographical position, with a proximity not only to the US

have observed a boost in its sales.

by train or truck, but ideally positioned to access many other economies through the shipping channels of the Pacific and

Q: Is there a possibility that new technologies can scare

Atlantic Ocean. This array of positive factors makes Mexico

away a new customer if he is only used to traditional

a strong candidate for any OEM looking for a new location.

technologies?

In just three years, our operations in Mexico have generated

A: Many customers are not able to competently operate

a lot of best practices and increased awareness of the brand.

cutting-edge technology, especially at such a high level,

This has served as a pool of ideas that we are now exporting

which is why Infiniti endeavors to create features that

to other markets where Infiniti is present as we successfully

not only innovative, but also highly accessible for a wide

begin our fourth year of operations.

range of customer demographics. We have developed our vehicles extensively, allowing anyone to manage the technology in an Infiniti in an easy and comfortable way. Q: Does the joint venture with Daimler in Aguascalientes change the way both brands are perceived in Mexico? A: We do not believe that this is the case. As a project of the Renault-Nissan Alliance with Daimler, it is one of many ongoing projects we have in cross-industry collaboration. Even though we will be sharing the production facility, the brands will be completely separate, since we take our product image extremely seriously and are not looking to mix, rebrand or rebadge. Moreover, we work independently in terms of engineering, design, and focus, but the great success of these manufacturing synergies is that they are being achieved without the need to mix the brands. In our joint venture plant, part of the strategy for success is sharing knowledge, expertise, and suppliers, even though the design between both companies differs greatly. Q: Why have so many luxury brands decided to set up plants in Mexico around the same time? A: Like all major trends, their arrival is explained by a combination of factors that bring sudden movement to an industry, and there are both macro- and micro-economic elements that account for this. On the production side,

| VIEW FROM THE TOP

FRENCH MANUFACTURER PREPARES FOR STRONG COMEBACK JOSÉ LUIS MONTIEL Director General of Renault México Q: With the recent introduction of new Renault models

shop, and we are always prepared to receive them. This

to the market, which vehicles have had the most success

service is complemented by our financial brand, Renault

in Mexico?

Servicios Financieros, which helps us keep in touch with

A: Our most important product has been the Renault

our customers. There are still things to improve, but we

Duster. The reason behind this was its innovative design

want to reinforce the idea that we are a reliable brand.

as an SUV and its unique position in the market within the sedan segment. It has been a really attractive product with

Renault is well known throughout Latin America, with a

first-time truck owners, and it has gained enough presence

17% market share in Colombia, 10% in Argentina, and 7% in

to be widely recognized in the market. This vehicle normally

Brazil, which is the second most important market for the

covers 40% to 45% of our total sales, which speaks for

company after France where we have 25% market share.

the excellent qualities of the car while also showing large

Right now, we have a 2% market share in Mexico, when the

opportunities for the rest of our models. We want to have four

market is growing more than 20%. Therefore, our priority

similar products that allow us to offer wider diversification

is attracting as many new clients as possible. Furthermore,

in the market, as well as lowering risks and improving

by 2020 we want to double our sales from 25,000 units to

market coverage. One of the strongest candidates for this

approximately 50,000.

list is the Renault Logan, which is a 4-door subcompact sedan with some of the richest content in its category. We

Q: What plans do you have for the development of

will also present the new generation Renault Stepway by

Renault’s dealership network throughout the country?

the end of 2015. This model is built on the same platform

A: Right now, we are not looking to expand our network.

as the Logan and is a crossover vehicle that targets the

We want to first update our analysis in terms of coverage

compact segment. While we are still looking for the fourth

and performance, considering our growth strategy for the

vehicle to include in this strategy, we will be launching the

next five years. Ever since we returned to Mexico in 2001

new Renault Koleos in 2016, and we will also have the new

we have neglected this issue, but once we understand the

pickup truck from the plant in Cuernavaca.

right way to target the market, we will be able to determine how we want to develop.

Q: What has been the response from the Mexican customers regarding the new Renault Kangoo?

Renault is using specific tools to track the performance

A: The Kangoo has been selling quite well in the leisure

of every dealership, and we are considering every aspect

activity vehicle segment, also known as the car derived

of the different regions we are analyzing to better assess

van segment, which is mainly focused on city vans. Our

the impact dealerships have on our national operations.

market share with this vehicle is close to 35%, and it has

Currently, we have 67 points of sale, which we want to

been quite popular with SMEs in the commercial segment.

grow to 70 in order to duplicate our market share over the

There are still some opportunities for this model, but

next five years. Nevertheless, we still cannot say if these

we have been quite pleased with its performance in the

numbers are what we really need to achieve the ambitious

market. Additionally, these were the first cars specifically

goals we are setting. Once we have this analysis complete

used as taxis for people with special needs. We pitched the

we will determine the best course of action for our strategy.

model to the state government and it was finally chosen as the best car for this purpose.

Q: How much opportunity do electric vehicles have in Mexico?

Q: What strategies are you implementing to reach the

A: It is expected that these vehicles will gain some real

target clients for Renault?

ground by 2020. The Renault-Nissan Alliance has already

A: Our most important point of contact is our aftersales

started to work in this segment, Renault with the Twizy and

service. We know when our clients need to come to our

Nissan with the Leaf. On Renault’s side, we are currently

preparing a re-launch for the Twizy to further promote its

50% of the Mexican market knows Renault, which means

presence in the market. The vehicle is already available in

there is an immense opportunity to grow our presence.

our dealerships, and it has a really attractive and unique

Finally, our last strategy involves our dealership network.

design. It has a range of 100km with a maximum speed

We want to have a win-win relationship with every one of

of 90km/h, it seats two people, it can be connected to

our dealers, revising their performance according to their

a normal energy outlet with an energy regulator, and it

region of influence. That way, we can ensure there are no

only needs seven hours to be fully charged. Furthermore,

distributors working with lower standards than those we

it can charge in just three hours with a 220V converter,

have defined for the country.

and it has the advantageous price point of MX$285,000 (US$18,400), which is quite competitive in the market.

Rather than having an effect on the commercial side, Nissan’s presence has helped us in our corporative

Q: How does the competition between both companies

development. To this day, we are fully supported by

in the Renault-Nissan Alliance help or hinder Renault’s

Nissan’s back office services, including customs, logistics,

development in Mexico?

legal, human resources, and purchasing operations. In

A: The competition has not limited us; on the contrary,

terms of the commercial plan, each company has its own

it has pushed us to be better. Although there are some

strategy.

synergies between the brands in terms of manufacturing, costs, and purchasing, we remain competitors and each

Q: What plans does Renault have for its new production

company strives to attain the best performance in the

site in Cuernavaca?

market. We respect every competitor, and the fact that

A: We are planning to utilize Nissan’s high manufacturing

Nissan is part of our alliance does not change our position.

capacities in order to manufacture 1-tonne pickup trucks.

Ultimately, for us, it is an opportunity to prove we can do

The design and components will be totally independent

things much better. This is a crucial moment for Renault

from Nissan, and our commercialization strategy will be

in Mexico, and it is a real opportunity to make everything

completely different. We still need to determine the total

exceptional.

investment and the production volumes we are going to manage, but we have already established that this model

Renault has structured its development around three

is going to be directed toward the local and the Latin

main factors. The first is product coverage, as we want to

American markets including Colombia, Chile, Ecuador, and

target the market more extensively and more efficiently.

Peru. This is an opportunity but also a challenge, given

Currently, we are targeting 50% of the industry’s

that we do not have previous experience in the pickup

segments, so we want to cover close to 85% by 2020. The

segment. We are going to start with 2,500 units, and

second factor is brand recognition. Even though we left

we will work our way up based on the results we obtain

the market for a while, we are a company with a strong

from our market analysis and the brand recognition we

tradition in Mexico. However, many people do not know our

are able to generate. We are confident of the success of

vehicles or they do not have the right image of our brand,

this product, and we are supported by all the experience

especially in terms of the newest generations. Less than

Nissan has in this segment.

| VIEW FROM THE TOP

PREMIUM SCANDINAVIAN OEM UNDERGOES INTRIGUING BRAND REBIRTH LUIS GERARDO SÁNCHEZ Managing Director of Volvo Auto De México Q: What are Volvo’s strategies to reach its long-term goal

the process of developing and growing in an organization.

of selling 10,000 vehicles a year in the country?

It is a more compact vehicle that may accommodate a

A: From a global point of view, Volvo has broken its own

young married couple.

sales record for two consecutive years, reaching a volume of approximately 435,000 units. The global sales target

Q: What does the new Volvo XC90 symbolize for Volvo

for 2015 is 500,000 units. In Mexico, we sold 1,055 units in

in Mexico?

2014, and we are forecasting 1,700 vehicles to be sold by

A: The XC90 represents the first step in the rebirth of the

the end of 2015. The main reason for this growth was the

brand, as the new statement of luxury to the customers.

launch of the new Volvo XC90, as well as the development

This model happens to be an iconic vehicle first launched

of a more robust dealer network. Unfortunately, we lost

14 years ago that has not changed dramatically. Despite

two of our most important local distributors in 2014, so we

this, customers still like it because of its flexibility,

had to develop others to replace them. Nevertheless, we

maneuverability, and safety. However, the new XC90 is a

expect to recover from this loss to develop a more stable

completely new vehicle in terms of design and engineering,

platform for our future operations. The year 2015 marks a

with a lot of new features not currently offered by the

turning point for Volvo and we are working on a complete

competition. Its interiors are totally renovated, with slimmer

renewal of all our lines.

and more ergonomic seats, as well as a massage option available. Additionally, this model is the first vehicle to

Q: Which models will be subject to Volvo’s plans for

have 360-degree sensors to detect surrounding objects.

renewal, and what kind of changes will you be making to

There is also a new tightening system for the seatbelts that

them?

activates before an accident, preventing any motion during

A: Volvo has always been considered an aspirational brand,

the crash. Furthermore, the XC90 has an integrated tablet

but we are a premium manufacturer that wants to be the

to have complete connectivity in the vehicle, providing

first option of every customer in this segment. We will start

basic autonomous driving features so the car can take care

with the XC90, and then we will move on to the entire 90

of the journey. In the future, our objective is to introduce

cluster. Afterwards, we will start with the 60 and the 40

full autonomous driving in all our models. This car is

cluster, covering all the models in a period of approximately

also Volvo’s first hybrid model in Mexico. The vehicle will

4 years. The 90 cluster will be our most luxurious line, while

function with both gas and electricity, and it will have a

our 60 products will be more sporty and approachable,

400hp performance.

directed toward customers who want to focus on the

performance of the vehicle and the enjoyment of driving.

Q: How can you be sure that the XC90 will prove to be

The 40 line on the other hand, is for young executives in

successful in this challenging market?

A: In 2014, we did a presale of a limited edition of 1,927

A: We are working with our partner BNP Paribas in a very

XC90 units available globally, 21 of which were sold in

positive way. We already launched the Volvo Car Financial

Mexico, greatly exceeding our expectations of the market.

Services program, and we started Volvo Car Insurance

This was the first transaction we ever made using digital

in 2014 to offer premium services for all our vehicles.

commerce, and we had an extremely positive response

Right now, we have reached 35% of our clients with BNP

given that the 1,927 units sold out in just 48 hours. It

Paribas. In terms of leasing, we have had many debates

was a record for this kind of transaction, especially for a

to determine the potential size of the market Mexico is

vehicle that customers had not actually seen. Now, we are

still developing in this area, and our plan is to launch a

targeting a volume of 250 XC90â&#x20AC;&#x2122;s by the end of 2015, and

leasing product in about a year. There is sound potential

we are expecting to sell around 600 units annually. The

for growth, but we still have to work on all the different

limited edition version was delivered in July 2015 at a price

aspects that are involved with leasing. The first important

of MX$1.35 million (US$90,000), and we will launch four

factor is culture and the identification of the right customer

other versions ranging from MX$850,000 (US$57,000) to

for a leasing product. Then, we must consider how to

MX$1.2 million (US$80,000), and finally the hybrid model

make this financially attractive for the customer, especially

that is going to be offered at MX$1.3 million (US$87,000).

considering the possible fiscal benefits. Finally, we have to

We are estimating all these prices based on the current

determine how we are going to recycle the vehicle in the

economic conditions of the country.

market after its leasing contract, and how we are going to get the customer to engage in the next product.

Q: What strategies is Volvo developing to strengthen customer loyalty?

Q: How is Volvo working to continuously improve the

A: During 2014, Volvo performed a customer trend

safety standards of its vehicles?

analysis, where we plotted traditional, adventurous, and

A: Safety has become a standard in the automotive

contemporary customers segments against low, medium,

industry, and is now just as important as quality; it is part

and high income levels. We then located every brand

of our DNA, and it will continue to be one of our main

available in the market, based on how customers perceived

objectives. We are incorporating new technologies like

it, and identified a special segment of customers that has

radar sensors, seating solutions, and pedestrian airbags,

a different definition of luxury, who were true advocates

and we are also working on new materials to develop a

of technology and contemporary design. This is one of

more rigid body to protect the customer.

the most difficult segments to understand, particulalry as these clients want to keep up to date with every innovation.

Mexico has not always been a safety-oriented market.

Volvo wants to target this segment, which means that our

This is a matter of education, and the industry has had

challenge is to find new ways to retain these people. There

to change to show customers the real value of these

is still a transition to be made between segments, but we

systems. For that reason, we have developed various

are working on moving toward the new generations.

programs in universities to educate young people about the responsibility of driving. Our Road Show program is

Q: How have you developed your dealership network

a platform for presenting real stories about drivers that

in the country and which role does the Volvo Retail

survived accidents. This is not an advertisement show for

Experience play in this process?

Volvo; it is a social program we started in order to improve

A: We are going through an image renovation process

the driving culture of the Mexican population.

with our Volvo Retail Experience (VRE). Our dealerships are now glass houses with frosted windows, and frames

Q: Which role does Volvo aspire to play in the premium

for displaying every vehicle. We wanted to create an

market?

impression of coldness from the outside, following the

A: We have a clear goal to reach 800,000 units by

Swedish interpretation of luxury, but also make things

2020, and our target is to compete by offering unique

really warm, homey, and comfortable on the inside. Our

experiences through our dealers, our vehicles, and our

new dealerships were already developed with this concept

values. Furthermore, we have a goal to eliminate all deaths

in mind and 30% of our network is currently going through

or serious accidents related to our vehicles by 2020. We are

this renovation. We expect to reach 45% by the end of

a relatively small company, and we do not have the same

2015, and complete the transformation by the end of 2017.

number of products as some of our competitors. However, we do not want to be the largest premium company in the

Q: How has Volvo grown in terms of financing in Mexico,

world, but we want to be the smartest one, offering the best

and what new services are you including in your portfolio?

possible service levels and our unique Scandinavian design.

| VIEW FROM THE TOP

REPEATING SUBARU’S US SALES SUCCESS IN MEXICO ANTONIO BARCELÓ GARZA President of Subaru de México

Q: What changes has Subaru experienced in the Mexican

A: The initial reviews have been really positive. The features

market during recent years?

we added have completely changed the Outback and the

A: The market has been very flat but Subaru has grown

Legacy, both physically and in terms of performance, but

235%. The main issue we have in the Mexican market is

we have kept them at their original prices. Subaru is usually

the availability of cost-competitive financing, as costs are

perceived as an expensive brand by consumers, but it is

still very high compared to the US. Even so, our objective

still priced below our German competitors. However, with

is to get close to 3,500 unit sales by the end of 2015,

these new models we are now at the same price level

particularly by utilizing our new models. In July 2015, we

as Mazda and Acura, and we are hoping to have large

introduced the BRZ, which is a joint development with

penetration in the SUV segment.

Toyota. Additionally, new models of the Outback and the Legacy families were launched in the Mexican market

Q: What have been the major challenges for Subaru in

in November 2014. This strategy is coupled with our

the market, and what is the company doing to overcome

dealership growth expectations. By the end of 2014, we

them?

opened four new dealerships in the country, and we plan

A: Between 2010 and 2012, a very difficult situation arose

to add another five in 2015, taking us from 14 to 23 in only

as a result of the global economic crisis and the tsunami.

two years.

Subaru only has two plants, and one was shut down because of this catastrophe. Our main challenge now is getting

Q: What has been the initial feedback on the new models

customers familiar with the Subaru brand. Marketing has

Subaru has launched?

been one of our main focuses, even though, surprisingly,

| TECHNOLOGY SPOTLIGHT: HENKEL MATERIAL TREATMENTS BONDERITE, TEROSON, and LOCTITE

which are focused on sealing and coating treatments, as

The quest for increased vehicle efficiency has led to

well as adhesive operations. Coating treatments lengthen

a series of innovations in manufacturing processes.

the lifecycle of metallic materials, whereas sealants protect

Normally, these are oriented toward thinner steel plates

vital components like electronic devices from exposure to

in the car’s body or the inclusion of new materials in

water and other harmful materials, while simultaneously

the chassis or the interior. However, new materials

offering better acoustics in the cabin. LOCTITE, however,

demand new treatments, as well as updated adhesive

is a line of high-performance adhesives that replace

technologies that offer the same levels of efficiency

conventional

that welding has offered to the industry over the years.

solutions contributes to the car’s structure, given that the

To address this disparity, Henkel has developed several

same level of resistance is provided, while reducing the

practices to improve current manufacturing processes,

likelihood of vibration. All three technologies promote

based on more than 90 years of history with innovative

the use of alternative substrates, with a significant impact

and sustainable solutions. A 10% weight reduction can

on the exterior, interior, powertrain, body, chassis, and

improve fuel economy in a vehicle by between 6% and

HVAC system of the vehicle.

unification

processes.

This

range

8%, and Henkel’s technology is capable of reducing the

weight of a car by almost 100kg. Henkel’s three principal

BONDERITE is a treatment solution for bodies and multi-

technologies are BONDERITE, TEROSON, and LOCTITE,

metallic substrate components that reduces energy

45% of our sales come from referrals. We have been doing a

the 100,000km mark, we are the second cheapest brand

lot of advertising, but word of mouth recommendations are

in the market in terms of service. Furthermore, we are also

one of the best ways to spread brand awareness. Subaru

the second brand in the entire automotive industry to have

is the ninth largest brand in the US, where we sell 1,500

a five-year warranty, which actually increases attendance

Subaru cars every day. The huge success Subaru has had in

at our service centers. Clients always want low costs and

the US has permeated into Mexico and it has given us some

a fast service during maintenance operations, so we are

momentum, at least in the north of the country. During 2013,

improving those areas through our CRM across our entire

we launched a strategy to reach a 1% market share in Mexico

portfolio. Another strategy we have implemented is to reach

by 2019, meaning we must sell 6,000-7,000 units in 2016 to

customers at the earliest age possible, which will help us to

ultimately meet our target of 10,000 by 2017.

maximize repurchasing opportunities in the long term. Most of our advertising is done through social media, and our

Q: What approach is Subaru taking toward its marketing

target audience has become much younger thanks to that.

strategies, and how has that been adapted to attract Mexican consumers?

Q: What will happen if your success in the US continues?

A: We want our customers to have a superior driving

Will Subaru fans in Mexico be able to get their hands on

experience. Our cars all have four-wheel drive with boxer

your new cars?

engines, making our technology and driving experience

A: This is an issue because Subaru only has two plants, one

superior to our competitors. Subaru has been focusing on

in Japan and the other in the US, and it does not have any

safety for the past few years, and our fuel consumption

plans to grow production, at least not until 2020. The US

has dramatically decreased, reaching a 15% reduction in

plant manufactures a model for Toyota, which is now being

the new Legacy. Aftersales services are also becoming

phased out. It will then increase production of Subaru

extremely important for the brand, so we are making a lot

models, but not as fast as needed.

of improvements in that area. We are expecting to have a production shortage worldwide, In the Japanese automobile market within Mexico, we are

but so far we have been protected in Mexico. If we continue

now the second cheapest brand in terms of maintenance

performing better in this country, then it will be difficult to

and repair services. Other cars do 10,000km before each

meet market demand. However, we are confident that we

service, but we can reach up to 12,000km. When they hit

will at least be able to achieve our projected targets.

consumption by up to 30%. It eliminates several stages in

bumper supports. Furthermore, it reduces or completely

the coating process, reducing the amount of water required

eliminates the requirement for certain welding processes,

to treat the vehicle and can reduce the vehicleâ&#x20AC;&#x2122;s weight

optimizing automation levels on the production line. In

by up to 37.4kg. The adhesive works on components with

terms of sealing, this technology prevents air and water

metallic substrates containing more than 85% aluminum

filtration, and reduces any vibration that causes noise in

and includes specially formulated lubricants that satisfy

the cabin.

each requirement in the steel, aluminum, and magnesium forming processes, extending the lifetime of machinery

Finally, LOCTITE offers a new adhesive technology, capable

and equipment.

of reducing a vehicleâ&#x20AC;&#x2122;s weight by 29kg. This product enhances levels of safety and simplifies production

TEROSON incorporates an entire line of sealing and

operations, saving up to 60% or 70% in weight compared

coating solutions that improve the structural and isolation

to classic steel adhesives. The process allows increased

capacities of the vehicle. This solution can eliminate almost

production

28.9kg of the vehicleâ&#x20AC;&#x2122;s weight. In terms of structural

processes, even between different materials. In addition,

improvements, TEROSON decreases weight in lateral

LOCTITE can eliminate up to 30% of the required pre-

montage for body operations, and it strengthens pillars,

treatment process for a metallic surface, with an adhesion

seats, large one-part components, as well as seat and

conducive to application in aluminum and plastics.

speeds

and

simplification

assembly

| PLANT SPOTLIGHT: HONDA CELAYA On February 21, 2014, 19 years after the company started

increases stamping efficiency by 40%. In terms of welding,

operations in El Salto, Jalisco, Honda inaugurated its

Celaya has a highly efficient general system to join body

second Mexican plant in Celaya, Guanajuato. With an initial

panels, with a reduced number of robots and an increased

investment of US$800 million, this new facility started

number of total welding points. Regarding painting, the

producing the 2015 version of the Honda Fit with an expected

plant features a new 3-coat/2-bake water-based process,

annual production of 200,000 vehicles and engines. At the

which reduces energy consumption by 40% replacing the

moment, the plant is not yet at its full capacity, but once it

traditional 4-coat/3-bake process. The entire plant has

reaches the 200,000 unit mark, Honda North America will

LED lighting to improve energy savings, and its production

produce 95% of the vehicles sold in the US.

line was specially designed to improve ergonomics, reduce time and space during the assembly process, and increase

With a projected 3,200 employees, the new Celaya plant

in-plant sub-assembly processes. All these innovations are

was designed with state-of-the-art technology introduced

also planned to reduce Hondaâ&#x20AC;&#x2122;s environmental footprint

in 2013 at Hondaâ&#x20AC;&#x2122;s new Yorii plant in Japan, including

throughout its manufacturing network, which entails

some of the most advanced manufacturing technologies

recycling its residue, as well as recycling and treating 100%

in the world. This facility features a high-speed servo

of its water. In addition to this new production line, Honda

stamping press and a high-speed die change system that

invested US$470 million in a transmission plant located

at the same site in Celaya. This plant started operations

Once Honda had settled the production of the new Fit,

in 2015, focusing on continuously variable transmissions

it decided to start manufacturing the new edition of its

(CVTs) with an annual production capacity of 350,000

crossover, Honda HR-V. This model will be added to the

units. With this new process, Honda will be able to

current Celaya operations, with the plant building both

supply its local plants, as well as other manufacturing

models simultaneously. However, the production capacity

sites in North America. This plant is expected to employ

will remain the same, with a total of 200,000 when the

1,500 associates, apart from the ones already working on

plant reaches full capacity. A number of each of these

the production of the Honda Fit. The CVTs produced in

vehicles will be destined for the domestic market, while the

Celaya will be fabricated in line with Honda’s Earth Dreams

HR-V is also planned to be exported to Canada, Europe,

Technology, helping its models achieve high standards in

and the US.

terms of performance and fuel efficiency. This plant will join Honda’s operations in Ohio and Georgia, increasing

At the end of July 2015, the Celaya facilities accounted for

the company’s annual transmission production in North

a total of 4,579 employees and a ground extension of 566

America from 1.375 million to 1.7 million units when fully

hectares. When added to the production in Guadalajara, as

ramped up. Furthermore, both plants will take Honda’s

well as other administrative operations in Mexico, Honda

investment in North America up to a total of US$21 billion.

now has a combined total of 7,187 employees in the country.

Mexican drivers are becoming more invested in the purchasing process of their new cars, researching all possible options before visiting the showroom, and even finalizing their sales online. With more than 40 different brands competing in the market, low price is no longer the defining factor, forcing auto makers to optimize their marketing strategies and customer service. At the same time, new regulations accelerate the adoption of car insurance while financing and leasing services are finally picking up steam. These trends are helping to transform Mexico into a more contemporary market, creating new opportunities along the way.

This chapter focuses on how companies are adapting their sales and marketing strategies in order to target a more knowledgeable client base. OEMs present their strategies to effectively target a consumer market that is characterized by changing buying behavior, outlining new models and financing products designed specifically for the Mexican domestic market. Moreover, luxury brands and industry experts are presenting their findings on new purchasing trends as well as forecasts on how these may change in the coming years.

LIGHT VEHICLE CONSUMER TRENDS

CHAPTER 4: LIGHT VEHICLE CONSUMER TRENDS 98

ANALYSIS: Mexican Market Trends

100

VIEW FROM THE TOP: J. Arturo Zapata, Corporación Zapata

101

VIEW FROM THE TOP: Carlos Alberto López de Nava, Grupo Alden

102

VIEW FROM THE TOP: Mike Glendinning, Volkswagen de México

103

INSIGHT: Francisco Torres, Bentley de México

104

VIEW FROM THE TOP: Carlos Aurelio Quezada Blasco, FCA México

105

VIEW FROM THE TOP: Eduardo Henkel, Rolls-Royce Mexico

106

VEHICLE SPOTLIGHT: 2016 Chrysler 300

108

INSIGHT: Martin Josephi, Lamborghini and Aston Martin México

110

VIEW FROM THE TOP: Francisco Torres, Porsche de México

112

VIEW FROM THE TOP: Esteban Hernández López, Auto Safe

113

INSIGHT: Rodrigo González, Ferrari & Maserati Mexico

114

INSIGHT: José María Herrera, McLaren México and Lotus México

115

VIEW FROM THE TOP: Ignacio Caride, MercadoLibre México

116

VIEW FROM THE TOP: Andrés de la Parra, NR Finance México

118

VIEW FROM THE TOP: Jörg Pape, Volkswagen Bank

118

INSIGHT: Centur Security Services

120

VIEW FROM THE TOP: Fernando Murguía Izaguirre, JATO

122

VIEW FROM THE TOP: Eveline Loza Dueñas, Marsh

122

INSIGHT: Horacio Chávez, KIA Motors México

123

INSIGHT: Eveline Loza Dueñas, Marsh

124

VIEW FROM THE TOP: Jorge Ernesto Alvarez, BNP Paribas Personal Finance

125

VIEW FROM THE TOP: Patrick Font, AXA Seguros

126

INSIGHT: Álvaro Gutiérrez, Inferno Exotic Car

128

VIEW FROM THE TOP: Gerardo Gómez Gálvez, J.D. Power

128

INSIGHT: Nissan / Google AdWords

SALES ARE UP, BUT ARE BUYER PREFERENCES CHANGING? After more than a decade of sluggish light vehicle sales,

VEHICLE OWNERSHIP SALES PER CAPITA Vehicle Ownership vs. VS Sales per Capita

Mexico is finally on the up, generating some of the best

400

sales figures seen since the boom in 2006. While this is

350

good news for the industry and the country’s economy, customers are now altering their purchasing behavior,

300

conducting in-depth research and browsing online vendors

250

before making their final decisions. This also translates into more specific demands for technology, insurance, and

200

safety, even resulting in a heightened awareness of the 150

impact their purchase will have on the environment. The Mexican car buyer is no longer fixated primarily on price,

100

but is beginning to understand and consider these many 50

variables when choosing their next car.

Brazil Mexico Argentina Source: AMIA ADEFA ANFAVEA IHS CIA E&Y

In 2014, only nine cars were being sold for every 1000

Global

cars owned per 1,000 (2015)

people in Mexico, while ownership rates were 353 cars for

Cars Owned

per 1000 vehicles sold(2015) per 1,000 (2014)

every 1000 people. Mexico’s high ratio of vehicles owned

Vehicles Sold per 1000 (2014)

versus vehicles sold per capita presents quite a challenging

Source: AMIA, ADEFA, ANFAVEA, IHS, CIA, E&Y

situation for most automakers, since it indicates a proclivity to retain cars instead of regularly renewing them. The

compact cars that provided the desired fuel economy, as

national vehicle park also reflects this trend, with an

well as affordable total costs of ownership. However, there

average vehicle age of 17 years. However, every cloud has

have been significant changes in the models preferred in

a silver lining, as this creates more business for the auto

the country, following vehicle life cycle evolution and the

parts segment, as well as creating a perfect opportunity to

entry of new brands and models. In 2009, the best-selling

increase sales in the domestic market.

model was the Nissan Tsuru with an overwhelming majority share of 54,463 commercialized units out of the total

Traditionally, Mexican customers have preferred compact

1,025,520 vehicles sold. Comparatively, by July of 2015,

and subcompact vehicles. According to the last census from

the Chevrolet Aveo had become the most popular model,

the National Institute of Statistics and Geography (INEGI)

with 41,534 units sold between January and July, leaving

from 2010, a regular Mexican family has an average of four

Tsuru in fourth place with only 28,500 units sold. There is a

members, which explains why sedan cars offer the best

distinctive difference between the sales of both models, but

option for the majority of the population. Petrol prices have

it is also important to consider that now there are more than

always had a strong impact on the purchasing behavior

40 brands in the country, accounting for more than 100

of the Mexican population, benefitting subcompact and

different models competing in the market. Furthermore,

10 LIGHT TRUCK HIGHEST SELLING MODELS IN MEXICO (JANUARY – JULY) 3.8%

Chasis Largo

583.5%

X-Trail*

29.2%

Trax

3.3%

CR-V 17.6%

CX-5*

40.3%

Pick Up Double Cabin 0.8%

Journey

45.4%

Ranger Crew Cab*

56.9%

Frontier

18.2%

Estacas Largo 0 2015 Source: AMIA

*Imported Model

2014

3,000

6,000

9,000

12,000

15,000

SALES BY SEGMENT

Sales by Segment (AMIA) 35.0%

Subcompact 10.5%

Compact 6.3%

Luxury 59.2%

Sport

21.1%

SUVs -4.5%

Minivans

14.5%

Pick Ups 0 Source: AMIA 2015

50,000

100,000

150,000

200,000

250,000

300,000

2014

2015 year

even though Tsuru is still a high-ranking model, its safety

editions of these luxury brands. This has also been confirmed

standards are no longer in line with what the industry

by José María Herrera, Director General of McLaren México,

expects from a vehicle. While pick-ups have delivered

who has already sold two units of the McLaren 675 more than

strong sales results in the Mexican market, with the Nissan

two months before the official inauguration of the McLaren

Chasis Largo as the leader in the overall light truck segment,

showroom in Mexico City.

2014 year

SUVs have now achieved a stronger position. These models now have an approximately 50% bigger market share than

Even though Mexico is still in the early stages of adopting the

pick-ups, with 135,411 units sold between January and July

technology, electric and hybrid vehicles are attracting quite

of 2015 compared with the 94,845 pick-ups sold during the

some attention from the public. Mexican customers can now

same period. Even given the growth of the SUV segment,

choose between models like the BMW i3, the Toyota Prius,

the CHASIS Largo remains the most sold vehicle in the light

and the Nissan Leaf, although they remain more expensive

truck segment, closely followed by the Nissan X-Trail.

compared to standard models in the market. However, the introduction of the more affordable Renault Twizy and the

Luxury vehicles have also been gaining ground in Mexico.

Chevrolet Spark is offering a new alternative for users. The

Although their sales numbers are still quite small, representing

Chevrolet Spark is the fourth most popular subcompact

5% of the total market, it is now more common to see a Ferrari

car and the sixth highest-selling vehicle in the country,

or a Maserati navigating the streets. An increasing number of

so the fact that an electric version of this model is being

brands are considering Mexico a promising market for their

introduced represents another milestone for the Mexican

vehicles, which has led to the inauguration of new showrooms

market, as the potential to accelerate the nation’s adoption

from Aston Martin, McLaren, and Lotus. In addition, Rodrigo

of electric cars becomes feasible. The national interest in

González, General Manager of Ferrari & Maserati Mexico, says

these vehicles is piqued, so do not be surprised to see the

that Mexico is an attractive location for special and limited

newest Tesla model on Mexico’s streets the near future.

MostSOLD Sold Models in Mexico (January – July) – JULY) 10 10 MOST MODELS IN MEXICO (JANUARY 13.5%

Aveo 17.9%

Versa

65.8%

Vento* 11.2%

Tsuru

55.3%

March

19.0%

Spark*

22.4%

New Jetta 14.6%

Sentra 2.0 Tiida Sedan

13.8%

Matiz*

71.6% 0

Source: AMIA 2015

10,000

20,000

30,000

40,000

50,000

2014

2015 year

Source: AMIA

*Imported Model

2014 year

| VIEW FROM THE TOP

BLOCKADES TO EVOLUTIONARY STEPS MUST BE DEMOLISHED J. ARTURO ZAPATA President of Corporación Zapata Q:

How

will

opportunities

Corporación that

are

Zapata

arising

after

seize a

the

new

number

challenge right now is that the government is unpredictable. Many finance companies are worried that the government

challenging years?

may succumb to pressures by taxi unions, and start

A: Beyond the potential return of investment for prospective

restricting Uber’s operations. If individuals lease a vehicle

projects, Corporación Zapata looks at three factors when

for this purpose, and then Uber is shut down a few months

evaluating business opportunities. The first is how to

later, they will be in serious trouble. Even if the owners were

add value to our potential customers and partners in a

willing to pay, they would not have a source of income. As

differentiated and sustainable way. The second is how to

citizens, we need to show the government that we support

better meet our potential customers’ expectations, while

Uber and other similar efforts by private companies to

going beyond the scope of our competitors. The third is how

address challenges that people face on a daily basis. If the

to provide opportunities for growth to our employees. In

government publically expresses its support for all types of

terms of customer and employee satisfaction, Corporación

ridesharing services, then it will significantly stimulate their

Zapata wants to be the absolute leader in its industry. We

growth and development in an orderly and lawful way.

are already a Great Place to Work® and a reference in terms of customer satisfaction, but our goal is to be the best in

Q: How is Corporación Zapata helping to create an

our industry. With that in mind, we will continue investing,

environment in which the government is more susceptible

hiring exceptional people, empowering and training them,

to these kinds of changes?

listening to our customers, and researching and developing

A: We are in the process of forming an association of

new solutions to our customers’ problems and challenges.

leasing companies in Mexico called Asociación Mexicana

The areas of opportunity that Corporación Zapata will

de Arrendadores de Vehículos (AMAV). The objective of

pursue going forward will depend entirely on these three

the association will be to work with the government to

pillars. Whatever projects our board decides to pursue, we

resolve concerns from both sides, and develop solutions that

must do so in a way that supports the community, which

support the development of more efficient and sustainable

is something that we and our stockholders are committed

transportation models. One example is to work with Congress

to. We do not want to be perceived simply as a socially

to improve laws and make leasing much more widely

responsible company; to us, social responsibility is a way of

available. Under the current laws, it can take years for leasing

life. We dedicate a significant percentage of our profits to

companies to repossess vehicles. That is why according to

the needs of those who are less fortunate, and work with all

the best estimates, leasing represents about 0.5% of the

of our employees to encourage them to donate part of their

total new vehicle market in Mexico, while in more developed

time and talents to the same cause, whether in Mexico or

economies it surpasses 20% of all new vehicles sold.

throughout Latin America. Q: What can be done in order to address the needs of the

100

Q: How are you taking advantage of the increased

citizens?

demand for light vehicles that has resulted from the

A: The world is truly adopting a more dynamic, flexible,

growing popularity of ride sharing services such as Uber?

and concentrated working culture, eventually resulting

A: It is a very interesting market. We are working with Mazda

in less traffic and an increase in people walking to work

and Ford on leasing projects for people who have contracts

and riding bicycles. We have to make our cities friendlier

to work for Uber. In general, a contract with Uber provides a

towards this trend. In Mexico City, for example, cyclists risk

reasonable guarantee that the driver will be able to make the

their lives to ride in a place where cars are king, but this

payments in time. Uber is also supporting this perception by

has to change. One of the potential changes that we will

agreeing to deactivate drivers who fail to make consistent

have to embrace is the construction of functional parking

payments. This is an example of mutual collaboration that

buildings on the city’s outskirts, so that people can then

ends up helping all of the involved stakeholders. The main

use public transportation within the city’s core.

| VIEW FROM THE TOP

REDEFINING APPROACH TO MULTI-BRAND DISTRIBUTION CARLOS ALBERTO LÓPEZ DE NAVA Director General of Grupo Alden Q: How have the sales of the various brands in your

a specific structure that we have developed. In the past,

portfolio evolved over the past year?

the key indicator for these companies was price, but they

A: Our sales have increased for every brand that we handle,

have started to realize that effective service has become

with Toyota, Nissan, Honda, Volkswagen, and Mazda even

more important. When customers have a good leasing

surpassing our expectations. We are rather pleased with the

experience, the chances for future business increase.

numbers these brands have produced in 2015, and we are

Therefore, our leasing infrastructure now includes people

expecting a sales growth of more than 15% by the end of the

dedicated to certain leasing companies, who are in charge

year. Nevertheless, there was an average rebate of US$2,000

of checking vehicle availability, negotiating prices, and

per car last year, which has been a slight issue. Even so,

coordinating logistics, which are all necessary steps toward

that has been decreasing steadily, and we hope that the

retaining business. With the current fiscal regulations,

2016 lines will not incur such penalties for us. Currently, US

companies will surely start to lease even more, taking

automotive companies are facing tough competition from

advantage of the opportunities in this segment.

Japanese and Korean companies. Even so, GM has been looking to retain its market share as much as possible, while

Q: How do you convince customers that purchasing

Ford and Chrysler’s market positions seem to remain stable.

vehicles from a dealership and returning for their

Regarding luxury brands, German brands will maintain their

maintenance or service is their best option?

dominance, since it is unlikely that Asian companies could

A: Normally, that depends on the brand. Brands like Toyota,

take over that segment with Infiniti and Acura. Regardless,

Hyundai, and Honda charge little for servicing, resulting in

the Japanese and Korean automakers are sure to continue

high retention rates, especially during the warranty period.

succeeding in the overall market.

The older brands used to be more expensive in terms of repairs, resulting in low loyalty standards, even within

Q: With 11 brands under the Grupo Alden umbrella, have

the warranty period. Image plays a big part in swaying a

you considered introducing new names into the group?

customer’s decision. For instance, people may think that

A: We are happy with the brands that we manage right

the service costs will be too high for older brands. Even so,

now, and even though some US brands may be dropping

service prices are finally leveling across the industry, given

in popularity, the reality is that each brand has its cycle.

that they have become a key driver for client retention and

Therefore, the more brands you manage, the more

remarketing opportunities. The future of this business is in

prepared you are for these changes.

service, and all companies need to realize that if they want to be the number one brand in the world.

Q: How important have leasing services become for Grupo Alden?

Q: With the current growth of the local market, what are

A: We sell around 2,000 cars per month, 500 of which are

Grupo Alden’s priorities for the remainder of 2015?

directed toward the fleet market, with 12% of these being

A: Our number one objective is to exceed the average

purchased through leasing alternatives. However, there are

industry profit growth; if we cannot rise to that challenge,

many vehicles in the light trucks segment that are lacking

we are doing something wrong. If you are selling many cars

in stock, so we have been struggling to supply them. The

without making a profit, you are in dangerous territory. The

Nissan NP300 and the Volkswagen Transporter are particular

margins in this industry are extremely small and expenses

examples of this deficit. The reason for this is that OEMs

are relatively stable. Aside from that, we want to continue

expected a regional growth rate of 10% per month, so they

expanding in Chihuahua, Queretaro, Puebla, and Mexico

did not provide enough stock for the Mexican market. This

City, where we are already present, and we are looking

has resulted in the cancellation of many of our fleet sales.

to develop a stronger training agenda. As I learned from

We are currently working with LeasePlan, Facileasing, CSI

Toyota, good managers hire well, they develop their

Leasing, GE Capital, and other leasing companies under

people, set good expectations, and motivate their staff.

101

| VIEW FROM THE TOP

HISTORY AND HERITAGE MERGE WITH MODERN PRACTICES MIKE GLENDINNING Executive Vice President of Sales, Aftersales & Marketing at Volkswagen de México

Q: How is Volkswagen tailoring its services to Mexico, and

customer service. All brands have to accept that business

which models have been the most successful in the country?

is cyclical and influenced by the economy and the product

A: The Volkswagen Jetta has the strongest name and image in

portfolio. There are phases when the portfolio is new and

Mexico, because it is locally produced and it competes in a high

strong, but there are others when the products are old

volume segment of the market. The Beetle also has a strong

and weak compared with the competition. Volkswagen

presence, with people in Mexico possessing an emotional

has introduced a comprehensive customer satisfaction

connection with it because of its history. Right now, the best-

strategy called the Best Face of Volkswagen, where we

selling car we have is the Vento, which is internationally known

apply five fundamental pillars. The first thing we did was to

as the sedan version of the Polo. It is an imported car, but it

construct a dedicated structure with enough resources, and

competes well at a price point of MX$180,000 (US$12,000),

then we reengineered our sales and after-sales processes

placing it in a high volume segment that appeals to private

with our dealers. On top of that, we established training

clients as well as fleet customers. Looking at the Mexican

and coaching programs where we spend approximately

market, 47% is represented by small- and medium-sized sedan

20 days with the dealers, as well as designing systems

cars, while the SUV segment is growing quickly. However, if

to help us measure the performance of every dealership.

you want to be successful and become a market leader, you

Finally, the addition of a dealer recognition program and

have to dominate in the A0 and the A sedan segments. After

an internal program of cultural change, have really helped

that, you have to gain coverage in all the remaining segments

embed this strategy with our dealerships.

of the market, starting with small hatchbacks with a price of MX$100,000 (US$6,700), all the way up to vehicles of MX$1

Q: How will the introduction of the Golf 7 help you boost

million (US$67,000), such as large SUVs.

Volkswagen’s presence in Mexico? A: Golf is an iconic model and is one of Volkswagen’s most

Given that the product alone is not enough for our clients, we

internationally recognized products. In Mexico, this model

are placing a huge emphasis on customer satisfaction and

competes in the A Hatchback segment, which represents

after-sales services. Many brands lose a large percentage

about 2.5% of the total market. It is a small segment, but the

of their clients in the first three or four years of ownership,

Volkswagen Golf is fighting for market leadership, holding

so our focus is to have a high rate of after-sales customer

a 25% share of the segment. We will sell approximately

retention. The more loyal your customers are, the more

7,000 to 8,000 Golfs a year, so the contribution to our

profitable the company will be, which also translates to

global sales will be relatively small. However, its value for

a higher remarketing opportunity. The used car segment

the brand, the image it carries, and the technology and

is an important area to consider. Historically, Mexico does

quality statement it implies have much greater importance

not have a positive reputation in this segment, which

to Volkswagen. Mexico is the sixth largest market for the

offers a great opportunity for every brand in the industry,

Volkswagen Group, with a local market share of 15.5%.

especially Volkswagen. A strong used car business enhances

China is currently our strongest market, followed by

the possibility of taking trade-ins for the new cars sold to

Germany, Brazil, the US, and the UK. The Volkswagen

customers. If you sell a higher percentage of used cars, you

Group has set objectives that are to be reached by 2018,

get a much greater workshop presence, as well as higher

both globally and for Mexico, and we have structured

sales in parts and components.

them around customer service, employee motivation, and having the most attractive products in the market.

Q: What strategies has Volkswagen implemented to retain

102

customers and boost satisfaction?

Q: How will the new production of the Volkswagen Tiguan

A: Our whole strategy for Mexico is to have balanced

in Puebla contribute to domestic sales in Mexico?

business operations, with strengths in every key aspect of

A: With the new Volkswagen Tiguan production, we have

nour operations, including sales, after-sales, used cars, and

an opportunity to offer a better price for a larger car

that properly meets the needs of the Mexican market in

to have input in global marketing strategies, and adding

the A-class SUV segment. Moreover, this production is

a little Latin nuance to the campaign. Volkswagen is

a statement of Volkswagen’s commitment to Mexico.

a people -oriented brand, which is why emotion will

Speaking of the market in general, there are many choices

always play an important part in our marketing strategies.

out there for the customers, even more if we consider

Nevertheless, the way we are engaging with our customers

brands that are not locally produced. However, the way

is also changing, particularly considering the impact of

clients relate to Volkswagen is strongly influenced by the

digitalization and social media. We must be even more

significant history and heritage we have in this country.

alert of the clients’ needs, as the strongest brands will be

Our challenge now is to take the relevant aspects of that

the ones that are capable of responding better through

history and utilize the emotional connection to create a new

these platforms.

market where our values of innovation and responsibility can be adequately represented. The Volkswagen Tiguan

Q: Considering the market differences within the country,

will be a car with unbelievable technology and outstanding

how will each region evolve in terms of demand and sales

quality, which will proudly represent the innovative nature

of certain vehicles?

of the brand. It will have a highly fuel-efficient engine, it

A: The industry and the market are shaped by the Mexican

will be manufactured in an extremely responsible way, and

economy, as well as the purchasing capabilities of the

it will have a competitive value proposition.

economically active population. Mexico is a strong sedan market, oriented toward transporting many people and

Q: Volkswagen is famous for iconic advertising campaigns,

large quantities of goods. The practical needs of the

such as Lemon and Think Small. What marketing

market have made these cars more popular in the country,

approaches is the company planning for its new models,

with vehicles between MX$120,000 (US$8,000) and

and how is Mexico participating in this process?

MX$200,000 (US$13,300) being the strongest sellers. This

A: Volkswagen de México is closely aligned with Latin

is unlikely to change any time soon, other than due to the

American requirements, giving us a perfect opportunity

growing influence of the SUV segment.

BENTLEY BRINGING NEW SUV TO MEXICO Bentley competes in a segment with its own rules and

with the Continental line representing 45% of sales, Flying

behaviors, which means that its market strategies have

Spur accounting for 50%, and a 5% market share for the

to be equally unique. Currently, Bentley is organizing

Mulsanne. In terms of engines, the company has noticed

events for potential customers in Mexico City, Guadalajara,

a strong preference toward W12 models. Additionally, the

Puebla, and Monterrey, hoping to achieve 17% growth by

development of the luxury market indicates that there is

the end of 2015. Bentley is the only luxury brand in Mexico

an attractive niche for a top-of-the-range luxury SUV.

with full support for its sales and service operations from the Volkswagen Group. The company’s vehicles are

According to Francisco Torres, Director of Bentley de

divided into three main families: Continental, Flying Spur,

México, the brand is planning to add one more model to its

and Mulsanne. The Continental family includes coupes with

prestigious portfolio. “The Bentayga is the first Bentley SUV,

several versions and two engine options, namely V8 and

and will be introduced in the middle of 2016,” he explains. “We

W12. With a starting price of US$290,000, Continental is

are already anticipating remarkable success for this model

aimed at customers who enjoy top-speed performance

in the market, and we will soon have an exhibition in a very

with style and luxury. The Flying Spur family has two

exclusive shopping mall in San Pedro Garza Garcia, Nuevo

versions of 4-door sedans with either a V8 or a W12

Leon, to prepare for the its arrival.” The amount of leather,

engine. The starting price for this line is US$280,000, and

veneers, stitches, materials, colors, and sound systems offer

is designed for people that like a daily fix of luxury in their

a huge amount of choice to buyers, making every Bentley

lives. Finally, Bentley’s flagship line is the Mulsanne, with

a unique piece of automotive artistry. “Ordering a Bentley

two different versions, both of which boast V8 engines.

is like buying a tailored suit, only far more exciting,” smiles

Cars in this family have a starting price of US$420,000, and

Torres. “You visit our dealership in Polanco where a brand

were designed without sparing any expense on comfort,

ambassador takes care of all your wishes, and six months

technology, and engineering. There are definite preferences

later you receive a beautiful 60%-40% combination of high-

in the Mexican market for the different Bentley models,

end technology and fine craftsmanship.”

103

| VIEW FROM THE TOP

A COMPLEMENTARY RELATIONSHIP BETWEEN TWO TITANS CARLOS AURELIO QUEZADA BLASCO Marketing and Advertising Director of FCA México Q: How has the creation of the FCA Group affected the

you could say that they all compete in the same segment,

success of each brand worldwide?

we have a clear strategy for each of them. Our products

A: This alliance strengthens both companies. Our two

complement each other, which is an essential part of our

product portfolios complement each other rather than

strategy. In terms of our sedan products, we are in every

compete, making us stronger in the global marketplace.

market segment. This year, the Dodge Vision and Dodge

However, the strength of each brand depends on the

Attitude are placed in the B segment, which is the biggest

country. While Fiat is one of Brazil’s top brands, Chrysler,

and most important segment in the Mexican market, and

Dodge, Jeep, and RAM are much stronger in the Mexican

the Fiat Uno has done an amazing job entering the A and B

market due to their history in the country. Similarly, even

segments as well. We are constantly renewing our product

though Dodge Journey is highly successful in Mexico,

portfolio, and 2016 will not be any different. We see the

we had to release it under the name of Fiat Freemont in

release of these five products as an opportunity to expand

Brazil. In other words, to potentiate our sales we have to

our market share and brand recognition within those

predetermine which brand will release each product. The

segments. The SUV market is also growing substantially

vehicles have to be tropicalized and undergo some minor

and we have an excellent share with our Jeep product line.

modifications, but they are essentially the same original

In terms of Alfa Romeo, the Giulia was recently released,

product. We can offer our clients added value with every

and we will continue to release new products within the

single one of our products, which is one of FCA Group’s

brand over the next few months. I am confident that Alfa

strengths. However, there are some products that stand

Romeo will improve its position and that it will compete

out in the local market, such as the Grand Cherokee, the

thoroughly with the market’s premium brands.

Dodge Journey, the Patriot, the Compass, and our entire RAM pickup line. Furthermore, we are the only automotive

Q: How important is the Mexican market in FCA Group’s

brand that has a line focused entirely on pickup trucks.

global sales and production strategies?

Although

A: Mexico is extremely important for the FCA Group

having

many

products

competitive

advantage, we have to spread out our marketing efforts

because

its

geographic

position,

its

proficient

due to the peculiarities of our lines. For example, the

workforce, and tremendous infrastructure. We recently

North region is very keen on our light truck line, which

invested close to US$1.25 billion in a new assembly plant,

means we have to direct most of our light truck marketing

and close to US$200 million in a component center in the

budget in that area of Mexico. Comparatively, the sedan

State of Mexico. The group has important investment plans

line is more centralized in Mexico City, Guadalajara, and

for the Mexican market and there will be some additional

Monterrey.

surprises for 2015. In terms of global numbers, close to 10% of the group’s production is done in Mexico and 20% of our

Q: What are clients seeking when they consider purchasing

engines are produced here.

a new FCA product, and which products are capable of

104

meeting their needs?

The Mexican market is very complicated due to the

A: Every client looks for high quality, world-class

multiplicity of brands and products, but we understand

technology, safety, a competitive price range, and fuel

that constant product evolution is a must. Sales and service

economy. The Dodge Attitude, which was released in 2015,

experience are also fundamental to creating a strong bond

provides up to 27km per liter and it is currently the leader in

with clients, as well as giving our products an added value

terms of fuel economy. Previously we did not have a strong

that is truly relevant to our demographics. Having such

footprint in the entry segments, so we set out to change

a good product line forces us to build mechanisms that

that with five product releases: Dodge Attitude, Dodge

will ease the migration from one product to another with

Vision, Fiat Uno, Mitsubishi Mirage, and Ram 700. Each of

higher specificities. The more complete our portfolio, the

these products has excellent fuel economy and, although

easier it will be to offer transitional options.

| VIEW FROM THE TOP

MEXICO WARMING TO THE LUXURY MARKET EDUARDO HENKEL Director General of Rolls-Royce Mexico

Q: What led to you entering the luxury dealership business

Q: Which Rolls-Royce models are currently available to

and applying your expertise to the Mexican market?

purchase in Mexico?

A: In 1986, I acquired Grupo Bavaria and Turbo Carrera,

A: We offer all Rolls-Royce models, but due to the size and

which were the previous importers of BMW and Porsche

exclusivity of the Rolls-Royce Phantom, the model has to

vehicles, respectively. As an automobile aficionado, I

be specially ordered. We have some units in stock of the

made the decision to buy these companies when I heard

Rolls-Royce Ghost and the Rolls-Royce Wraith, but the

about their impending closure, thus acquiring the rights

client can also order them with customized specifications.

to import both brands. During that time, we struggled to

We offer our customers the opportunity to design their own

make sales, so we focused more on providing technical

vehicle, with the features they want and the colors they like.

service for the few existing customers in the country. We

However, the Mexican public prefers to see what they are

continued with this business model up until 1992 when we

going to buy, so out of every three cars that we sell, only

started to import BMW motorbikes. When I realized that the

one is custom made. We are currently extending to our

automotive market was going to open up in 2004, I decided

customers an invitation to visit our UK plant, where they

to invite BMW to Mexico. This was no easy task given the

can arrive in one of our vehicles and have a go at designing

conditions the company had to meet in order to operate an

their own car. This has proved to be an attractive incentive

assembly plant in the country, such as a 32% local content

and some Mexican clients have accepted the offer.

requirement. In the end, BMW decided to open an assembly plant in Lerma, but when the frontier opened in 2004, BMW

Q: What is the general profile of a Rolls-Royce customer?

no longer needed an assembly plant and transformed it

A: Back when we only stocked the Rolls-Royce Phantom,

into an armored vehicle plant. The auto parts market also

the vehicle was directed to customers that would sit in the

grew in 2004 and BMW made deals with many auto parts

back while they were driven by their chauffeurs. However,

suppliers in the country. BMW has since announced the

when we launched the Rolls-Royce Ghost and the Rolls-

construction of a new plant in San Luis Potosi.

Royce Wraith, they were targeted to proud and successful younger clients who were going to enjoy driving the car.

Q: What factors led to the opening of Mexicoâ&#x20AC;&#x2122;s first Rolls-

Aside from that, buying any Rolls-Royce is like buying a

Royce branch?

work of art; the wood, leather, and paint, inside and out,

A: BMW, the owner of Rolls-Royce, requested that I become

represent an extremely intricate manufacturing process.

the distributor of the brand in Mexico. We started importing

Additionally, thanks to the BMW engineering, our cars

cars in 2007 and sold them through Grupo Bavaria in

have enough power and performance to make them

Mexico City, but, after the launch of the Rolls-Royce Ghost,

attractive to any driver. They are fun and fast cars, capable

we decided that it was time to open a dedicated Rolls-

of reaching the same speed or even more than any BMW.

Royce dealership. To best target the Mexican market we established a showroom on the corner of Campos Eliseos in

Q: What are the main goals of Rolls-Royce Mexico during

the capital, which enabled us to be closer to our customers.

the next few years?

This is a privileged position for us, given that it is a very

A: Rolls-Royce is a brand that does not need to exhaust

busy street, really close to the hotels in the area. Our

many resources on marketing; many magazines are

location enables us to reach the local market, as well as

reaching out to us, either to be on their covers or to write

customers from other Mexican states. There is still room for

articles about the cars. Also, many luxury brands outside

development in the country, given its economic profile. The

the automotive industry have contacted us to promote

obstacles impeding our current sales are the slow growth of

their own products along with Rolls-Royce. Even so, we

the economy and the security deficiencies that have not yet

are planning to increase our sales by being a lot more

been resolved. However, there is still a great opportunity for

aggressive in the luxury market, particularly now that the

development in Mexicoâ&#x20AC;&#x2122;s luxury market.

economy is starting to improve.

105

| VEHICLE SPOTLIGHT: 2016 CHRYSLER 300 Chrysler’s refreshing new take on the Chrysler 300 is aimed

The leather-wrapped, three-spoke steering wheel is

at dynamic drivers who are looking for an exceptional

reminiscent of classic cars, and couples with the 7-inch,

vehicle. It offers improved fuel economy and engine power

dashboard-integrated display to offer the driver the best

as well as a more comfortable interior, making it a worthy

of both worlds. Navigation, real-time vehicle performance,

competitor in Mexico’s increasingly quality-driven market.

and wireless cellphone connectivity provides ample information about the car and can almost entirely be

True to 60 years of iconic style, the 2016 Chrysler 300’s

controlled with voice commands. Keyless technology

artisanal interior quality, furnished with new leather

enhances the hands-free experience, while the Premium

designs, as standard, adds a touch of refinement to the

Harman Kardon sound system with 18 speakers and a

cabin. Heated multi-axis adjustable seats also extend to

booming subwoofer envelops the passengers with a real

lumbar support that can be adjusted for further comfort.

depth of sound.

The 8-speed automatic transmission is managed with a

cross path detection, full-speed forward collision warning

smooth rotating gear shift, which creates a more spacious

with active braking, lane departure warning, advanced

central space through the elimination of the gear stick.

brake assist, and rain-sensing windshield wipers, to name

This does not detract from the 292hp 3.6l V6 motor, or the

just a few.

more powerful 5.7l V8 version, which will see an increase to best-in-class 370hp, available on the rear-wheel-drive

The

versions of the Chrysler 300S, 300C and 300C Platinum.

maintaining a loyal following through its signature old-

This car also boasts a suite of more than 80 characteristics

school craftsmanship paired with clever technology,

to improve safety, giving buyers the option of two

aesthetics, and design harmony. This bold machine

SafetyTec features, including a high-resolution rear view

balances substance with style and is set to appeal to a

camera with parking assist, blind spot monitoring, rear

wide range of drivers with a taste for quality.

sedan

sits

between

luxurious

and

muscular,

LUXURY BRANDS UNDERGOING TECHNOLOGICAL ADVANCEMENTS Most of today’s luxury cars can be described as being either

and showcases, while we focus more on horse riding and

sporty or elegant, but there are some brands that merge these

concourse type activities for Aston Martin lovers.”

traits to create something completely out of the ordinary. When considering this synergy, some of the first names that

Since the launch of Lamborghini’s Aventador in 2012, there

spring to mind are Lamborghini and Aston Martin. These

has not been one vehicle within the same price segment

two iconic OEMs are completely different; Lamborghini’s

that can outperform it. Its acceleration and handling

exotic reputation exudes a stylish sense of desire, power, and

capabilities are comparable to vehicles that cost upwards

speed, while Aston Martin represents class, craftsmanship,

of US$1 million thanks to its 700hp engine and four-wheel

and a deep history, while still providing the driving pleasure

drive. Additionally, Lamborghini has made important

that exhilarates any driver. Both of these brands have

progress in carbon fiber and aluminum development.

enjoyed a rich presence in popular culture, expertly driven

The carbon fiber composite and aluminum chassis that

by superheroes and secret agents, and are persistently

Lamborghini manufactures provides a lighter and stiffer

occupying the dreams of automotive aficionados.

structure that enhances performance. Along with fluid

“We have recently become the best-selling dealer in Latin America for Lamborghini and Aston Martin, performing better than some other big cities around the world.” Martin Josephi, General Manager of Lamborghini and Aston Martin México

The market for these two brands is still dawning in Mexico,

suspension technology, Lamborghini has now introduced

but Martin Josephi, General Manager of Lamborghini

its Anima system to the Huracán, which consists of

and Aston Martin México, explains that since opening its

accelerometers and gyroscopes that tell the car in which

doors in 2010, Lamborghini has tripled its sales. Aston

direction it is moving, if it is shifting, or if it is losing control

Martin is expecting to increase its sales even faster, despite

at any given time. When the car loses control in a curve,

only arriving into the country during February 2014. “We

for example, Anima will automatically give power to the

obviously cannot compare ourselves to a dealer in Beverly

other wheels to enable it to take the curve properly. The

Hills, London, or Munich.” says Josephi. “Even so, we are

suspension can shift between stiff and soft thanks to a

performing better than some big cities in the world, and

fluid suspension technology located inside the dampers

we have recently become the best-selling dealer in Latin

that responds to magnetic shocks. This means that the

America for Lamborghini and Aston Martin. We expect Aston

Aventador can be a very soft car on the street and have

Martin sales numbers to grow very strongly during the first

a stiff suspension on the track or highway. “A glimpse at

couple of years before stabilizing at a 10% growth rate.”

what Lamborghini has in store can also be seen through the range of prototypes that they have been introducing

Mexican consumers have access to the complete range

recently, like the Sesto Elemento, the Urus, the Veneno, or

of models that both OEMs manufacture. Lamborghini

the Egoista,” says Josephi.

provides the Huracán and the Aventador, while Aston

108

Martin offers the Vantage, the DB9, the Rapide S, and

Lamborghini is now throwing its hat into the HV ring. In

the Vanquish. “The price of an entry level product from

September 2014, Lamborghini introduced its first hybrid

Lamborghini is higher than the equivalent from Aston

concept car, called Asterion. This new model has PHV

Martin, and Lamborghini and Aston Martin also attract

technology that allows it to travel up to a maximum of

different types of people,” Josephi explains. “For example,

50km using only electrical power, but still houses the same

Lamborghini clients are usually men who embrace an active

610hp gasoline engine as the Huracan. The car has one

lifestyle and have an interest in more dynamic situations.

electric and one gas engine in the back, and two electric

Comparatively, Aston Martin attracts clients with a more

engines in the front, letting it reach a maximum speed of

classic lifestyle. We have customers who are primarily

125km/h in electric mode, and 320km/h in gasoline mode.

attracted by the brand, while other clients want to try out

“I believe that Lamborghini was taking its time to come up

different things. In light of this, we arrange activities that

with a worthwhile model, since almost all other brands have

cater to both: for Lamborghini we organize track events

already come up with some sort of hybrid,” states Josephi.

Aston Martin, on the other hand, is holding its focus on

Martinâ&#x20AC;&#x2122;s vehicles possess enormous versatility, utilizing

elegance and quality. Every sigil is fabricated by a jeweler

powerful engines without compromising the elegance and

in Birmingham, and, in the case of the Vanquish, eight

comfort of the car. The Rapide S, for example, is designed

cowhides are used to make the leather interiors with

for daily use and has enough room for four passengers, but

a million hand stitched threads in every car. The brand

is still capable of reaching a maximum speed of 330km/h.

also uses a large amount of carbon fiber in its chassis in order to keep weight to a minimum while maximizing

It is clear that Lamborghini and Aston Martin are two

performance. Furthermore, Aston Martin has recently

brands that have pushed the boundaries of luxury and

developed a partnership with AMG to create an engine

technology and, while they are not leading the charge in

for its next generation of vehicles. In two yearsâ&#x20AC;&#x2122; time, it

terms of electric vehicles, it is certain that they will continue

will get all its electronics from Mercedes-Benz, further

to push the boundaries of design, elegance, performance,

strengthening the OEMâ&#x20AC;&#x2122;s technological advances. Aston

and engineering for many years to come.

109

| VIEW FROM THE TOP

BROADENING THE APPEAL OF LUXURY VEHICLES FRANCISCO TORRES Director General of Porsche de MĂŠxico

Q: How do you communicate the prestige of Porsche to a

can attract new customers who are looking for a car unlike

Mexican audience?

anything else in the market, something really unique and

A: The Porsche brand has deep roots in Mexico thanks

exclusive. This car is both a coupe and a convertible, with

to the performance of our cars during the Carrera

the ability to be used on the racetrack, in the city, or on

Panamericana in the 1950s, which helped build the

the highway, without compromising performance. The new

prestige of Porsche significantly. Back then, Porsche was

Porsche Macan has also helped to attract new customers,

a young car producer who was challenging the big, global

particularly those who may not have considered driving a

and well-positioned brands, and the name embodied a

Porsche in the past. It is a very practical car with a beautiful

radically different concept; these cars were built to be

design and is lighter, sportier, extremely agile, and slightly

light, efficient, and agile. By the 1970s, Pedro RodrĂguez,

smaller than the Cayenne. It certainly represents a new

the greatest ever Mexican race driver, had huge success

SUV concept that is unlike anything else in the market. The

driving for Porsche at many European races, including the

Macan also attracts a younger customer base, appealing to

24 hours of Le Mans. As a result, the Porsche brand has

recently married couples or young professionals who want

been closely associated with sports vehicles in the minds

to treat themselves.

of car aficionados. To this day, many customers come to us with stories about their ancestors either witnessing or

Mexico is also reacting well to some of our limited edition

participating in these legendary racing events.

models, for instance, the Porsche 918 e-Hybrid Spyder, of which only 918 units were built, has sold 9 units in Mexico.

Q: How quickly has Porsche grown in Mexico and how are

This accounted for more than half of the Latin American

you capturing the attention of new customers?

quota. Additionally, only 80 Porsche 911 Martini Racing

A: Between January and November 2014, we grew

Editions were built worldwide, seven of which are in

by 24.3%, which was four times more than the overall

Mexico. Many Mexican customers are true car connoisseurs

automotive market in Mexico. Customers who acquire a

with a taste for limited edition vehicles.

Porsche are looking for a car that gives them a different feeling, and a car that can stir emotions. This is not a

Q: What financial services does Porsche offer to its

machine for getting from A to B, but a car that represents

Mexican customers?

a way of life and a whole new experience. Whether they

A: Porsche Financial Services is our financial instrument.

buy a 911, Cayman, Boxster, Panamera, Macan, or Cayenne,

It is totally supported by Volkswagen Financial Services

they know that Porsche will surpass their expectations.

and we enjoy all the assistance and knowledge that

Even so, this does not mean that Porsche is totally immune

Volkswagen Group can offer. However, the financial

to the market trends and economic developments that

products we offer are tailor-made for the cars we are

affect other OEMs. We regularly update our product

selling and the customers we cater to. Around 29% of

portfolio in order to bring something fresh to the market.

our car sales are achieved though financing, utilizing all

In 2014, for example, we had eight product introductions

the relevant financial products, such as traditional credit,

in the Mexican market, including completely new models

premium credit, and leasing. These are available for all

like the Macan, new generations of the Cayenne, and fresh

of our cars, making Porsche Financial Services a very

interpretations like the 911 Targa.

good option for customers who never thought they could own a Porsche. Our leasing option has been particularly

110

Q: What impact are these new vehicles having on the

important in supporting our growth as it has increased

Mexican market?

by almost 200% in 2014 alone. Previously, leasing was

A: With the introduction of the Porsche 911 Targa, we are

not seriously considered in Mexico, but changes to tax

offering our customers a new version of the iconic 911, with

obligations and regulations resulted in a substantial

an even more stylish and versatile design. The 911 Targa

financial impact on our clients.

Q: Opening a dealership is a deeply strategic choice,

brands, managing a Porsche dealership is not about large

given how few you have. What are the steps that Porsche

sales volumes, but about generating satisfaction with our

takes before opening a new dealership?

vehicles and our service.

A: First of all, we need proof that a specific location is mature enough to support a Porsche operation. We hire

Our customers should be treated with dedication and

independent advisors to analyze the market and find

respect, and they ought to be able to get in touch with the

locations where demand is big enough to support a

owner of the dealership when they need to. Consider the

dealership. After that, a committee decides on the locations

new experience we are offering this year with our Porsche

that we should explore further. Potential partners need to

Center Santa Fe, which is smaller than most of our dealers

be locally-rooted investors and successful business people,

and acts as a boutique. This establishment allows the

they need to have a measure of prestige, and they should

customers to relax, enjoy the exclusive atmosphere, and

be trusted in the community. Our committee analyzes

receive special attention from Porsche.

the partner profiles and whittles the list down to five or six, which we then invite to bid for the dealership. Once

The expansion of our dealer network is closely linked to

we receive their confirmation of interest, we send them a

the performance of the Mexican economy. Some markets

package detailing our estimated volumes and prices, our

that were not on our radar five years ago are now very

brand policies, and all the topics they have to follow. After

appealing. We will soon open a new dealership in Veracruz

a couple of months, they have to submit a full business

and we are looking at various promising locations in other

plan to Porsche and, when we determine which candidates

parts of the country.

have the most compelling business cases, we pay a visit to their current premises. We evaluate their management

In 2014, we opened new dealerships in Leon, Guanajuato and

style, their personnel turnover, their finances, and their

Santa Fe, to reach a total number of 11 dealers nationwide,

customer satisfaction, in order to provide a complete

and we also overhauled our dealership in Interlomas, Mexico

analysis. Each member of our team then independently

City. In 2015, our growth in Mexico should exceed 24%,

scores each candidate before we vote. Once the decision

which is even higher than the dynamic growth of our brand

is made, we then make our final recommendation to the

on a worldwide scale. Therefore, we are delivering sound

Volkswagen Group, which is usually accepted. Unlike other

results despite the challenging environment.

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| VIEW FROM THE TOP

ARMORING ADVANCEMENTS DIRECTED BY BALLISTIC EVOLUTION ESTEBAN HERNÁNDEZ LÓPEZ Director General of Auto Safe International Q: How is Auto Safe addressing the personal protection

which translates into a weight reduction of about 300kg.

needs of the Mexican market?

Through these measures, we are quickly becoming the

A: This is client dependent and differs based on their

leaders in the field of bulletproof vehicles.

situation. The prominence of car safety is caused by the vulnerability of getting from point A to point B. Some of

Q: What specifications are expected from Auto Safe as an

our clients are shell-shocked because of past experiences,

OEM supplier?

while others use armored vehicles like they would life

A: The expectation is that the armored version of

insurance, making the purchase with the hope of never

their vehicles maintains its aesthetic and performance

using it. Auto Safe is part of the WBA security group,

standards. These cars go through years of engineering

and as a whole we represent close to 13% of the market.

and are dismantled within a week, before they are then

From the beginning, Auto Safe has been industrializing

armored and reassembled. In the future, this will continue

the armored car business by working directly with car

to cause problems because vehicle manufacturers are

manufacturers and gaining experience with the likes

adding more features and more technology to their cars.

of Toyota, Renault, and General Motors. In Mexico, the

When you work closely with an OEM, you must be able to

government is becoming an increasingly strong market

reach and surpass their high standards.

segment for us, but our client base consists of around 10% transportation companies, 15% government agencies, 35%

We adhere to international norms that regulate testing, but

individual clients, and the remaining 40% are OEM clients.

they may not include bullets that can be found in Mexico, so we have to implement our own testing procedures. Then

Q: How do you approach the manufacturing of armored

we have composites, made of unidirectional polyethylene

vehicles, and what technology do you use to do so?

and steel, which stops bullets like the 5.56 x 45 SS109 that

A: Engineering and ballistics are critical to the process.

cannot be stopped by such plastics alone. In response to

Mexico is producing a little over 2,000 armored units per

the emergence of two new weapons called FiveSeven and

year, which represents a very small cross-section of the

P90, which use similar projectiles to that of the AR-15 but

country’s overall vehicle sales. Our engineering department

are smaller and can fit in a handgun, we have developed a

develops the armor for each car, and then sends it to our

new level of protection called AS 3AP. Clients know that

assembly facility, although for the more common models

we strive to offer the best product available, as this quality

we have a dedicated assembly line. The most important

can be seen in our finished products all around the world.

technology is found in the materials we use. Once armored,

We have over 3,000 vehicles currently being used in more

the vehicle is going to weigh more than the manufacturer

than 15 different countries, so our history speaks for itself.

originally intended, so weight management is crucial in

112

attempting to get as close to the car’s original performance

Q: How important is Auto Safe’s Mexican presence to the

as possible. Currently we are using 600 HB steel that

global operations of the company, and what does the

helps us reduce the thickness of steel without hindering

future hold?

its ballistic resistance capabilities. We also use lightweight

A: All of our markets are important because they provide

ballistic glass, some of which has the strength to stop

distinct experiences for us to learn from, but Mexico is a

bullets from an AK-47 with just 22mm of thickness. We also

large market and regularly generates high demand for

use polyethylene and unidirectional aramid fibers. Some of

protective vehicles. All of the distinct experiences we gain

these products are either thinner than the industry standard

from each of our markets make them important for our

but provide the same level of protection, or they are just

global operations. Additionally, we are always looking

as thick with increased ballistic protection properties. In

into new products, so we will keep heading toward lighter

high level armor, like the B6 and B7, we can reduce the total

vehicles, better technology, improved suspensions, and a

armor weight by up to 30% by using advanced materials,

feeling that our clients are driving the original car.

LUXURY DEMAND BALANCED BY STRATEGIC EXCLUSIVITY When it comes to luxury cars, Italian vehicles represent

measures were possible mainly because of Ferrari’s small

the cream of the crop, counting such reputable names

structure, which allowed the company to take the initiative

as Ferrari and Maserati among their ranks. As stated by

when the market demanded it,” González states.

Ferrari itself, words are not nearly enough to describe the feeling that automobile aficionados experience with either

As is traditional during almost every governmental power

of these brands. Conveniently though, while both are vastly

shift, President Enrique Peña Nieto campaigned with the

different in terms of style, appearance, and performance,

promise of renewed wealth and abundance for Mexico. For

they combine perfectly with each other. Rodrigo González,

that reason, Marco Mattiacci, CEO of Ferrari North America,

Director General of Ferrari & Maserati Mexico, explains that

stated that Mexico would be the new China for Ferrari. “By

both brands offer all of their available vehicles in this country.

2012, there was a rise in demand of up to 7,300 units and

Maserati has two models: the QuattroPorte GTS and the

it was expected to increase even more,” González states.

Ghibli SQ4. Ferrari, on the other hand, presents a much wider

“Nevertheless, Di Montezemolo declared that Ferrari would

selection to choose from. In the 12-cylinder line, there is the

not produce more than 7,000 vehicles a year in order to

Ferrari F12berlinetta and the FF, while the 8-cylinder line

maintain its exclusivity.” He continues by explaining that,

features the Ferrari California and the 458 models Speciale,

after some time, Mattiacci’s declaration proved to be

Spider, and Italia.

unfounded. Nowadays, clients who want to buy a Ferrari need to leave a significant deposit, which will only be

The market for Ferraris is divided into three main targets, as

returned once the car has been sold, preventing regular

González explains. “The Ferrari California was designed for

cancellations. These measures made Ferrari even more

the female market, but it turned out to be really attractive

exclusive than it already was, creating a higher demand

to first-time clients. The other 8-cylinder models, on the

for the brand and a waiting list of nearly two years for new

other hand, focus on a young customer base, ranging

customers. As a result, 42 new units were sold in Mexico

from 35 to 50 years old, while the 12-cylinder models are

during 2014, representing a large chunk of the 600 sold in

targeted toward a client range of 50 years and older.” While

the country since 1998.

these regular models have begun to make an impression in Mexico, González also mentions that Mexico is becoming

During 2015, Mexican clients will continue having access to

an attractive market for collectable and limited edition

the usual Ferrari models, while also gaining the opportunity

vehicles. According to him, the new LaFerrari sold nine cars

to order the new Ferrari California T. There was recently a

in Mexico and only two in the US. Not only is this figure

Geneva-based presentation of a new 8-eight cylinder model

higher than what would be expected from Mexico, it also

with a turbo engine that will replace the 458 series, and 2015

happens to be the highest number in Latin America, turning

will also be the delivery year for the nine LaFerrari sold two

Mexico into a key market for Ferrari North America. There

years ago. As the motto from the Ferrari Museum Maranello

is, however, a limited customer base in the Mexican market,

states, Mexican clients are “living the dream”, and with the

and González states that the only way to compete is to offer

luxury market on the rise, we can expect a more important

post-sale services of the highest quality. “Unfortunately, the

presence from Ferrari and Maserati over the next few years.

necessary purchasing power to afford this kind of vehicle is concentrated in a small group of people, so we want to retain as many clients as possible,” he explains. “Since gaining a number of new clients in 2009, we have been focusing more on keeping those customers close, and ensuring that they remain loyal to the brand.” Sadly, Ferrari had not seen much progress in Mexico before this influx of new buyers. These clients arrived after the crisis of 2008, which represented one of the worst economic periods for Mexico and affected vehicle sales in all market segments. González explains that, after analyzing the situation, Luca di Montezemolo, then President of Ferrari, decided that the company would only manufacture cars to order. This led to a drop in production to less than 6,000 units and prevented the rise of used Ferrari prices. “These

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PRESTIGIOUS DEALER BRINGS RACING TECHNOLOGY TO MEXICO When an individual’s entrepreneurism blooms at a very

The McLaren 650 has a V8 3.8l engine with double turbocharger

young age, the results can be outstanding. When he was

and 641hp, weighing in at approximately 1,200kg, which is

just 14 years old, Javier Herrera took the first steps toward

200kg lighter than the competition. The carbon fiber chassis

building a relationship between Herrera Motors, McLaren, and

is far better than any alloy, and its hydraulically independent

Lotus. Without telling his father and brothers, he scheduled

suspension absorbs road irregularities in a matter of seconds.

an appointment with the global director of Lotus where

Furthermore, its exterior design is equally spectacular and

he presented his family and the experience they had in the

every detail is an abstraction of McLaren’s logo. In the Lotus

Mexican automotive market. Soon afterward, he did it again

range, the Exige has a 3.5l V6 supercharged engine capable of

with the global director of McLaren, laying the foundations

providing 445hp, which delivers amazing track performance.

for a project that he would consolidate five years later. Both

Furthermore, this vehicle is sufficiently comfortable for daily

directors visited Mexico several times before finally deciding

use, and it has had a fantastic reception in Mexico. Lotus’ other

that Herrera Motors was the best option to commercialize

models have also seen success, with the Lotus Elise having a

their vehicles in the country.

significant impact on customers, and the Lotus Evora being the brand’s top-selling product. The Evora has the same engine

With 75 years of history, Herrera Motors is one of the oldest

as the Exige, but possesses the electronics and equipment of

dealership groups in Mexico. That amount of experience

a daily car, which could be the secret to its success in Mexico,”

combined with young Javier Herrera’s initiative were the

explains Herrera. In terms of new releases, McLaren’s launch

deciding factors that made McLaren and Lotus entrust their

of the 675 has resulted in Herrera Motors selling two units in

vehicles to the group. José María Herrera, Javier’s brother,

Mexico, with delivery dates scheduled for the last quarter of

has since become Director General of both brands in Mexico,

2015. This version is similar to the 650, but with 100kg less

and he has huge expectations for them in the domestic

weight. It has 661hp and can reach 100km/h in 2.9 seconds

market. “We are really excited to grow alongside both brands

or 200km/h in 7.9 seconds. Lotus will also bring the new 675

here in Mexico, and it is surprising how readily the public has

LT to Mexico, as well as launching the new 570 by the end of

accepted both Lotus and McLaren,” says Herrera. While this

2015 with a base price of US$238,000. McLaren, on the other

is the first time that McLaren has introduced its vehicles

hand, introduced the P1 to the world stage, but since there

to Mexico, Lotus had previously tried to enter the market

were only 25 units in the entire world, none of them could be

without much luck. Even so, Lotus no longer has any doubts

sold in Mexico. However, there are plans to introduce a new

about Mexico and, after a complete renovation proposed by

model between the 650 and the P1 that will compete directly

its new CEO Jean-Marc Gales, the brand is ready to establish

with the Lamborghini Aventador. Meanwhile, Lotus investors

a strong presence in Mexico. Located in Santa Fe, McLaren

are placing a large amount of resources in several new

and Lotus’ showroom is now the only exhibition point for

improvements in terms of engines and equipment planned for

these vehicles in the country. However, Herrera Motors has

2016, while there are rumors of a new Lotus SUV.

plans to extend its presence to Monterrey, Guadalajara, Puebla, and all major cities in Mexico.

The highly anticipated return of Formula 1 to Mexico makes 2015 a tremendously memorable year for both brands.

Both McLaren and Lotus represent the power and prestige

“Mexico has a strong Formula 1 culture, and it is amazing

of Formula 1, which is one of the main reasons they have

to see how some customers know at least as much about

attracted the attention of Mexican drivers, according to

our products as we do,” states Herrera. Even with its four

Herrera. “McLaren is the pinnacle of design, sensation, and

independent branches of McLaren Technology, McLaren

technology, and its technology is significantly ahead of other

Aerodynamics, McLaren Automotive, and McLaren F1,

supercars in the market,” explains Herrera. “Lotus on the other

McLaren is committed to bringing at least some part of

hand, has the advantage of being a unique product in the

the Formula 1 experience to its consumer vehicles.

market, with characteristics that no other brand can provide. It is the only vehicle with a mechanical transmission, mechanical drive, and an aluminum chassis completely assembled with aerospace-level adhesives, providing a weight of around one tonne.” Interestingly enough, these brands were the first ones to use a carbon fiber MonoCell for their bodywork, and are both continuously undergoing a forward-thinking innovation process. “When considering weight versus power, there is nothing in the market that can compare to these two brands.

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“McLaren is the pinnacle of design, sensation, and technology, and its technology is significantly ahead of other supercars in the market” José María Herrera, Director General of McLaren México and Lotus México

| VIEW FROM THE TOP

PREMIER E-COMMERCE PROVIDER IS SIMPLIFYING THE HUNT FOR VEHICLES IGNACIO CARIDE Director General of MercadoLibre México Q: What challenges have you encountered while convincing

Q: With large dealership groups in Mexico beginning

the Mexican population to use both MercadoLibre and

to use online platforms, does this represent direct

Autoplaza to buy cars?

competition for your company?

A: Ten years ago, a buyer would typically search through

A: We have been doing business in the Latin American

the newspaper’s classifieds section, which was neither

market for 15 years. As a result, we are Latin America’s

the most pleasant nor the most time-efficient experience.

number one site in terms of e-commerce traffic, and we are

Advertisements

minimal

the world’s eighth largest e-commerce site, period. Selling

information about the product, making it more necessary

online is not an easy task; you have to build a strong brand

for the buyer to engage to know enough to be interested.

in order to generate quality traffic, and then convert that

Advertising online is cheaper and much more efficient,

traffic into opportunities. We are experts at doing this, so

and is undeniably further reaching than promoting in a

we are not threatened by new entrants. Several powerful

used car lot. Today, sellers can list reams of information,

retail companies have opened their websites in the hopes

providing prospective buyers with a better overview

of attracting a portion of the online market. However, as

of the product. As a result, people now spend around a

many lack the expertise to adapt their sales strategies

tenth of the time searching for a new car compared to the

to fit an online scenario, no one has yet achieved the

amount of time they used to spend before the rise of the

same success as MercadoLibre or AutoPlaza. Ultimately,

internet. Unfortunately, the payment process has proven

if our competitors are successful and are able to provide

to be a challenge for us. Listings usually have multiple

pleasant online experiences to buyers and sellers, that

interested parties, and people tend to make deposits to

customer base will become more invested in buying online,

gain an advantage over competing buyers. This system

and building this trust benefits all companies involved in

was prone to fraud, so we developed our MercadoPago

e-commerce.

would

normally

contain

system, which helps people with their reservations and vehicle viewings while protecting buyers from malpractice

Q: What innovations can we expect to see implemented

in this area. Furthermore, we believe that it is the customer’s

on your websites, and do they translate into your strategic

responsibility to investigate the seller and the responsibility

objectives?

of the government to eradicate illegal products. We are the

A: One of our vital innovations is the MercadoPago

only company that checks every listing with an intelligenct

system. We have also recognized the mobile market as an

system that detects typical fraud patterns. This department

opportunity if we can connect efficiently. All in all, we strive

is constantly checking for repeated emails, phone numbers,

to make our clients’ vehicle search much easier. On this

and bank accounts, or other elements that raise red flags for

note, we developed an Application Programming Interface

us, such as people claiming to be major companies that sell

(API), which allows both dealers and manufacturers

car fleets, but who have not contacted us directly.

to automatically integrate their systems with ours. To illustrate this, Ford receives used cars on a daily basis

Q: What was the motivation behind MercadoLibre

across its 300 dealerships. With our integrated systems,

acquiring Autoplaza?

we can link their inventory with our site so that customers

A: While MercadoLibre was the number one overall player

can monitor these opportunities immediately. So far, we

within the Mexican market, Autoplaza was the number one

have been receiving positive feedback on this new feature.

player specifically in Mexico City, and was a great brand

In addition, although MercadoLibre does not sell any of

commanding

quite

its data, we were able to develop a price guidebook by

simply, it made sense to acquire it to expand our reach

gathering all of the product information listed on our

and to offer more coverage to sellers. When a seller lists

website. By analyzing price, age of the car, mileage, and

their product on either platform, it is advertised on both

other factors, users are able to see roughly what price they

MercadoLibre and Autoplaza.

should be paying for their new cars.

considerable

market

recognition;

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| VIEW FROM THE TOP

LEADING MEXICO’S FINANCING MARKET DOWN THE RIGHT PATH ANDRÉS DE LA PARRA Director General of Nissan Renault Finance México (NR Finance) Q: How has Nissan Renault Finance México helped to

for each brand, taking a different approach and providing

increase the Nissan-Renault customer base in Mexico over

different services while recognizing different customer

the last 12 years?

needs. Credi Nissan currently has a 49% penetration rate,

A: In 2014, the company managed to attract one million new

Renault Servicios Financieros is close to 70%, giving it the

customers, and by the end of our fiscal year in March 2015,

highest penetration rate in the Mexican market for any

we also achieved 400,000 active contracts. NR Finance

brand, and Infiniti Financial Services is currently at 56%. Our

supports Nissan, Renault, and Infiniti, which launched in

largest portfolio is Nissan, with 85% of the market share.

the Mexican market around two years ago. The growth of

Another important development is the Nissan semi-new CPO

NR Finance has been thanks, in part, to Nissan’s significant

program. As long as a CPO vehicle is purchased from one of

growth over the past couple of years, and also because of

the dealership networks, we can provide the same financing

the increased sales penetration for each brand. In terms

tools that are available for new vehicles.

of Mexico’s existing leasing companies, or independent companies that gravitate toward this segment, NR Finance

Q: Automotive financing in Mexico saw an 11.3% increase

has been able to immediately lead the market. We manage

in 2014. What needs to happen to ensure that Mexico

significant fleet volumes, serving both large corporations

reaches 70% of new vehicles sold through financing?

and SMEs. This sector represents about 15% of our portfolio,

A: The largest financing penetration within the Mexican

and since we launched Nissan Fleet Services this number

market was achieved in 2007, before the global financial

has been steadily increasing. Nissan Fleet Services was a

crisis. Back then, financing represented close to 65% of

new alliance initiative in Mexico that helped us to become

new vehicle sales in the Mexican market, which is a figure

the leader in fleet financing. We have been working with

that we are currently closing in on again. Last year, the

Nissan in order to develop this initiative, which provides a

Mexican market had a 56% participation rate, and at the

deeper range of services than just financing and leasing,

moment we are at 59%, which shows an upward tendency.

including insurance, fleet services, and additional support

The cultural tendencies of previous generations were not

to strengthen brand loyalty. If a customer has any concern

favorable toward the financing industry due to a certain

regarding the car, its service, repairs, or financing, they can

level of distrust, so cash transactions were seen more

approach our contact center, and we will immediately take

regularly. Nowadays, we are in a more stable market when it

care of the situation.

comes to interest rates, so approaching people that herald from newer generations is much easier when it comes to

Q: In November 2014, NR Finance held a 25.7% share of

financing mechanisms. There is no doubt that we have to

the automotive financing market in Mexico. How is this

develop that emerging market, and we believe that the

figure evolving?

leasing product will be the breaking point in order to do

A: We have completed the fiscal year with a 25% market

so. Older generations of Mexican buyers generally view a

share, and performed better than in March of 2014. Our

car as an investment, but new generations understand that

market penetration will most likely rise again this year. Today,

you can pay for the usage of a vehicle without necessarily

we are the largest financing company among all banks and

having to own it. When it comes to leasing vehicles, there

other captive and fleet companies that finance vehicles

are tax incentives that can be important for the customer.

in Mexico. We were able to gain the top position because

For example, light commercial vehicles are fully tax

we were the first to jump into the segments that were not

deductible, so if a company performs certain commercial

previously offered financing. Customer profiles vary across

activities, it would make sense for them to lease.

our brands and we understand that reality. Even though

116

we are NR Finance as a legal entity, our commercial names

Q: What are the biggest challenges of implementing

are Credi Nissan, Renault Servicios Financieros, and Infiniti

financing services in a country with such a large informal

Financial Services. We customize and adapt all the processes

economy?

CMY

A: One of the main concerns for a finance company

negotiation processes with all available insurance within

nowadays is the collection process. States and some

the Mexican market. This will empower us to provide the

courts are becoming more aware of the situation, so the

best insurance, not only for automotive, but also for life

reposession processes are faster than they used to be,

insurance. As such, we are trying to add services in order to

although they are yet to reach the speed that we would like.

give the customers the opportunity to acquire everything

Another considerable improvement is that credit bureaus

they need in the same store.

have to share their information. You can find the complete set of information for any given customer, enabling you

This year, there has been a transformation regarding non-

to obtain an accurate and representative credit history

bank banks in terms of their regulations. When we first

for a potential client. As of now, besides being the largest

started the company, we used to be regulated, a term

company in the automotive finance industry, we also

which is known as Sociedades Financieras de Objeto

have the best past-due loan portfolio. The ratios that we

Limitado (SOFOL), and we were then transformed into

have in comparison with banks and corporations are by

a Sociedades Financieras de Objeto MĂşltiple (SOFOM),

far the best in the Mexican market. If you maintain a close

which is not regulated. When NR Finance started issuing

relationship with the customer then you can bring them

commercial paper in the Mexican stock exchange, we

back to the same dealer at the end of their contract and

became a regulated institution once again. As of right

provide them with another solution. We are looking from

now, you have to be regulated. We believe that non-bank

every angle at how to create this loyalty.

banks will be regulated in a similar way to banks, but only regarding the asset side of the industry. Since we do not

Q: What are the major plans that NR Finance hopes to

take deposits from the customers, the liability side of

execute during 2015, and how is the Mexican financing

such regulations is not applicable to us, but will be once

landscape expected to evolve?

we start issuing commercial paper. In that regard, if you

A: We now have the largest fleet portfolio, but we still

are not properly organized, and if you do not comply with

believe that there is a lot of opportunity to continue to

all of the vassal policies, then the company must be very

expand our services. We see the insurance services field as

well capitalized and have strong operational reserves. The

being another expansion opportunity. We recently teamed

players in the market are going to change, and we will

up with a new insurance broker that has helped us in the

inevitably see the introduction of new players.

AUTOMOTIVE REVIEW_IMP.pdf

13/08/15

12:55

| VIEW FROM THE TOP

FLEET LEASING SEEING RELATIVE UPSURGE IN DEMAND JÖRG PAPE CEO of Volkswagen Bank Q: Volkswagen decided to introduce leasing more than 40

A: Volkswagen had already created direct banking activity

years ago. What were the reasons behind this decision?

in Germany in the early 90s, sustained by the reputation

A: Forty two years ago, leasing was our first financial

of the Volkswagen Group. By offering personal banking

service in the Mexican market. We consider it to be the best

services, the direct banking unit was able to establish a

mobility scheme due to its many advantages, including a

more comprehensive relationship with clients, which

freer liquidity for the user. Nowadays, 68% of our clients are

translated to an increased loyalty. This is our main aim at

companies and roughly one fourth of our portfolio is based

Volkswagen Financial Services worldwide. In Germany,

on leasing services. This figure changes depending on the

the direct bank of Volkswagen Financial Services is one

brand, with Audi’s 37% leasing portfolio being a prime

of the largest of its type in terms of deposits. It was also

example. Our leasing services have grown significantly over

a fundamental part of the recovery process after the crisis

the past two years, and considering the loyalty implications

of 2008, as the deposits business allowed the company

of this product, we want to continue promoting it with

to continue with its financing and leasing business, while

our Mexican clients. Private leasing remains a challenge

other competitors had to temporarily leave the field.

in Mexico. Ownership is still considered one of the top priorities for customers, and although we have seen some

In 2008, after we detected that this might also be an

evolution, currently there are more opportunities in the fleet

opportunity for our Mexican customers, we created the direct

and corporate segment.

bank in Mexico. It is an entity under the brand umbrella of Volkswagen Financial Services in Mexico that is open to the

Q: Considering that Volkswagen Bank was created to

general public, offering deposits and investment products

boost the company’s leasing and financing services, what

with the highest quality and security standards. At the end

led you, in Mexico, to enter the personal banking arena?

of 2014, our savings product was recognized as the best of

BULLET-STOPPING, NEXT GENERATION ARMOR PLATING MATERIALS In recent years, automotive trends have been heading

for armored vehicles consists of private customers, of which

in positive directions, with a wealth of green, efficient,

Centur manages a 7% share. This group includes private

and safety conscious initiatives arising in all segments.

civilians, as well as government and corporate officials,

Unfortunately, in some cases, being safe on Mexico’s

with most customers preferring a vehicle that looks and

roads is not just about seatbelts and airbags, but also

acts exactly as the original. Before armoring a vehicle,

includes considering threats from dangerous criminals. As

Centur must strip off all the interior components to reveal

a result, Mexico is now the second largest manufacturer

the chassis and body. The armor is then fitted with either

of bulletproof vehicles, with an estimated 4,000-4,500

adhesives or welding, depending on the material used. In

produced per year, second only to Brazil’s 13,000 units.

order to maintain the weight, performance, and originality of each vehicle, Centur invests heavily in R&D focused on

118

One company on the frontlines of this battle is Centur

new processes and materials. The company uses materials

Security Services. Centur develops specialized armor that

such as aramid fibers and high density polyethylene, which

protects and safeguards passengers from any would-be

are seven times lighter than the steel used in common

dangers. According to Gonzalo Santa María Silva, Director

armoring processes, while being more resistant. Discretion

General of Centur Security Services, the largest client base

is achieved with a number of approaches, such as using a

its type in the country. We also offer automotive financing,

A: We are currently working with five insurance companies

fleet mobility services, insurance products, and leasing for all

and a broker that is constantly looking for the best offers

the brands within the Volkswagen Group in Mexico.

in the market. That way, our salespeople can offer the best solution to the client according to their region, the brand

Q: How much have financing services grown in Mexico

of the car or the model. In case of an accident, we have

over the last few years, and what factors have made this

worked extensively to make sure that cars go to shops

development possible?

within our network, managing to return almost 100% to

A: In Mexico, cash remains an important channel for the

our dealers. We always strive for customer satisfaction,

acquisition of vehicles. However, over the last few years,

not only when the clients get the car, but throughout their

its market share has been decreasing while captives have

entire experience with us.

been comparatively expanding. As the automotive market is the basis for the related financing services growth,

Q: What future do you see for your automotive financial

the development of the Volkswagen Group’s brands is

services in Mexico?

especially important for us. Last year, the group grew by

A: This year we launched Ducati Financial Services to start

around 7% in the market, and our captive, Volkswagen

to offer our financing services to those clients, considering

Financial Services, significantly faster. Volkswagen Financial

their very particular needs. In this case we can offer credit

Services had a productive year in 2014, with a 20% upsurge

for the motorcycle as well as for the accessories related to

in contracts and a penetration that rose from 37% to 44%

the Ducati experience.

in 2013. If we consider our insurance products, we can say that more than half of the Volkswagen Group’s cars that are

Compared to other markets in the world, Mexico is still

acquired in Mexico carry a product by Volkswagen Financial

really focused on pure leasing. However, over the last

Services. Last year we also created Think Blue. Finance.,

couple of years we have seen an increasing demand for

a program that was considered a benchmark initiative,

additional services from fleet customers, such as road

with the main objective of promoting low emission cars

assistance, substitute cars, maintenance, repairs, and other

through attractive financing opportunities.

related services. Therefore, we are developing a program that can offer customized solutions, which we expect

Q: Does Volkswagen Bank manage your insurance

to launch by the end of 2016. We want to keep growing

products directly or do you collaborate with insurance

and we expect to reach 50% of our market with 100,000

companies?

financing and leasing contracts by the end of 2015.

mold to make the armor exactly the same shape as the car’s

be made with a thickness of up to 5.7mm with a maximum

body interior and chassis, and adjusting the suspension to

weight of 6.5kg/m2, making it ideal for architectonic

maintain the height of the vehicle. On average, a Centur

reinforcing without affecting the external appearance of an

armored vehicle weighs between 180-350kg more than

armored vehicle. NeoFlex has neoprene intertwined with

a non-armored unit, so these are necessary steps to

each layer of material, adding complete imperviousness

maintaining the original form and dimensions of the car.

to any substance. Kevlar, on the other hand, loses ballistic properties when it gets wet due to the separation of layers

The latest innovation in Centur’s portfolio is a Brazilian

in the material.

material called NeoFlex, which evolved from Kevlar and is one of the most-used materials in the armor industry.

With such innovative products in its arsenal, Centur is

NeoFlex is a specialty thermoplastic elastomer based on

poised to expand its presence in the private market, as well

the chemistry of styrene block copolymers with exceptional

as to approach leasing companies for more mass volume

resistance to UV and ozone aging, as well as several

contracts. Unlike other sectors, for which demand is less

chemical agents that affect and weaken substitutes. The

inelastic, quality and reliability are the most important

material was designed to resist a high quantity of impacts

factors within the armored car segment. Therefore,

in one area, achieved through neoprene-coated aramid

although Centur is not against increasing production

layering, permitting fusion between external and internal

volume, the company understands that the focus on

layers, such that it possesses an operating temperature

improving processes and quality, as well as offering

from -40°C to 120°C with high elastic recovery. Neoflex can

excellent customer focus, must remain a priority.

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| VIEW FROM THE TOP

SPECIALTY DATABASES BUILDING FOUNDATION FOR COMPLETE INDUSTRY KNOWLEDGE FERNANDO MURGUÍA IZAGUIRRE Regional Sales Manager for Latin America at JATO Q: When did JATO decide to enter the Mexican market

all over the world access to exactly the same information

and what were the reasons behind this decision?

in the same format. Regarding smaller companies, we

A: JATO has been operating in Mexico since 1995 and

normally customize solutions to their needs, synthesizing

our decision to enter the market was mainly a result of

information and narrowing it down to precisely what the

two key influences. Firstly, the Mexican industry was in

company requires for its operations.

an extremely promising position at that moment, and secondly, the company was investing in expansion projects

Q: As Mexico’s automotive industry grows, what new

in several markets. Mexico had also just signed the NAFTA

opportunities has JATO detected in the market?

agreement with Canada and the US, which signaled the

A: We have recently introduced three new products to

start of more business in the automotive industry as well as

the local market. The first is a forecasting tool for vehicles,

a need for proper information about the market.

which provides an insight into market potential for sales. The second one is a complete solution for analyzing the

Q: What advantages do JATO services offer over other

TCO of a vehicle, as well as how it will affect the final

research and consulting companies?

consumers, leasing companies, and manufacturers. Finally,

A: JATO’s main advantage is that we are involved in the

we have created, for the first time in Mexico, the most

entire production chain, meaning we have information

complete and accurate database containing a calculation

available from the moment the vehicle enters production

of the total number of cars circulating in the country. This

until the moment it reaches the final consumer. Our

database is divided by state and municipality and includes

databases include information about sales and production

a selection of specifications that allows automotive analysts

volumes, and we are able to arrange this data according

to calculate market potential. These tools will provide a

to make, model, and model mix. We have specific

better insight into the industry, as well as helping our users

information regarding prices, whether they are cash prices,

to better understand the Mexican automotive market. The

net prices or financing prices, and we also manage data

biggest opportunities will arise from working with OEMs,

related to incentives and discounts offered by dealers

their suppliers, and financing and leasing companies in

or manufacturers. Additionally, we provide aftermarket

Mexico. We are currently working with all the manufacturers

information

repairs,

and importers in Mexico, as well as those on their way here,

depreciations, and all other costs related to ownership.

and are related to around 80% of the leasing companies,

In terms of sales, our database includes all cars that have

banks, and automotive financing institutions, not to mention

been sold through financing, leasing or auto-financing

some of the country’s most important insurance companies.

including

service,

maintenance,

instruments. We manage this data for more than 80% of the credit institutions in the country, and we are the only

Q: What new trends has JATO detected in the Mexican

source for that information in Mexico.

market, and what challenges are OEMs facing these days? A: Our systems and databases are specifically designed

120

Q: How do you take advantage of your global network to

to understand the Mexican automotive industry and

build new business in Mexico, and how do you approach

how a new product should be introduced to the market.

smaller companies in the local market?

For example, our JATO V4 product is designed for the

A: That is the heart of our strategy. Given that JATO has

introduction of new vehicles, comparing them to their

a worldwide presence, we are able to establish global

closest competition from other companies. The client

corporate contracts with most companies in the industry.

compares the specifications of the new vehicle, the prices

We normally sign these contracts at the customers’

and incentives of other companies, as well as the different

headquarters and include our services in all countries where

consumer options to obtain the real price at which the

they operate. On top of this, our customers take advantage

vehicle should be sold. With this data, the client can predict

of the standardized data that we offer, as it gives users

the competition for the product, and define the optimal

production volume for the market. All these factors create

their costs every time the market goes through a new

a proper financial analysis, which will determine if the

cycle. We have been offering this service for more than ten

product will be successful in the market. Our clients use

years, and we have given our clients an insight into how

this tool every time they launch a new product and every

the industry has changed over time.

time they need to revisit their marketing strategies. Today JATO is the only company that can provide a complete

Q: How are JATO’s solutions helping leasing services

database to carry out this type of research.

expand in the market? A: While specifically targeting leasing and financing

The first challenge to tackle is that competition has grown

companies, we offer data regarding all models sold in

significantly in the automotive market; 30 years ago there

Mexico. That way, when a fleet management company

were only five brands of manufacturers, but now there

seeks any type of information, our clients only have to do

are more than 30. This means that supply has expanded

a quick search of our database to find the information.

enormously, and the quality across the different brands

We are currently collaborating with approximately 60%

has become rather similar. Therefore, the challenge for all

of the leasing companies in Mexico, while keeping our

these companies is to offer better cars with more attractive

information updated on a daily basis. Part of JATO’s

features and more incentives for the final consumer.

service is providing data on how many vehicles have

However, these companies also have to compete with

been sold through leasing services. This was introduced

imported vehicles from the US. Nowadays, there is a new

two years ago and we are currently including information

car for every vehicle imported from North America; this

from ten companies in the market. Furthermore, we are

is a terrible proportion, and poses a challenge for the

offering our TCO systems and databases to the leasing

government to create better regulations. In terms of exports,

companies, which provide them with all the information

the main challenge is to continue building successful FTAs

they need to support their business. Our clients use this

with other countries. Mexico currently has agreements with

data to compare different vehicles in the same segment,

Brazil and India and other important markets, but many

helping them to provide the most suitable product to

revisions have to be made in order to improve our export

the final fleet user. Some of our customers already have

operations to those regions. For production operations, we

their own systems, but they use our information to feed

provide data regarding volumes in Mexico as well as other

their databases in terms of service, maintenance, repairs,

regions, allowing manufacturers to calculate how much

components, insurance, depreciation, and residual values.

they need to produce for each market. Q: What is JATO’s approach to serving the heavy vehicle Q: What products have you developed for sales and after-

market?

sales services, and how are they changing the paradigm

A: We are currently focused on the light vehicle and light

of the Mexican market?

commercial vehicle segments, but we have started some

A: We have a product specifically directed at dealerships,

research in the heavy vehicle market. There are a lot of

which is designed to offer the appropriate information to

opportunities in this segment, but we still need to talk

their salesforce. This database includes all the necessary

to the companies in this market to establish their needs

information to promote a vehicle with the final consumer

in terms of market intelligence. During this process, and

in the most effective way. We have electronic, paper, and

through our normal information acquisition operations,

web solutions including car specifications, incentives,

we always collaborate with the different associations

key advantages against competitors, and data regarding

and dealers related to the market, as well as with every

car components, service, repairs and maintenance costs.

governmental institution interested in acquiring this

With this information, we support the dealerships to

information. Nevertheless, that does not mean that we

professionalize their salesforce and to create a consultative

always commercialize the information, since sometimes

sale of the vehicle. Additionally, we provide specific

we provide it as part of a data exchange or collaboration

information to dealers and manufacturers regarding

programs with different private and public organizations.

commercialization of the aftermarket. JATO performs analysis related to maintenance, service, and repair costs,

Q: What are your expectations for the coming year?

in order to compare a company’s aftermarket value against

A: We are optimistic and have forecasted that the

their nearest competitors. We also have data regarding

automotive market will see double-digit growth this year.

the difference between maintenance and repair costs per

Our main priority now is to create new solutions for the

state, per dealership, and even per type of service. With

aftermarket and auto parts manufacturers, as well as for

that information, our clients can do a general revision of

the leasing and financing sectors.

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| VIEW FROM THE TOP

INSURANCE PIONEERS PREPARE FOR FLOODGATES TO OPEN EVELINE LOZA DUEÑAS Automotive Vice President of Marsh Q: What have been the key achievements of Marsh in the

McLennan Companies is that we have an international line

Mexican market for automotive financing?

of communication, allowing us to introduce international

A: Marsh has been in Mexico for more than 50 years, all the

best practices to the Mexican market, while offering the

while possessing an important presence in the automotive

best products.

sector. The most important steps in this area were taken 20 years ago when we started Seguro Gratis. Along with

Q: Which measures could the Mexican government take

the OEMs, we started this program to offer free insurance

to stimulate automotive financing?

when clients bought their cars in cash. We were pioneers

A: The government has implemented important measures

back then; we designed our products with the insurance

that will strengthen the automotive insurance sector. Proof

companies according to the needs of the OEMs, which

of this is Seguro Obligatorio Carretero, a program that

helped us to acquire a great deal of experience. In June,

was announced last year and has been enforced since

2014, Marsh was designated as the best insurance broker in

last October. Other examples include the mobility law in

Latin America by Reactions magazine. Without a doubt, this

Mexico City, the Alcoholimetro program, and the demand

achievement was a result of the dedication, professionalism,

for mandatory insurance in other states. We promote all

cooperation, and work ethic of our 4,200 workers in the

these regulation programs and we communicate them to

entire region. The key to this success is offering the best

our clients in order to offer them better counseling.

products with absolute transparency, efficiency, and innovation. We are constantly preparing ourselves and we

Q: Which role should commercial banks play in the

expect important growth over the next few years.

Mexican market for automotive insurance services? A: An important number of insurance companies are

Q: As the automotive industry grows, what resources are

connected to Mexican commercial banks; in fact, we work

you employing to constantly improve your products?

with some of them to support them with better solutions

A: We are always investing in new technology, human

to their clients. In Mexico, there are many different kinds of

resources, and our cooperation with insurance companies,

insurance companies, whether they are national, foreign,

in order to best meet the needs of our clients. We focus

or associated with a financial entity, and there is constant

on the local market, but we are also aware of the global

investment in this sector. Insurance products should not be

developments. The advantage of being part of Marsh &

considered an expense, but rather an investment.

NEW PLAYER IN A CONSOLIDATED MARKET

122

This year has been full of notable highlights in the industry,

total coverage of 83% with 46 distributors. KIA applied

including the arrival of KIA Motors into Mexico, not just

an enormous marketing campaign before, during, and

as a manufacturer, but as a distributor for the domestic

after its big inauguration event. One of the strategies it

market. On July 2, 21 dealerships around the country were

implemented was KIA on Tour, an event in the ten cities

inaugurated simultaneously in a grand event to welcome

where the company opened dealerships, which allowed

the brand. KIA strategically chose ten cities that would

more than 24,000 people to take a test drive in the three

enable it to obtain 60% of the Mexican market. “The

models the brand is bringing to the country. At the same

company expects to end 2015 with 9,000 units sold, with

time, the company launched the cinematographic KIA

the objective of obtaining a 5% market share over the

Movie University contest to promote Mexican talent. The

next five years,” states Horacio Chávez, Director General

participants made a video showing KIA’s arrival to the

of KIA Motors México. The company also has a second

country and the winner received a KIA Sportage 2016.

opening round planned for the end of 2015, to reach a

Additionally, KIA became a Platinum sponsor of Copa

THREE-DIMENSIONAL APPROACH TO SUPERIOR RISK MANAGEMENT By Eveline Loza Dueñas -

uncertainty,

This is where Marsh’s 3D methodology comes into play. The

disruptions in supply chains, fluctuations in the prices

Economic

fundamental purpose of the Marsh 3D model is to maximize

of raw materials, cyber security, regulatory changes,

the ROI in risk management through increased efficiency,

terrorism, and rising health care costs all pose unique

improved decision making, and a reduction in costs. 3D

challenges for business leaders. Managing risk effectively

stands for Define, Design and Deliver, and is an approach

is not just about having the right insurance policy, but also

to accident analysis that helps to reduce the frequency

consists of creating opportunities for cost control, freeing

and severity of claims. The first step of this method is to

up capital and, ultimately, promoting sustainable growth.

build understanding, which is achieved by analyzing risk

This risk management approach stems from over 30 years

management strategies against a company’s business

of constant innovation, recently accelerated by techniques

priorities. At this stage, not only are the traditionally

and tools that arrived after the advent of Big Data and

insurable risks identified, but so too are non-insurable risks,

Analytics. However, even with today’s technology, for a

such as operational and strategic threats. Once identified

risk management program to be effective, it is essential

and prioritized, critical risks progress to the second step,

to begin with a basic principle: understanding. The answer

where strategies are selected to design an implementation

is to thoroughly understand business goals, risk tolerance,

plan. The third step is when this thoughtful analysis and

and the balance between assured risk and working capital,

planning is rewarded, as the customer ends up with a

as these are the real factors affecting the company.

detailed and enforceable plan, as well as receiving expert advice on creating optimal risk management.

Even though car insurance is not mandatory in Mexico, it is important that the insurance culture penetrates

By focusing first on the business objectives, the dynamism

deeper and that the number of specialized consultants

of the automotive industry, and the risk profile of each

in the industry increases. For the automotive market, car

company, this integral risk management solution also

accidents represent a significant impact to the economy,

extends to the protection of the companies from unwanted

society, and to families, particularly when loss of life and

risks. It aligns risk management with the strategic growth

medical and legal expenses are concerned. As a result, it is

objectives of each company, integrates risk management

vital to create and promote a culture of accident prevention

in the financial and operational model, and maximizes the

in this growing automotive industry. A significant part of

value of investment in risk management. Above all, this

an insurance broker’s value proposition lies in not only in

support is focused on finding the opportunities hidden

acting as an intermediary between companies and insurers,

within a company’s fleet management approach, or in

but also in being a specialized consultant. In the case of

the insurance program held by its agencies or investors.

the automotive market, it is important to raise consumer

Ultimately, the main objective is always to generate an

awareness about the social benefits that insurance brings.

attractive offer for customers, in terms of pricing and

It is also necessary to complement this with a wide range

competitive conditions within insurance policies, which

of products that allow drivers and owners the choice of

in turn generates advantages for OEMs as a mutually

how to protect themselves and their vehicles.

beneficial relationship with Marsh.

América 2015, and it organized its first soccer tournament

the company to satisfy the auto parts demand from its

called KIA Cup, gathering 32 teams from schools in Mexico

clients. Furthermore, KIA’s maintenance services have the

City, Guadalajara, and Monterrey. The winners of this

lowest prices in the market and are available at any of our

tournament traveled to the Copa América 2015 to attend

dealerships.” Regarding financing, the brand has already

the first three matches of the Mexican Squad.

established a strategic alliance with BNP Paribas, which has provided strong financing infrastructure for KIA in

The three models KIA brought to Mexico were the Forte,

Mexico, promoting the commercialization of its products.

the Sportage, and the Sorento. During its first month in

“Our sales and after-sales services are based on three

the market, the best-selling model was the Sportage with

main pillars. We offer the most extensive warranty in the

910 units sold. “KIA Motors is a different, vibrant, and

market with coverage up to seven years or 150,000km,

trustworthy brand. Therefore, we look for drivers with a

we have the lowest maintenance costs and the fastest

young heart that look for a new driving experience. Aside

financing services in Mexico, while all our products

from the production of the new Forte, the construction

follow our ideals of design, technology, and quality,” says

of KIA’s new plant in Pesqueria, Nuevo Leon will allow

Chávez.

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| VIEW FROM THE TOP

LEASING AND FINANCING CROPS ALMOST READY TO HARVEST JORGE ERNESTO ÁLVAREZ CEO Mexico of BNP Paribas Personal Finance (BNP) Q: What opportunities is BNP Paribas pursuing in the

insurance. Our premium coverage offerings are extremely

vehicle financing market?

competitive within the market. As an accessible finance

A: Over the last two years, vehicle sales through financial

company, BNP asks its clients for the minimum that is

services have gone from 52% to 56%, which is a trend that

expected from a legal standpoint. To cater for customer

we expect to continue. All of our markers indicate that

needs, we have a range of agreements with AXA, ABA,

we are heading for record-breaking sales in 2015. Two

GNP, Mapfre, and Qualitas. In terms of credit, life, and

years ago, BNP began operations with only 0.8% market

unemployment insurance, we work with our sister company

share, but despite that initial low penetration, we have

BNP Paribas Cardif.

since been experiencing internal growth of 70% every year. This resulted in a 3% market share in 2015, which we

Q: How attractive have alternative purchasing options

anticipate to increase to 5% next year. Given that 40 new

such as fleet services and leasing been in Mexico?

KIA dealerships were opened recently, we expect this OEM

A: We currently focus on retail financing, but we have

to constitute 35% of our total sales volume in 2016.

minimal participation in the fleet market. At the moment we do not have a leasing product, but if we do develop one

Q: What strategies are you using to promote your financial

for the Mexican market, it will be directed toward SMEs

services for the used vehicle market?

rather than big fleets, which is an extremely competitive

A: Our main tool is called Crédito Click, which gives both

market. At the moment, we are finalizing our leasing study

dealers and clients a prompt resolution regarding the

in order to make an informed decision about whether or

approval or denial of a loan. We also provide broad insurance

not we implement our leasing product by the beginning

availability within the same platform, giving clients the ability

of 2016. If the service gains traction in Mexico, we would

to make an informed decision after carrying out a complete

expect to have 10% product penetration within our

analysis. Our product is extremely competitive, but the main

portfolio over the next two years.

issue in terms of the secondary market revolves around our distribution channels. For the most part, we distribute our

Q: What level of growth does BNP Paribas expect over the

credit products through official car dealerships, where efforts

next few years?

and interests are directed towards selling new vehicles. In

A: A major part of our growth is attributed to our distribution

2015, we are launching an extended guarantee program that

network. We currently have relationships with Ford, Mazda,

will be marketed alongside our finance product, which is

Volvo, KIA, and Peugeot, and our future growth is contingent

intended to tackle the concern that clients tend to feel when

to the relationships that we develop with the country’s

purchasing used cars.

remaining companies. Our strategy is focused on expanding our distribution network, as it constitutes our biggest asset.

124

Q: What are the most prominent differences between

These distributors are aware of the exact financial benefits

BNP’s Mexican and international operations?

that we offer, which are then communicated effectively to the

A: In other countries, we have implemented a more multi-

client. Our main target is to complete financial agreements

product approach, offering a range of products such as

for cars without having to search for non-paying clients,

automotive financing, credit cards, and personal loans, to

and for this reason we set out clear guidelines in terms of

name a few. In contrast, our Mexican operations are solely

permitted indebtedness, which are established in our Crédito

dedicated to mid-term automotive financing. Mexico has

Responsable program. Our priority for 2015 is to consolidate

been a benchmark for foreign operations, as evidenced by

the recent alliances that we have created with KIA, Peugeot,

our Crédito Click tool; this flagship project was established

and Volvo, as well as creating new partnerships with dealer

here and subsequently implemented in France and Spain.

associations, while simultaneously catering to the anticipated

In Mexico, car insurance is not mandatory but as a finance

intensification of sales in Q4 of 2015. These strategies will be

company we require our clients to have some sort of car

maintained as we move forward into 2016.

| VIEW FROM THE TOP

ENSURING CLIENT ASSURANCE ABOUT BENEFITS OF MOTOR INSURANCE PATRICK FONT Vice President of Damage Insurance at AXA Seguros Q: What is the secret behind AXA’s penetration level in

Policy coverage for used vehicles is also extremely

the Mexican insurance market as a relative newcomer?

important, regardless of the market. The insurance

A: Eight years ago, AXA was completely unknown in the

penetration for older vehicles is much lower, which is an

Mexican market as a brand. The best indicator of our success

issue that we must tackle, but in the end it comes down to

here is the increase in clients, and although the margins are

the importance level that owners place on protecting their

still low, they improved by 2-3% over the past years. AXA’s

assets from a value standpoint.

philosophy is that we can better absorb risk by diversifying our portfolio. Since 1991, AXA has had significant life

Q: According to current regulations, every owner needs

insurance presence in the US, but had no presence in Latin

to have civil responsibility insurance for federal highway

America whatsoever. Over the past few years, Mexico

transit. How effective has this program been?

has become the company’s most important market in

A: Any regulation that helps raise public awareness of

the continent due to the huge success we have had here,

the risks of driving is a step in the right direction, and

and the country enabled us to take the first step toward

we expect this regulation to extend to all cars in the near

becoming a multi-specialist company. Motor insurance is

future. Although the overall compulsory liability coverage

one of the strongest pillars for AXA Mexico; it was the first

is something that is currently active in some states, it is

business line for the company and quickly positioned us as

something that is yet to be enforced unilaterally. I believe

one of the most important players in the motor insurance

that, given time, the market will open up to this program by

industry. If we want to continue our success in Mexico

itself. We have partnered with a few corporations that are

then motor insurance has to continue its rise to popularity,

sensitive to this matter. Speaking from a client perspective,

which is not an easy task in a country where only one in

the road accident victim rate amounts to 17,000 deaths

four vehicles is insured. Even so, there is higher sensitivity

per year, so we are pleased about the protection that this

toward insurance when living in a bigger city, as shown by

initiative provides to the client. Additionally, we are actively

the insurance penetration in Mexico City, which, according

participating with the Reacciona por la Vida association,

to AMIS, is somewhere around 52%, whereas this number is

whose role is not only to defend victims that were not

only 26-27% across the whole of Mexico.

protected, but also to create links with the appropriate authorities in order to better communicate with the public

Q: AXA offers a wide portfolio of solutions in the

on this topic.

automotive segment, but which of these have been the most popular in the Mexican market?

Q: What strategies is AXA implementing to expand its

A: There are two in particular that come to mind. The first

market presence, and what are your expectations for

is the Pago en Sitio modality, which enables our policy

2015?

holders to get paid at the site of the accident, and has

A: The AXA Group is definitely keen on expanding in Latin

proven to be an extremely successful tool in creating a

America, already showing our willingness to do so by

stronger bond with our clients in Mexico. The second is El

expanding into Colombia and Brazil. That being said, AXA

Protector del Asegurado AXA, which enables the client to

will maintain its main Latin American focus on the Mexican

request an external agent to review the case in order to

market while evaluating further opportunities. In a scenario

decide whether their claim is valid or not. El Protector del

where three out of four cars are not insured, coupled

Asegurado AXA is committed to reaching a well-based,

with all the support that the government is providing

comprehensive and essentially fair settlement, meaning

for this compensatory interest, the growth expectation

that whatever this person’s first assessment is, AXA has

could be extremely different based on various factors, so

to comply with the decision in terms of compensation.

understanding exactly how the insurance market will grow

This scheme is highly efficient and has helped us to handle

is far from easy. Even so, we remain confident at AXA and

approximately 600,000 motor claims annually.

we look forward to being part of Mexico’s future in insurance.

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HIGH-PERFORMANCE MATERIALS FOR A HIGH-CONCEPT SUPERCAR Occasionally, innovation is only possible when the right

its projected 1,400hp. The roof is particularly interesting

imaginative and creative minds work together. In the

from a design perspective, as the company has not yet

case of the Inferno Exotic Car concept, the collaborators

settled on a polymer that would offer the resistance

involved have taken their creativity to the next level,

required, but the vision is to create a panoramic roof

designing their dream sports car and working to turn it

resembling glass. A remote control system is also being

into a reality with next-generation materials.

developed to operate the doors, inspired by Koenigsegg,

“It might sound like an impossible dream but we are making progress”

Álvaro Gutiérrez, CEO of Inferno Exotic Car

Over the last decade, LTM Hot Spot has been focused

Lamborghini, and Ferrari, although the Inferno variant on

on communication materials for mass consumption

these designs will open up the whole side of the car, as well

brands, such as industrial model road signs for Mexican

as allow the driver to start and stop the engine.

localities. However, as an unusual escape from their regular projects, the company has designed the Inferno Exotic

To transform its innovative design and the driving

Car concept. The company’s designers and engineers

conditions created by its powerful engine, one of the

have exercised their love of disruptive brands, such as

first problems faced by the company was the need for

Pagani, Koenigsegg, Ferrari, and Lamborghini, particularly

new materials. As a result, the Inferno Exotic Car will be

highlighting the latter two as reference brands for quality

the first concept car to apply metal foam technology,

and design. Despite the exceptional classification of the

as its intricate design would be impractical to build with

concept, Álvaro Gutiérrez, CEO of Inferno Exotic Car

any other material. Metal foam technology requires

wanted to design a vehicle that could compete in the

elaboration of a Zn-Al-Ag alloy, which offers exceptional

market as a legal car. Although this car would be risky to

mechanical and anticorrosive properties that are ideal

truly manufacture and commercialize, the company knew

for automotive manufacturing. The silver element adds

it would tap into the inner child of drivers. According to

superplasticity that allows the alloy to be deformed up to

initial feedback, Inferno was compared to the Batmobile

100 times its original length, without losing mechanical

or a Hot Wheels car, showing that the company had

properties. This alloy is used to cast and to elaborate a

succeeded in its imaginative approach. The vehicle has a

large interconnected network of NaCl-filled pores, as well

total height of 1.1m and a weighs less than 1,000kg, which

as open-cell foam, which is a cellular structure consisting

would allow the car to reach a top speed of 395km/h with

of a solid metal. Ultimately, the defining characteristic of

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metal foam is that the extremely high porosity makes it

company until they could produce something tangible.

ultralight. The company is including close to 25 patents

“We initially needed something real to make companies

in the project (belonging to both ITESM and LTM Hot

believe in this project, but the vehicle is now a reality,

Spot), encompassing technology that is already available

and new companies are always looking to get involved,”

but not included in any brand. This means that the project

he glows. Some of the companies that are now working

is neither restricted by design, nor by the copyrights of

with the project are logistics specialists, who intend to

existing brands. One of Inferno’s collaborators is Senior

include people with expertise in vehicle construction

Automotive Designer, Antonio Ferraioli, who has been

specific to the concept’s characteristics, even if this means

part of other exotic car designs including the Lamborghini

branching into foreign markets or importing personnel.

Veneno Roadster. Ferraioli

has helped the Inferno

Several entrepreneurs are taking note of this opportunity

prototype, which is currently situated in Guadalajara, to

to increase investment in the automotive industry, and

meet its compliance with official regulations. Even so, the

Gutiérrez expects the experience of Antonio Ferraioli’s

vehicle still needs to pass all the necessary tests before it

team to launch them into the exotic car or limited edition

arrives in Leon for feedback, painting and finishing, and

models segment. If they can ensure high levels of quality

the official presentation with the internal team. It can then

and safety in their manufacturing process, then the

be subjected to further tests in ITESM’s testing chambers.

ambition to create a roadworthy vehicle could be reached. In the long term, a minimum of five to seven prototypes

The company is seeking a foothold that would allow it to

would need to be constructed and displayed at the most

join forces with national companies, and to demonstrate

important international forums and museums of influential

that Mexico is a hub of innovation for new automotive

companies in locations such as Dubai, Miami, Los Angeles,

products and projects. Gutiérrez knew from the outset

London, and Monaco. “It might sound like an impossible

that it would be difficult to approach a transnational

dream but we are making progress,” continues Gutiérrez.

127

| VIEW FROM THE TOP

MARKET RESEARCH UNVEILING NECESSARY CUSTOMER FOCUS GERARDO GÓMEZ GÁLVEZ Director General México of J.D. Power Q: What key factors does J.D. Power use to help companies

with the dealer and the second one is dedicated to the

retain and grow their business?

two year usage of the car. Therefore, we now have three

A: Our 2014 study identified four main factors: quality of

studies for the Mexican industry, which makes us a more

the vehicle, service satisfaction, cost of ownership, and

complete benchmark for the automotive brands.

the appeal of the vehicle, which is defined by the car’s performance and features. Out of these four, the most

Q: In 2014 1.1 million vehicles were sold in Mexico. What

relevant factor for the Mexican market is the appeal of the

factors could help the industry grow that to 2 million?

car, adding up to 66% of the total amount of customer

A: Mexico is a very sensitive market, where any variation

satisfaction. The next most important factor is quality, then

can cause a 50% drop in the industry’s potential. However,

cost of ownership, and finally service satisfaction. However,

the country has regained some stability after the crisis of

during the last 12 months we have observed an increase in

2008, placing it in a positive position with similar market

service satisfaction importance, ranking just behind appeal

behavior to the US. The 1.1 million units sold last year were

of the vehicle. These rankings are different from those in

the second highest sales in Mexico’s history, just behind

markets like the US, Canada, or Brazil. The US, for example,

2006, and sales are expected to increase by up to 1.4

has a more balanced relevance rate between all four factors.

million units over the next seven or eight years. It is hard

In Brazil, on the other hand, customers focus more on cost

to say when we will reach the two million mark in domestic

of ownership and service satisfaction, given the higher

sales, and it probably will not happen within the next ten

cost of the vehicles. This is not a problem in Mexico, where

years. If we compare Mexico to the US and Japan, in terms

600,000 people are able to buy a new car every year.

of population we are a third of the US, and in terms of territory we are four times bigger than Japan; that would

Last year, we added a study on satisfaction during the sales

mean that our market opportunity would be approximately

process, and this year we are splitting it into two different

five million vehicles per year. Since we rely on the economic

studies to offer more detailed information to the OEMs.

growth of the country, it is most likely that we will reach

The first one will be focused on the customer’s experience

that goal over a long-term period. In the medium term, we

WORDS WITH TREMENDOUS IMPACT Commercial strategies have always had their complications,

effective marketing campaigns, directing their messages

but in this new digital era, the rules of marketing are being

to a specific segment of users determined by the

rewritten. Nowadays, it is easier to present a new product

advertiser. In addition, Google generates data regarding

and the advantages it might have compared with its

the impact of the campaign with its tool Google Analytics,

competition, but it is increasingly challenging to attract the

and companies can modify their strategies based on real-

attention of the customer who receives an ever-increasing

time results.

amount of marketing messages from a growing number of

128

brands and products competing for a share in the market.

Given that most customers carry out their own research

As customers continue to spend an increasing amount of

before purchasing a new vehicle, it was only natural for

time on online platforms, it has become imperative for

automotive companies to hop on the Google AdWords train

every company to have a strong digital presence. Google

and explore the benefits it could offer in the automotive

revolutionized the way brands position themselves on

segment. Nissan Mexicana has worked extensively with

the internet through the creation of its marketing engine

Google

Google AdWords. This tool allows companies to create

showing relevant adverts to potential Mexican customers.

develop

effective

marketing

campaigns,

might reach the 2-2.5 million mark, but we also need to

as a malfunction. The engineers know how to operate

consider the import of used vehicles. There needs to be a

their products, but the client is unlikely to have the same

market of used vehicles, given that they target a specific

knowledge. Therefore, we provide this feedback to the

population segment, but there needs to be a proper

OEMs so they can design their products focusing on the

regulation that controls the quality of imported vehicles.

clients and their requirements. In Mexico, OEMs are doing

Sometimes it is possible to buy either a new compact car

poorly on this front. They are training their salespeople on

or a used SUV for the same price or even less, and two

how to use these technologies, but they are not listening

out of every three new vehicle clients have never been to

to the input provided by the customers. They need to

the dealership. Capturing those clients earlier would be a

focus on how the clients operate, and they need to instruct

massive opportunity in order to increase new vehicle sales.

their service providers so they can teach users how to use their cars correctly. It is not possible for a salesperson

Q: What should be the focus of OEMs to increase sales

to offer the proper instruction without the appropriate

according to J.D. Power’s findings?

support, especially with multimodal brands. There is

A: OEMs should be targeting emerging small markets

still a great opportunity for OEMs to develop within the

like Mexico, Colombia, and Peru. Currently, the products

Mexican market, both in terms of feedback and customer

offered in Latin America are the same as in the US with

instruction.

small modifications, but they do not fulfill the customer’s needs. OEMs are focused on producing affordable,

Q: What aspects were most important for Mexican clients

compact vehicles that meet the requirements of the mass

when buying a new car in 2014?

market in Mexico. However, the Mexican market is looking

A: Fuel economy has been the most important factor

for alternatives that better fit their needs, such as bigger

since 2013. Mexican customers are concerned about the

spaces, better fuel consumption, and new technologies.

rising price of petrol, which is reflected in their purchasing

The challenge for OEMs is to develop the flexibility that

decisions. For the second year in a row we have seen a

allows them to reach all of their clients appropriately. That

shift toward more rational decision making in the Mexican

is why OEMs need to start thinking forward to provide

market. However, this depends on the population segment;

state-of-the-art technology at affordable prices.

the luxury market focuses more on the design and performance of the vehicle, while the mass market strives

Q: How are companies progressing with educating

for a more efficient car. Nowadays, there are mass market

Mexican customers in terms of new technologies, and

cars that are in a similar price range as luxury cars, but

what has been the general market response?

their target customers are focused on the performance

A: The customer’s satisfaction will depend on whether

and fuel economy of the vehicle. Similarly, there are new

the gadget works or not. If they do not understand how

luxury cars that are more compact and less expensive, but

the technology works, they will report it to the company

their target market is still focused on the design of the car.

The obvious next step was to develop stronger visibility

Furthermore, it can take advantage of the extensive Display

for distributors and to create a direct contact with the final

Network Google offers, comprised of more than one million

client. In April 2012, through an alliance with Google, the

websites, videos, and mobile applications.

National Association of Nissan Automobile Distributors (ANDANAC), and the digital marketing agency Go Virtual,

Improving its digital communication efficiency has made

Nissan Mexicana launched its AdWords campaign Nissan

an important contribution to Nissan’s recent growth in

Distributors, generating considerable benefits for 170

Mexico, obtaining an approximate growth of 257% in

distributors in the country.

the number of visits to Nissan dealerships within the ANDANAC network. Sixty two new distributors have

The final goals of this campaign were to increase the traffic

joined the project, and the company has seen an increase

within the website network of the national Nissan distributors,

of 249% in generated quotations. It has scheduled 350%

as well as to push the test drives and quotations these

more test drives compared to the data registered before

dealers offered to potential clients through the creation

the implementation of this campaign. Furthermore, the

of individual AdWords accounts for each distributor in

success of the project led to the creation of specialized

September 2013. Nissan Mexicana now enjoys the benefits

teams to target new potential clients, and it has allowed

of being strongly positioned in the Google search engine.

Nissan to reach its ideal client base.

129

Not long ago, Mexico City was collapsing under the weight of more than 300,000 new cars entering the city every year. Moreover, public transportation lacked organization, intensifying the chaos on the roads. Finding innovative uses for its yearly budget of over US$4.3 billion, the Ministry of Mobility has created increasingly diverse ways to link effective public transport methods, such as MetrobĂşs and Ecobici, by ceding concessions to companies that will offer more efficient routes and services. With the addition of innovative car sharing services, these factors are expected to ease congestion problems of cities around the country. Complementing these creative initiatives, lighter, safer, and more efficient units, with new engine technologies, are being introduced to meet the requirements of sustainable cities of tomorrow.

In this chapter, public and private sector leaders discuss their wide range of efforts to develop and introduce the necessary technologies and mobility solutions to optimize Mexicoâ&#x20AC;&#x2122;s mobility systems, identify transport demand, and reduce road accidents around the country. This chapter also analyzes possible mobility projects and new financial solutions for public transport and large fleets. Finally, through these expert insights, we focus on how public transport provisions and fleet leasing are undergoing an increasingly digitalized transformation.

FLEETS & MOBILITY

CHAPTER 5: FLEETS & MOBILITY 134

VIEW FROM THE TOP: Rufino León Tovar, Former Minister of Mobility for Distrito Federal

135

VIEW FROM THE TOP: J. Arturo Zapata, Corporación Zapata

136

VIEW FROM THE TOP: Guillermo Calderón Aguilera, Metrobús

137

VIEW FROM THE TOP: José Luis Pérez Romero, Autobuses Troncales Lomas

138

VIEW FROM THE TOP: Marcio Hociko, LeasePlan

138

INSIGHT: Mario Daniel Fernández Manriquez, Ixe Fleet

139

TECHNOLOGY SPOTLIGHT: AXA Drive

140

VIEW FROM THE TOP: Mauricio Medina, TIP México

142

VIEW FROM THE TOP: Diego Solórzano, Carrot

144

VIEW FROM THE TOP: Sebastián Barrios, Yaxi

145

INSIGHT: Hugo Martínez McNaught, Reacciona por la Vida

146

VIEW FROM THE TOP: Adriana Lobo, CTS EMBARQ México

148

VIEW FROM THE TOP: Jaime Jaime Delgado, CANAPAT

149

TECHNOLOGY SPOTLIGHT: Scania Fleet Management Services and Scania Watch

150

VEHICLE SPOTLIGHT: Volksbus 15.190 OD

152

VIEW FROM THE TOP: Elías Dana Roffe, Transportes LIPU

153

VIEW FROM THE TOP: José Anaya, Omnitracs

154

INSIGHT: Emiliano González, Commercial Vehicle Group

155

VIEW FROM THE TOP: Lynch Grattan, Fruehauf

156

PLANT SPOTLIGHT: FCA Toluca

133

| VIEW FROM THE TOP

INTEGRATED MOBILITY SYSTEM DESIGNED TO KEEP MEXICO MOVING RUFINO LEÓN TOVAR Former Minister of Mobility for Distrito Federal Q: What have been the most successful mobility programs

sustainability. Every five years we conduct a survey on

implemented in Mexico City?

public transport methods so we can map the population’s

A: Our program foresees an integrated system that allows

needs. The city is placing emphasis on Rapid Transit Buses

users to move from one type of transport to another

(BRT), as well as the Rapid Bus Service (BRS), which uses

as needed. This has led to the creation of several mobile

assigned lanes but with conventional 11-meter buses. This

applications to plan trips according to the available

system has a centralized collection system, predetermined

transport to reach any destination. We have recently

stops, and card validation access. We opened two new

updated the system so that it marks incidents or accidents

lines in 2014, one of them in conjunction with Autobuses

en route, pulling information from all public transportation

Troncales Lomas (ATROLSA).

organisms in the city, including Metro, Metrobús, RTP, and Electric Transport. Next year, we will include transports

Q: What is the most complicated part of implementing

under concession, an initiative that has not been applied

mobility programs?

anywhere else in the world. Furthermore, we want to

A: One of the main complications is how to manage public

ingrate all means of public transportation under the City

service concessionaries. Every person in Mexico City has

Card access platform. Another pillar of the Integral Mobility

witnessed the chaos caused by dangerous incentives

Strategy involves promoting a mindset oriented toward

driven by passenger volume. In an effort to transform

the use of public transportion. This means that areas with

owner-operators into private companies, we have ceased

a greater citizen concentration will coincide with public

issuing these types of concessions. Private companies offer

transport hotspots. We have modified the city’s divisions

completely different incentives, the drivers have a fixed

to avoid long-distance journeys on a daily basis, developing

salary, and the company benefits from offering services

specific centers catering to individual needs, such as a

with well-spaced stops.

specialized judicial city, and a hospital city in Tlalpan. Q: What are Mexico City’s future mobility priorities? Q: What budget has the city allocated for mobility

A: We need to develop an aligned political environment,

projects?

access to financing, and a shared vision. The challenge is

A: This fluctuates because of each division’s budget. The

to promote our agenda in order to generate the necessary

metro has been allocated an annual budget of MX$12 billion

budget for our strategy in the coming years. We have a wide

(US$780 million), electric transportation receives MX$600

range of goals, including the replacement of old minibuses,

million (US$39 million), RTP is given MX$2 billion (US$130

the construction of 100km of integrated roads, doubling

million) and the Metrobús budget reaches almost MX$200

the capacity of the Metrobús network to at least ten lines,

million (US$13 million). Additionally, Mexico City’s Ministry

and the expansion of the BRS system to 40 routes. Public

of Public Works and Services is allocated MX$52 billion

transport in the city covers 1,240 routes and, although

(3.4 billion) for mobility projects. A department within

mapped, they are constantly changing. Therefore, we are

the Authority of Public Spaces is also assigned to help us

now collaborating with telephone companies to implement

manage public spaces and renovate forgotten urban areas.

a tracking system that will obtain data regarding volume at any given stop or station. We have also developed a

134

Q: What criteria are used to decide which mode of public

pilot app called Deja Vu, which provides information about

transport options will be used in a given area?

nearby buses and estimated time of arrival. Strict planning

A: There are three criteria to consider when implementing

and extensive studies are conducted before undertaking

new public transportation systems. The first factor is the

any new project. For instance, to support the privatization

volume of people that require the service. Secondly, we

of the minibus system we have carried out technical studies.

consider the potential complications that could arise from

This is necessary to gauge the flow of passengers and

the construction works, and the third is environmental

effectively communicate it to the new companies.

| VIEW FROM THE TOP

APPLYING THE RIGHT TECHNOLOGY WILL SOLVE TRANSPORTATION CONCERNS J. ARTURO ZAPATA President of Corporación Zapata Q: Which trends might define the bus as the preferred

benefits, owner-operators can also have access to tenders

method of mass transportation in big cities?

for specific geographical routes with the government.

A: The pursuit of continued investment in underground

There are already many examples of these companies

metro systems has always been very costly, but it makes

working successfully in various cities.

sense as a means of transportation in the highly populated downtown areas of a city. As you start moving out into

Q: What are the common challenges of convincing state

residential areas, underground metro systems are no

governments to adopt these schemes?

longer economically viable. Hence, Mexico City, Monterrey,

A: Most local governments welcome and support these

Guadalajara and most other cities in Mexico, will be better

initiatives. However, they often fail to recognize that in order

served with bus transit systems. This includes buses that

to make them viable, they must also address issues such

are free to move on traditional streets, as well as those that

as fares, which have been kept artificially low for political

circulate on restricted lanes. People on the outskirts may

motives. Rates must now be brought back to levels that

be brought to central bus stations where they can board

enable the replacement of inadequate and unsafe buses.

these more efficient buses.

Today, raising fares, remains the greatest blockade to revamping the bus transportation system in most major cities

Q: How is Corporación Zapata contributing toward these

in Mexico. Governments do not want to take these measures

developments, and what level of collaboration do you

because that would make them unpopular, so companies

have with owner-operators?

and society must work together to convince the government

A: At Corporación Zapata, we have invested heavily in the

that this is only a short-term situation. Once passengers see

distribution and service end of the mass transportation

the benefits of modern and improved public transportation

industry. We are the largest player in this sector in Mexico.

services, they will rationalize and embrace one-time price

Most of our value proposition today is focused on buses, as

hikes. When we are able to convince the government to start

we believe this market segment will contribute the most to

moving in this direction, mass transportation will significantly

address the challenges we now face. Buses have become

improve and expand. This is a goal that we devote significant

much more amicable from both an air and noise pollution

resources to, and we intend to continue investing strongly

perspective, and are much less costly than underground

towards achieving it in the near future. We already sponsor

metro systems. One way to implement new bus systems

research to capitalize on the best practices developed in

is through dedicated lanes and formally scheduled longer

other cities and countries, and the implementation of the

routes, much like Mexico City’s Metrobús system. We are

latest technology.

working closely together with Daimler, our business partner, to offer better solutions in this sphere.

Q: In what ways could automation technologies be applied to the mass transportation sector?

We have been working with independent microbus owners

A: Automation technology could start becoming viable

in order to help them organize and incorporate themselves

if it is unequivocally capable of telling the difference

into fully fledged companies. The potential advantages

between a human being and an animal. When these

for owner-operators are huge, as they can become credit

computerized buses come to a rapid halt, they could also

worthy, which puts them in a position to acquire new

automatically communicate with other units behind them

vehicles that are safer, more fuel efficient, and less costly

to send a warning of the approaching danger, further

to maintain. More efficient buses mean more profitable

increasing safety. Politically speaking, bus drivers may

routes, which leads to better salaries for the drivers.

feel like this would be a threat to their livelihoods as it

Furthermore, larger, more efficient buses help to reduce

could negate the need for human interaction, but the

traffic congestion, and modern and safer buses also lead

reality is that drivers would continue to play a key role,

to a significant reduction in accidents. Alongside these

maybe even with enhanced responsibilities.

135

| VIEW FROM THE TOP

THE NEW FACE OF MOBILITY IN MEXICO CITY GUILLERMO CALDERÓN AGUILERA Director General of Metrobús

Q: What vision is the Metrobús project designed to fulfill?

About 22 million trips are made a day, and even though only

A: The Metrobús project was born out of two problems:

17% to 20% are made by car, these vehicles occupy 80%

the 300,000 new cars entering Mexico City every year,

of the streets. Nevertheless, pedestrians should be the top

and the government initiative to improve the city’s

priority, and public transportation should have a much more

air quality. Given that metro lines required a 25-times

important role since it moves most of the population.

larger investment, Metrobús represented an effective alternative. Additionally, the bus network was out of

Q: How does Metrobús decide which OEMs provide its

control and had been replaced by small, independently

buses?

owned microbuses. The Bus Rapid Transit (BRT) scheme

A: Metrobús has a research department that analyzes

was invented in the city of Curutiba, Brazil more than 25

technology trends, and we choose our suppliers according

years ago, with its most important example in Bogotá.

to the results we obtain. We started using Euro III engine

Therefore, we consulted experts in both locations, and

technology, but when we decided to upgrade to Euro IV

we were aided by Dr. Mario Molina. Finally, Metrobús was

we were asked by the government why we needed it, since

established in 2005, removing 1,300 old microbuses with

there was no access to this technology. Similarly, when

high pollutant emissions and little passenger space off

we asked two OEMs to provide buses that complied with

the streets. Those vehicles have now been substituted

these regulations, they expressed concerns regarding the

for high tech, low emission, and high capacity buses that

availability of ultra-low-sulfur (ULSD) diesel. The Mayor

fit 150 passengers. Metrobús represents a paradigm shift

intervened to solve this, but we still had to collect ULSD

when it comes to technology. We were the first public

in Ciudad Juarez for two years. Only Volvo believed that

transport option in Latin America to incorporate the Euro

we would get enough ULSD, so they provided the vehicles.

III standard, followed by Euro IV and Euro V, and it has

Currently, we have many more brands circulating, while

prevented the emission of more than 122,000 tonnes of

MAN Truck and Buses and several Chinese OEMs also want

greenhouse gasses. Furthermore, Metrobús was the first

to be our providers.

transport project in the world to achieve an effective commercialization of its emissions reduction. We have

Q: In 2013, Metrobús was awarded the best sustainable

done this since 2006 with a Spanish carbon fund through

transport award. What were the reasons behind this

the World Bank.

recognition? A: We were evaluated on three major factors: technology,

136

Q: How does Metrobús fit in Mexico’s mobility future?

environmental aspects, and benefits for the end users.

A: Metrobús is not a finished project. The system has 150

We have been able to reduce travel times by around 40%,

kilometers of roadways across five lines and a vehicle park

therefore recovering 20 million man hours a year. There are

of 450 buses, but we intend to build at least 80 to 90 more

50% less accidents on the roads, and it is the system with the

kilometers by 2018. Today we move around 1 million users

lowest number of accidents in Mexico. Moreover, Metrobús is

who are making 230 million trips a year, but by the time

100% accessible for disabled and blind people, with carriages

we have our roadways completed, we should be moving

that are exclusively for women. We just opened Line 5 in 2014,

about 1.8 million people with 500 million trips annually. In

and we are already working on the construction of Line 6. It

a place as large as Mexico City, Metrobús cannot be the

will travel 20km through the northern part of the city, and

only mode of public transportation. That is why Metrobús is

we hope to have it ready by September 2015, incorporating

interconnected with the Metro. This ensures longer, safer, and

around 80 new buses. The financing for this project comes

faster trips that can be complemented with non-motorized

exclusively from the city’s resources, which also reaffirms the

means of transportation such as Eco-bici. These systems

city’s commitment to changing its urban mobility system.

are part of the Integral Mobility Program. Today, cars own

Our goal is to expand Metrobús to reach 200km with four

the streets and our mobility pyramid is completely inverted.

more lines, providing a better service every year.

| VIEW FROM THE TOP

CHANGING PARADIGMS IN URBAN MOBILITY JOSÉ LUIS PÉREZ ROMERO President of the Board at Autobuses Troncales Lomas

Q: What were the circumstances that accompanied the

If there is a way to negotiate with other concession holders

creation of Autobuses Troncales Lomas?

on these routes, then we can try to execute the project.

A: Autobuses Troncales Lomas (ATL) was created in 2012 when eleven owner-operators possessing route concessions

Q: How many people use your services and are you able to

along the Chapultepec-Reforma-Palmas corridor pooled

cope with the demand?

their investments. At the beginning, it was hard to convince

A: Every day we move 76,000 passengers, so it is

the stockholders to leave their original structure to become

important that they are not left waiting too long. We

a company with a central organization. We held many

are still calculating how many buses must be provided

meetings with the concession holders to communicate

to give an adequate service. At the moment, studies are

that the government was requiring operators to become

showing that to give an optimal level of service, we need

organized into a company. Now we are a coordinated

to have 85 units, so we bought 10 more buses to achieve

company, with a regulated service that monitors all the

that. Additionally, SEMOVI has to conduct a study to see

units by GPS, supervises the speed limit, and requires that

the impact of semi-reserved or even fully-reserved lanes.

all passengers are seated without exception.

I believe that the Government of Mexico City should run these studies in order to ensure that public transport has a

Q: What incentivized the owner-operators to embark on

dedicated lane in which to circulate. People will not choose

this change?

our services over their cars if we do not have this benefit.

A: The most important factor was ensuring that the company’s finances were going to be transparent. Decisions

Q: What has been the most important change in your

are being made collectively, promoting an enhanced level of

vision for the future of public transportation?

trust in the venture. If the owner-operators trust us, we must

A: Ever since we sat down with a working team from

respond by being trustworthy and delivering their monthly

the operators of Metrobús, CISA Corridor Insurgentes,

pay. This means that if there is any additional cost, such as

they helped us to understand that the changes to public

GPS units or new windscreens, it must be approved by the

transport in Mexico City were going to be very important.

board. Convincing the owner-operators of our transparency

At first, we did not have the same technical experience

meant documenting every expense and administrative

as their engineers, so it was difficult to understand their

action we took. Initially, they felt uncomfortable with

terminology. Now, a year and a half later, we are fully

someone else managing their business, fearing that we

capable of providing ideas and inputs to the project. We

would become rich at their expense, so we had to maintain

understand transportation out on the streets, while they

active communication to clear this up.

see transportation on the map and on a computer screen. CISA’s engineers and our internal council complement

Q: How is the company planning to expand its coverage,

each other, making a great team.

and what is driving those plans? A: Users have been requesting that our services reach

The changes have been significant because we see a need to

Santa Fe, which will happen soon if the Ministry of Mobility

think about the future. We used to be demonized, but today,

(SEMOVI) and the government of Mexico City authorize our

we provide jobs, not only for ourselves, but for the many

routes. Another project we have had on standby is to reach

people that travel on public transportation. The changes are

the Cuajimalpa area of Bosques de las Lomas. We do have a

providing passengers with a good service, as well as reducing

vision to expand our services, but it does not depend solely

the harmful emissions polluting the city. We might not see

on our ambitions. To grow, we have to conduct studies with

the consequences of this, but future generations will. We

SEMOVI so we do not harm the interests of third parties.

want ATL to be a model company, showing how operators

For example, we have to be 500m clear of anyone else

can collaborate for a mutual benfit and, if we can help get

providing such services, so as to not invade other routes.

their companies running, we would be glad to support them.

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TRANSPARENCY, ATTENTIVENESS, AND EXPERIENCE FUEL LEASING SUCCESS MARCIO HOCIKO Director of Operations at LeasePlan Q: What were the key operational decisions that facilitated

Q: What are the main benefits of the Open Calculation

LeasePlan’s rapid growth in recent years?

concept?

A: LeasePlan has been primarily focused on customer

A: Transparency is the driving force behind this concept.

service, which was the key success factor behind our

Open Calculation allows us to share the profits that we

growth. The company has also introduced international

gain from maintenance, tires, and our Residual Value

products into Mexico, helping us to stay ahead of the

program. Our commitment is to offer a car for a specific

competition. For example, our customers have access

price, but with Open Calculation we will share the profits

to online portals for invoicing, for displaying the status

at the end of the contract. During the contract lifecycle,

of vehicles, and for all of their operational needs. This

we will follow the costs and suggest fleet programs that

kind of product has been implicit in our success, and

focus on the needs of the customer, which are generally

is directly related to our customer service goals. In

oriented twoard cost reduction. Some customers are

addition, we should soon have 26 people within our call

dubious of the program and question how we could make

center, almost doubling our previous size. We want to

any money if we are sharing our profits. In response, we

enhance the quality of contact with our clients, which led

simply explain that their success is our success too. This is

to an additional focus on internal training. Our training

because if we commit to share the profit, we also commit

program covers internal procedures and the entire suite

to reduce our clients’ costs. The lower the costs they

of products that the company offers. This is repeated

have, the more profit they can gain with the buffers of

once every quarter to ensure that our employees are

maintenance and residual value. This is how we build trust

constantly learning and improving to offer optimal

with our customers as we work with them to increase the

customer service.

performance of their fleets.

ONE-STOP LEASING SHOP

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Born out of the opportunity to provide fleet management

Through Ixe Automotriz, Ixe Fleet is able to lease over 10,000

services and leasing to the Mexican market, Ixe Fleet

vehicles, making it one of the largest vehicle leasers in

was formed by two leading companies in these fields,

Mexico. Headquartered in Mexico City, the company covers a

namely, Ixe Automotriz and Wheels Inc. When clients of

broad market, generating business with anything from large

the recently formed Banorte-Ixe began requesting fleet

corporations to SMEs. The largest advantages that Ixe Fleet

administration, it was Wheels that came in with its fleet

offers its clients is the protection of a financial group, which

management solutions. After 75 years of expertise in the

offers ready access to liquidity and competitive leasing rates,

fleet market, this Chicago-based company provided the

while providing a comprehensive fleet service. Furthermore,

system and technology to Ixe Fleet, as well as the necessary

Ixe Fleet’s relationship with Auto Uno, which helps with the

training for call center managers and other executives.

maintenance network, remarketing, purchasing, and dealer

Mario Daniel Fernández Manriquez, Subdirector Flotillas

relationships on a national basis, permits proper upkeep

of Ixe Fleet, outlines Ixe Fleet’s three main channels for

of the fleet vehicles. In addition to vehicle leasing, Ixe Fleet

attracting clients. “The first is via other clients that are

offers a range of management products and services to

directly contracted by Wheels in the US and Europe, most

simplify administration. “As we are under the protection of a

of which are corporations that want to streamline and

financial group, we can satisfy practically 100% of the client’s

use a single supplier internationally. The second channel

financial necessities, while also providing all the fleet services,”

involves leasing arrangements through Banorte clients

states Fernández Manriquez. “Nowadays, most clients are not

who are offered an integral service, and finally, through

comfortable with various suppliers that offer them just one of

personal recommendations from previous clients.”

these services, making us a highly attractive alternative.”

Q: What are the main difficulties in applying gestoría

customers, but it also helps to reduce costs, allowing us to

given the regulatory environment in Mexico?

be more competitive in the market.

A: The main challenge is that rules vary across the 32 states, so we need specialists that know the rules for

Q: What new launches is LeasePlan planning in terms of

each location. Finding that information from each state

telematics, and what else does the future hold for the

was tough, but we are improving our processes each year

company in Mexico?

and growing this service quite well. Everything that we

A: While we are in a pilot phase right now and intend

learned we have put into our processes, guaranteeing that

to launch a full proposition for telematics that includes

the knowledge we are developing will be used far into the

management reports for reducing costs and monitoring

future. LeasePlan is the only company that offers gestoría

driving behavior by the end of 2015, and we aim to offer

services as a standalone product; our competitors only

more features in telematics during 2016. Our customers

provide it within a package. Our strategy was to offer

want us to help analyze the data that is obtained, while

solutions to clients that were not convinced about fleet

also recommending ways in which that data can be used

management, but still required assistance with gestoría.

to reduce losses in time or fuel consumption, which can

These services are quite bureaucratic and complicated,

further translate into reduced insurance costs. We are

normally presenting a headache for fleet managers.

also launching a free mobile app in Q4 2015 that will allow drivers to track the status of the car and monitor

Q: How advanced are LeasePlan’s telematics systems in

maintenance requirements. Drivers that use the cars for

operational tasks can use the app to request maintenance

A: The two types of telematics systems are GPS, which is

instead of calling our call center, resulting in a more efficient

not linked to the vehicle’s computer, and OBD, which is

service. They can also view the dealer network in their area

integrated into the car’s system and can be monitored by

and their maintenance history, which will prove to be very

LeasePlan. The choice of which system to use comes down

useful when the car has an issue. The app will be packaged

to the needs of the customer. If they just want to reduce

alongside our other services at no cost to our customers.

accidents, control mileage, and track the car, we deliver

The next phase of the company’s operational strategy is

the GPS system. If there is a need to access in-depth

to be recognized as the leader in fleet management and

information about the vehicle’s performance, then we

driver mobility solutions in the Mexican market, as well as

can also provide OBD solutions. The data that we collect

reaching the target of having 20,000 units in operation by

allows us to provide a broader range of services to our

the end of 2015.

| TECHNOLOGY SPOTLIGHT: AXA DRIVE Given Mexico’s growing vehicle park and considering

The smartphone must be in a horizontal position for

the average age of a Mexican vehicle, it is becoming

the electronics to have a close approximation to the

increasingly important for drivers to really understand

real performance of the car. After every journey, AXA

how to move through traffic. According to data from the

Drive evaluates the strengths and weaknesses of the

National Council of Accident Prevention (CONAPRA), more

user’s driving style, offering a final punctuation based

than 16,600 are killed every year on the road, while more

on the results. Those scores are saved daily, creating a

than 1 million are gravely injured. This represents more than

log where the user can check his or her progress. AXA

2.6 million accidents annually, with an approximate cost for

Drive also creates a community where drivers can share

the country of MX$150 billion (US$9.7 billion). To enlighten

their experiences and the advancement of their driving

drivers and to promote traffic safety, AXA launched a new

skills. Furthermore, the application is open for all users,

mobile application called AXA Drive in May 2014. Using

independent of whether they have an AXA insurance

the accelerometer and GPS embedded in a smartphone,

policy, while the company does not gather personal

AXA Drive can record the vehicle’s acceleration, braking,

information from the drivers. The personalized advice that

and turns, creating precise statistics regarding the driving

AXA Drive generates based on the driving style of each

style of the user. The application is available for iOS and

user, combined with global statistics presented on the

Android systems, and it has now been downloaded more

application, motivates drivers to keep using AXA Drive

than 81,000 times.

and keep improving their driving skills.

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| VIEW FROM THE TOP

THE NEXT BIG MARKET FOR LEASING SERVICES: SMES MAURICIO MEDINA Commercial Director of TIP México

Q: What is TIP’s current situation within the leasing

when it needs a service. These value-added services have

market in Mexico?

enabled us to acquire more business, mainly because

A: TIP’s fleet has over 12,000 units and we have around

companies do not want to spend time on all these things.

45% of the leasing market for trailers. Three years ago we discussed how to increase our growth rate and, since

Q: TIP’s customer base is comprised of carriers, private

the trailer segment did not show significant progress, we

fleet owners, and SMEs, how do your solutions vary for

decided to venture into the automotive industry to lease

each segment and what is the business ratio for each?

light cars, heavy trucks, or anything with wheels and an

A: Carriers represent 30% of our business and usually want

engine. TIP works directly with the dealers to penetrate the

long-term leases because they are looking for competitive

market. Alongside leasing, we provide fleet management

rates. They also want to own the equipment at the end

services, a segment with extensive opportunities for

of the lease, which is a cultural distinction exclusive to

growth in Mexico.

Mexico. Private fleet owners do not usually want to own the trailers, especially if they are international companies.

Q: Since TIP México first began operating, what strategies

Representing 50% of TIP’s business, these corporations

have been applied to the Mexican market?

prefer to lease, so we offer them short-term and long-

A: Our strategic objective is to be closer to our customers.

term leasing products with support for maintenance and

For that, we offer both short- and long-term rentals. If a

tracking systems. The SMEs that we are focusing on are

trucking company needs a trailer for just one day, we are

directed toward cars and looking for a better and faster

the only ones who can offer that. We take a large risk in

service. Large companies demand better prices while

holding inventory in our yard. However, when a trailer is

sometimes sacrificing service. SMEs want to learn how to

urgently required, which is quite a common occurrence,

benefit from leasing products, so one of our objectives is

the inventory is invaluable. The other strategy is to enter

to show them that it is better to lease than to buy. The

the automotive industry in order to lease cars. In a few

penetration of leasing in the SME market is small but

months, we will be one of the top five leasing companies

growing fast, representing a significant strategic segment.

for automobiles in Mexico. We estimate that the leasing market is made up of around 50,000 cars a year, 2,000

Q: Out of the 12,000 trailers in your fleet, how are most of

of which are leased through TIP México. While we are

them dispersed within your customer base?

quite small in this segment, we are actively expanding our

A: Our main segment is retail, which experienced a difficult

footprint and moving into different cities to cover as much

year in 2014. Nowadays this segment is doing better, so

territory as we can. In the next two years we ought to be

we have been able to increase our penetration. For the

in the top three.

last three years, the automotive industry has changed its requirements for inventory transportation, so we have been

Most leasing companies invest the capital to provide the

able to lease a lot more to customers in this sector. OEMs

lease, but TIP offers a full leasing service from beginning to

are increasing their capacity, such as Nissan, Chrysler, and

end. Within this service, we are able to suggest what type

Honda, while others like Audi, Mazda and KIA are coming

of vehicle a company can lease based on the client’s budget

into the market. Therefore, we believe this segment will

and usage requirements, which helps to reduce their total

continue to grow.

cost of ownership. We then follow up on the maintenance,

140

assisting the client to find the best dealer for repairs and

TIP

tune-ups. Legal advice is also something we provide,

companies are hired by OEMs to deliver parts, so they

primarily

serves

trucking

companies.

These

particularly when a customer has an accident on the road.

have increased the volume of freight. When this is the

Finally, we use a tracking device that records the distance

case, they require the necessary resources to grow. If

that a vehicle has travelled, allowing us to tell the customer

an OEM was to demand a large amount of trailers in 24

hours, it is not easy for the trucking companies to get hold of those in time. Furthermore, if the project is not 100% guaranteed, we can offer a leasing product that lasts for one year or more. Q: What types of trailers do you supply and how many do you generally hold in inventory? A: Our trailers are a mix of different sizes. The inventory is made up of dry vans, refrigerated units, chassis, and flatbeds, among others. We usually start the year with an inventory around 5% of our total fleet. On average, around the year, we have roughly 3.5% of our fleet of trailers available. At the end of the year, during Christmas season, there is much more activity, so our availability of trailers decreases at that time. It is difficult to have trailers to support the Christmas season because customers will usually ask for a three-month rental. When the trailers come back in January, we have to put them back on lease because the costs will rise. Q: Financing and leasing levels in Mexico are lagging way behind those found in the US or Europe, so how could the Mexican government improve this situation? A: Within this industry, the governmentâ&#x20AC;&#x2122;s incentive to lease is very low. When you lease a car, you can deduct only MX$6,000 (US$390) in taxes. In order to push the industry toward leasing, the government should look to increase the fiscal benefit. The second improvement could come from limiting the bureaucracy for vehicle licensing. We would also like the government to work on expediting and digitalizing the current license plate processes. It would be great if the authorities provided a leasing plate, which might really help leasing companies to be more productive. The last thing is how leasing companies can educate their customers about the financial benefits of this scheme when compared to buying. The financial knowledge of SMEs is very limited, so occasions they do not fully understand this. On the insurance side, all of our assets are covered under a good policy which can translate into cost benefits for the customer. Q: What are TIPâ&#x20AC;&#x2122;s major plans for 2015 and 2016? A: The leasing culture in Mexico is still emerging, so we want to continue working with customers to grow that market. Right now, we are collaborating with Honda and Lincoln as their leasing arm at their dealerships. We will increase our footprint in Mexico by opening new branches in four or five more regions over the next two years. We are also starting to lease forklift trucks to be in line with the logistics industry. Our customers are actively requesting this service, so we have to be proactive with these kinds of assets. There will be significant growth in this area over the next few years.

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| VIEW FROM THE TOP

DISMANTLING THE MISCONCEPTIONS OF CAR OWNERSHIP DIEGO SOLÓRZANO Director General of Carrot Q: What led to Carrot’s foundation and what aspects of

that has a large city and good infrastructure. We are

the market made Mexico ready for this service?

currently analyzing Buenos Aires, Santiago de Chile, and

A: Cars are truly underutilized assets, in many cases

Bogota as possible locations for Carrot. There is still no

spending approximately 90% of their lifetimes parked.

competition for car sharing in Latin America, and we are

Over a period of many years, people spend a fortune on

in a unique position given our knowledge of the market.

maintenance, insurance, gas, parking, and even financing. Therefore, car sharing presents a real alternative to

Q: How has Carrot helped to educate Mexico’s consumer

the expense and hassle of ownership. When I first saw

base about the benefits of car sharing?

the business model in Boston I thought it was really

A: Mexico still has the mentality that ownership of a car

innovative, especially for cities where people cannot afford

equals success. Even though this is difficult to change,

to own a car, or simply do not want one because of the

we have implemented three different strategies to try

traffic conditions. When Carrot began operating in 2012,

to combat it. The first is instructing the public about the

there were not many car sharing services in developing

hazards of owning a private vehicle, and to show there are

countries. Today, we are already operating in various

more effective ways to move around the city. Secondly,

college campuses and we are present in Mexico City,

we actively seek out media coverage, evidenced by

Monterrey, Puebla, and Guadalajara.

around 400 published articles about Carrot. These focus on the innovative part of the service, its impact

Q: What were Carrot’s initial growth expectations when

on urbanism, and its entrepreneurship value. The third

the company was founded?

strategy we have is related to Mexico’s megatrends as a

A: In the beginning, we thought that 200 vehicles after

market. Currently, the average driving speed in Mexico

ten years would be a great accomplishment. After

City is 14km/h, sometimes even less in some regions. If

starting a pilot program with three vehicles in Colonia

the country continues growing at the rate it is, then this

Condesa, Mexico City, people started talking about

will soon become less than 10 km/h.

the project, leading to the city’s former Mayor, Marcelo

142

Ebrard, agreeing to have an official launch with 20 of

Mexico City’s subway moves approximately 8 million

our vehicles. Thanks to the media coverage from that

people daily, with 15% of them belonging to a middle-

event, the demand was gratefully overwhelming, forcing

to high-income bracket. This shows that this segment

us to grow to 40 cars. Now, we have five different

is starting to see public transportation as an efficient

vehicle models and we will close the year with 150

alternative to owning a car. There is also a megatrend

available cars, bringing us very close to our initial

for people to live closer to work instead of traveling over

expectations in only three years. Carrot is growing

long distances. Additionally, Mexico City has recently

much faster than first predicted; we already generate

been making some of the largest investments in public

profit and we have around 6,500 customers. We are

transportation seen globally. Even so, the government

developing an aggressive growth strategy for Mexico, as

needs to invest a lot more to develop a safer city where

well as devising a game plan to expand into other Latin

pedestrians and cyclists can feel comfortable, meaning

American countries. Furthermore, in March 2014, we

there have to be more efficient travel alternatives

started our second round to reach 300 vehicles by March

available for all citizens, such as subway lines and BRTs.

2016, and we will be closing this year with 12,000 clients.

Once these have been introduced, the total cost of

Mexico City still has an 8,000 vehicle potential for car

ownership for private vehicles should be raised through

sharing, so we will be focusing a lot on growing our car

taxes, gasoline, or any other method. People need to

base there. Guadalajara’s size and attractiveness has led

start learning how to combine all available mobility

us to building a growth plan for that city, and there are

alternatives and realize that the most efficient way to

also great opportunities in every Latin American country

utilize a car is by using it less.

Q: How have clients responded to the electric vehicle

A: At the beginning, the Secretariat of Environment and

option and how many trips have been made with these

Natural Resources (SEMARNAT) told us that the most

cars in Mexico?

fuel-efficient vehicle in the market was the Nissan March,

A: Around 5% of our trips have been made with electric

so we chose Nissan because of this small, convenient car.

vehicles, while hybrid vehicles have had much more

With that in mind, Toyota later approached us and we

success, at around 25%. EVs are tough vehicles for car

immediately fell in love with the Toyota Prius. After that,

sharing, especially in a country like Mexico where charging

we realized there was an opportunity in the market for

infrastructure is practically nonexistent. Our plan is to have

premium cars, leading to the introduction of the Audi A1

more electric vehicles in our fleet, but that project is still in

to our portfolio.

the early stages in Mexico. At the moment, the government does not have any plans regarding charging infrastructure,

We recently added SUVs, but we do not have an exclusivity

which is why we built our own charging station specifically

agreement with any brand. Additionally, we also started

for our customers. However, given the large investment

offering cargo vehicles in January 2014, which has

needed, we will not be pursuing this opportunity much.

been a great business generator so far. We have several e-commerce site clients that use our cargo vehicle service

Q: How have companies like Uber affected Carrotâ&#x20AC;&#x2122;s

when they have an emergency delivery. While we were first

business penetration in Mexico?

unsure about the opportunities in this segment, we have

A: I think they have actually helped us. We have had 36

had tremendous success with it, even though it took us a

months of continuous growth in sales, trips, and active

while to get these vehicles on the street.

users, even seeing acceleration in our results during the first half of 2015. Nowadays, there is not a month that goes

Q: What level of resistance or support does Carrot receive

by during which we do not see more trips and more active

from OEMs in Mexico?

users. In the end, any kind of service that gets people out

A: The most important factor is that this is a niche project

of their private vehicles eventually helps us to grow. While

targeted mostly at young people between 25 and 35.

we could consider Uber and traditional taxis as potential

Most people in this age range are really satisfied with the

competition, in reality they are used for different purposes.

service, but once they start a family, they might realize

Uber has helped the mobility ecosystem in Mexico, as more

that car sharing stops being as convenient. It is a fact that

people are realizing that they have a new alternative. Carrot

this age group has less driving licenses than ever, and is

compliments this service by providing vehicles for longer

consequently buying fewer cars. Every OEM is struggling

or more specialized trips. Our biggest competition actually

to target this segment, meaning that car sharing offers

comes from people who buy cars, because the chances

a great way to get to know the vehicles before they are

of them using alternative methods of transportation are

ready to buy. In that sense, car sharing works as the best

really low.

test-drive for any vehicle. Furthermore, we have detected that around 65% of our customers who drop the service to

Q: How do you pick the OEMs you work with and which

buy a car, do so with one of the models they have already

product segments are you currently using in your fleet?

used with Carrot.

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| VIEW FROM THE TOP

INVENTIVE APPROACH TO IMPROVING LONG-MALIGNED TAXI SERVICES SEBASTIÁN BARRIOS Founder and CEO of Yaxi Q: What led to the original decision to create Yaxi, and

fraud protection systems, artificial intelligence programs

how has the company evolved over the last three years?

that check the overall status of Yaxi’s system, alarms, and

A: We came to the realization that the technology being used

monitoring systems, among other things.

by Mexican taxi operators was far behind that used in other countries. We decided to build a system that would allow

Q: How many vehicles does Yaxi have in its current network

Mexican taxi drivers to shift from communicating with phone

of taxis, and how do services differ for customers?

calls and radio transmissions, to utilizing the more advanced

A: We have 6,000 drivers within our platform, but we expect

tools that were already being used the US or Europe,

this number to rise twofold or threefold in the next couple of

which allow operators to design trips and communicate

years. Provided that there are 140,000 taxi drivers in Mexico

with their headquarters through their smartphones. Yaxi

City alone, we want to eventually have 100,000 operators

has changed quite a lot since it first began operations in

within our system. Although those numbers seem high, we

Mexico. The first version of the application simply had a

believe that this is achievable on a national level. Right now,

button that requested a taxi, and we, as a team, would call

we are operating in some of the highest demand cities in the

a taxi stand. We would then provide the customer with the

country, such as Mexico City, Guadalajara, and Hermosillo,

taxi’s information, essentially simulating the experience.

not to mention some small experiments in Monterrey,

This gave us an idea about whether the idea was worth

Queretaro, and Cancun. Regardless, our main focus and our

pursuing or not. We quickly found out that the demand was

biggest market is Mexico City. Due to the way our business

completely overwhelming us, and that we could not handle

is established, coupled with the usefulness of the service, we

every request with that methodology. Consequently, we

are definitely looking at expanding into other markets. As a

decided to solve the problem by connecting taxi drivers

result of Mexico’s different tariff usage, which is set by the

directly through our system, so a phone line was no longer

government, there are different car segmentations based

needed. This new system allowed the user to have direct

on the customer’s selection of a given rate. The price is

contact with the operator, to be aware of their specific

representative of the quality of the car, and we give our users

location, have the closest driver pick them up, and improve

the freedom to choose between these different options.

the overall service experience. The eventual system upgrade

We have seen that customers give more importance to

that followed enabled customers see the operator’s name

availability rather than price, so we have added a selection

and license plate number, as well as the estimated time of

option that focuses on the proximity of the vehicles.

arrival. It also opened up the possibility to call the assigned

144

operator, leave a service review, keep a record of your

Q: What are your strategies to expand your presence in

previous trips, ask for tax deductible billing, and perform

Mexico and abroad?

electronic payments with a credit card or PayPal. In order

A: The company is close to being profitable, and after

for us to achieve this, we had to get taxi drivers on board, set

reaching that point we can start expanding internally.

up bank accounts for them, and make sure that everything

Our biggest competition comes from centralized taxi

was properly established to ensure the operator’s peace

services and from people asking for taxis on the street.

of mind. Although electronic payments are not a big trend

In order to combat this, we have invested in online and

in Mexico, we managed to bring in most of our payments

TV advertising, but we recognize that word of mouth is

through credit cards. The application’s innovations are an

the most effective way to attract users. We found out that

ongoing process, and we just released the application’s

many taxi applications have done successful in-country

newest version that will let users know how much their trip

expansions, but almost all companies that have gone to

is going to cost beforehand. Additionally, there are some

foreign markets have failed, apart from Uber and Easy Taxi.

innovations that users do not necessarily see, like driver

Our strategy for the moment is to strengthen our presence

security checks, quality and security tests, driver follow-

in the Mexican market, and perhaps move beyond our

ups, traffic feedback through our driver’s information input,

borders into foreign markets through an alliance.

PROMINENTLY PLACING ROAD SAFETY ON MEXICO’S AGENDA In Mexico, road traffic accidents are the number one cause

unsafe. For example, the state of Jalisco had a regulation

of death for children aged between five and fourteen,

that allowed users to have a blood alcohol content three

and the number two cause of death for young people.

times higher than international standards. Reacciona por

Additionally, there are over 16,600 road related deaths

la Vida proposes that the alcohol blood level should be

every year, and a total of over 860,000 Mexicans who are

standardized in every jurisdiction within the country.

living with disabilities due to these tragic, preventable

Additionally, it wants minimum and enforceable speed

accidents. These startling numbers led to the creation of

limits in cities and highways, and that cellular phone usage

Reacciona por la Vida, which is a national alliance made

while driving should be penalized. Another example of

up of AXA Insurance and the Civil Association of Road

critical de-regularization can be seen in Mexico City. In

Accident Victims (VIVIAC). This nonprofit organization

order for drivers to acquire their driving license, the only

was legally constituted in 2013 due to a desperate need

requisite is to prove they are of age; there is no obligation

for road accident prevention in Mexico. “We came to the

to show proof of driving knowledge or skills, or even of

conclusion that car crash victims should play an important

physical capabilities. On the other hand, there are public

role in putting this issue on the country’s agenda,” says

authorities that are truly embracing this wave of road

Hugo Martínez McNaught, Director of Public Affairs at

awareness and have showed a lot of commitment toward

AXA and Spokesman for Reacciona por la vida. “We saw

it. For example, the Ministry of Finance was recently very

that in more developed countries, car crash prevention

active in drafting the regulations of a new law in Mexico

is a concern that is shared by the government and the

that makes third party liability insurance mandatory on

country’s residents. Unfortunately, Mexico, as a society,

every federal highway. Although some entities have been

does not pay the necessary attention to road safety, even

more participative than others, there definitely seems to

though it is a tremendous problem that has massive human

be a national consensus that more action needs to be

and economic repercussions.”

taken with this topic.

“We have clear objectives in terms of public policy, such as helping the government achieve its goal of reducing injuries and deaths by 50% by 2020” Hugo Martínez McNaught, Director of Public Affairs at AXA and Spokesman for Reacciona por la Vida

The NGO has two main strategies. The first pillar is a media

Reacciona por la Vida works with companies like Google

strategy with the objective of increasing awareness about

Ads Grants, the Chrysler Foundation, Estafeta, AXA,

road safety. Reacciona por la Vida has put campaigns

Fundación Casas, Fundación Cinépolis, Cinema Pack

in place that continuously communicate the five main

Cinépolis, Bosch, and Toyota. The NGO also works with

risk factors or five key safety behaviors present in road

UNAM and its scientists, which have studied road safety

crashes. These include driving under the influence of

for over 15 years. Additionally, CTS Embarq has taken upon

alcohol, using a motor vehicle without seatbelts or child

itself to raise awareness in terms of sustainable mobility,

seats, distractors like mobile phones, the lack of helmet

which is something that drew the attention of Reacciona

usage on bikes, and speeding. The second pillar is its

por la Vida. Finally, the company is working with one of the

drafting of a national legal framework that focuses on road

most important think tanks in Mexico regarding road safety,

safety and sustainable mobility. This was originally drafted

the Institute for Transportation and Development Policies

as a general law, meaning that, if it is passed by congress,

(ITDP). Looking ahead, Martínez McNaught is positive

every government level has to comply, regardless of the

about the initiative’s future. “We have clear objectives in

state or municipality’s autonomy. This general law would

terms of public policy, such as helping the government

put in place the minimum guidelines in terms of the five

achieve a 50% reduction in injuries and deaths by 2020.

main risk factors.

It would be terrific if we could have a road safety and sustainable mobility standard traced out before President

Mexico has had uneven laws and regulations that make

Enrique Peña Nieto’s term ends, giving us a significant

traffic circulation in certain parts of the country highly

window of opportunity,” he concludes.

145

| VIEW FROM THE TOP

TRAVERSING THE ROAD TO SUSTAINABLE MOBILITY ADRIANA LOBO Director General of CTS Embarq México

Q: How was the Embarq network established, and what

Q: How open has the government been to the idea of

led to its arrival in Mexico?

expanding the Metrobús network?

A: Embarq started as an initiative for sustainable mobility

A: The government has been incredibly open. As a matter of

and was created by the World Resources Institute, initially

fact, we worked very closely together on the development

funded by the Shell Foundation in 2002. After that, Dr.

of Line 1, which was then taken on by the government after

Schipper and Dr. Keith developed a program that would

its initial success. Since those first days, we have created

establish Embarq offices wherever sustainable mobility

many bus stations, which have given us access to a lot of

was needed, knowing that this was the only way to have a

variables for measuring the effectiveness of the project.

real impact on local mobility development. Mexico was the

One analysis has led to the conclusion that commuting

first center to settle within the network, followed by Brazil,

times can be reduced by 30% to 50%, depending on the

India, Turkey, and China.

time of day. Similarly, polluting emissions can be reduced by the same amount, while the number of accidents have

Q: What encouraged a project like Metrobús to be

also decreased. In the past, the street of Insurgentes in

implemented in Mexico City?

Mexico City had an average of 800 accidents per year,

A: Due to the challenge that sustainable mobility poses

but, once the Metrobús project was introduced, this was

in this region, we were able to begin our operations in

reduced to less than 130.

partnership with the city’s government. We knew that fixing every problem in the city was an impossible task,

The premise of this whole project was to swap 20-year-

so we decided to focus on specific projects during the

old microbuses for new Metrobús vehicles. After that, we

initial phases, which led to the development of the

started to focus on other technological advancements.

Metrobús project. At that time, Mexico City’s Secretary of

Our first units started with Euro III, and then we moved on

Environment and Natural Resources, Claudia Sheinbaum,

to Euro V and EPA 07. Line 4 currently has hybrid buses,

was really interested in implementing a strong mobility

but implementing this kind of technology has proven to be

program in Mexico City. This was a strong, new concept

quite a test. The down payment for cleaner technologies is

for the Mexican population, and we knew we had to

much higher, and we have met some barriers that have not

build a sustainable partnership with the government.

allowed us to fully commit to this new initiative. The rates

Furthermore, we needed to expand our communication

we charge are fairly reduced and capital investment is still

with bus owners, which was no easy task. The biggest

not common practice. Additionally, gas has become a very

challenge was finding a single organization that could

attractive fuel for buses, with the next generation most

handle high vehicle demand, while providing proper

likely being a mixture of hybrid and gas models.

logistics operations and a standardized maintenance

146

process. In that respect, we were lucky to partner with

Q: How did CTS Embarq change the way in which Mexican

RTP for Line 1’s initial stage. During the first day of

transportation companies operate?

operations, Line 1 transported over 220,000 people,

A: Part of CTS Embarq’s success comes from the way

showing instantly that Metrobús could help ease the

the Metrobús program was structured. The 236 different

transit problems in the city. The country has doubled its

lines that previously ran through the city yielded their

vehicle park which has been great for the automotive

concessional rights in exchange for a stock share in CISA

industry, but it has led to a city with more than 5 million

Company. They have now become partners and they receive

cars in operation. Furthermore, when we revised the

part of the profits from this new program. Once Metrobús

persistent air quality problems in the city, we concluded

was established in Mexico City, we knew that other cities

that 70% of them could be attributed to a faulty mobility

would want to follow the example. Although this may be

program. This shows that, even though we have won

true, many municipalities and state governments do not

some battles, the final goal is far from being reached.

have the capital to make this kind of investment, which

led to the creation of PROTRAM. This program has been operating for eight years and it funds up to 50% of the countryâ&#x20AC;&#x2122;s infrastructure development in terms of mass transportation. PROTRAM has already developed projects in Chihuahua, Puebla, Monterrey, and the State of Mexico, and it currently has 40 other projects in the pipeline. Therefore, our new focus is to create programs directed toward proper vehicle financing strategies. Q: How are your relationships with Reacciona por la Vida and ITDP helping to develop better mobility laws for the country? A: Together, we are all focused on creating a framework that will promote a safer environment to increase the efficiency of our cities. We work directly with the local governments, but we must also work closely with the federal government in order to break any obstacles regarding national policies. The sustainable mobility movement has spread across the country and everyone wants to participate. Nevertheless, there is a strong dilemma between the development of infrastructure for light vehicles and the promotion of public transportation. The automotive industry is truly important for the national economy, but Mexico has yet to find the correct balance between these two segments. In countries like the Netherlands, there is a high rate of car ownership but people use their vehicles in a different way. Their cities are structured much more efficiently, so there really is no need for inner-city driving. Even Germany, a country with one of the strongest automotive industries, is looking for ways to make its cities friendlier for its citizens. Furthermore, there are cities like Helsinki that want to reach car independence in the next 20 to 30 years. However, this does not mean that cars will no longer run in the city, it only means that they will not be the first option for commuters. Single occupancy vehicles should not be the future, and countries are finding ways to change those trends by creating new investments for businesses that are closely related to sustainable mobility. Q: What shift have you seen in the mentality of the Mexican population regarding sustainable mobility? A: A growing number of young people think that Mexico needs to change its mindset. Many people are moving closer to their workplace, choosing biking or walking as their preferred method of transportation. There is also a clearer understanding that different methods of city transportation have varying impacts on the quality of the air. Companies like BMW, GM, and Audi are studying and investing in projects that will change this, which could indicate that we might see the transition sooner rather than later. Mexico might not lead the movement, but I truly believe that we can be a very active player in this paradigm shift. The real question is if this pace is quick enough for our quality of life to significantly improve.

| VIEW FROM THE TOP

REGULATIONS PLAYING VITAL ROLE IN STRENGHTENING THE TRANSPORTATION INDUSTRY JAIME JAIME DELGADO President of National Chamber of Passenger and Tourist Transportation (CANAPAT) Q: What are your main priorities as the new President of

to tighten safety measures. We have implemented

CANAPAT?

federal highway patrol operations, and, in collaboration

A: We have developed a plan that includes fundamental

with CAFUPE, we are asking the government to gillnet

conditions of the current transportation environment, as

pedestrian bridges and overlapping highways to minimize

well as the range of problems the industry is facing. The

the risk of vehicle vandalism. It is essential to prioritize

first issue we tackled was the presence of transportation

the safety of passengers, drivers, and vehicles. This is

vehicles that do not comply with regulations. We must

part of the effort to overhaul certain important sectors

promote a standardization of vehicles so that all parties

surrounding the industry, such as infrastructure, parcel

can operate on a level playing field. The industry is facing

services, and tourism. CANAPAT is part of the National

pressure to optimize costs, while competing with other

Tourist Business Council (CNET) and the Mexico Tourism

modes of transportation such as low-cost airlines. The

Board (CPTM), and as a result we are aware that tourism is

emergence of other players, such as Uber, is affecting the

growing at a double-digit rate.

inner-city passenger transportation market. Similarly, the BlaBlaCar application is stirring city-to-city transportation,

Q: How do you help transport operators meet the

with cheap prices outweighing the risks represented by

industry’s legal framework requirements?

these companies for many customers. Since the market

A: We receive support from the Ministry of Communications

remains unrestricted by any foreign trade agreement, there

and Transportation (SCT), which is in charge of regulating

are significant opportunities to enter the domestic market,

Mexico’s transportation industry. We have implemented

which could also have a major impact on our market

various strategies to tackle the problem and, over a three

share. There are several problems caused by informal

month period, we have fined more than 300 vehicles that

transportation companies, since they do not have to adhere

do not comply with regulations. Nevertheless, we want

to tax or vehicle standard regulations, while informal

to promote the standardization processes with vehicle

employees receive no benefits and lack the proper training.

owners, which is why SCT and the Ministry of Finance

This means that the quality of vehicles can be poor and

developed a Vehicle Regulation Program, previously

contribute to pollution, whereas registered companies must

known as the scrapping program. This project has been

adhere to government specifications.

active for over ten years now, but the government had previously failed to set goals regarding the number of

The implementation of the latest tax reform means that

vehicles requiring standardization. This number has now

each of our affiliates must receive proper training in

been set at 6,000 units for the 2015 to 2016 period, subject

line with these regulations. We have been focusing on

to environmental evaluation. Furthermore, the government

professionalizing the transportation industry in Mexico.

has improved the fiscal benefits for these companies.

Today, we run 38 training centers in conjunction with

Now that we have gathered momentum, we expect that

our affiliates, as well as a degree program that we have

the scrapping programs will be more dynamic during the

managed for more than 13 years in collaboration with

second half of 2015.

UNAM, with over 600 graduates so far. In addition,

148

we recently established a master’s degree program in

Through these regulatory changes, we seek to limit

transport administration. The the first class for this subject

air pollution, both through the introduction of new

will graduate in 2015, so we are currently seeking a second

technologies and by eliminating vehicles causing the

generation of students. Moreover, we are evaluating, along

highest levels of contamination. CANAPAT has been a

with our Training Commission, ways to certify our drivers

key player in helping improve the overall transportation

at a federal level, building on existing experience and

fleet of the country, and now our fleets average an eight-

industry expertise. Another problematic area was highway

year lifespan, meaning that Mexico is one of the top five

security, which we tackled by working with the authorities

countries in terms of vehicle longevity.

| TECHNOLOGY SPOTLIGHT Q: How has mobility changed in the country and what

SCANIA FLEET MANAGEMENT SERVICES AND

resulting challenges have been generated for CANAPAT?

SCANIA WATCH

A: Vehicles that do not comply with established guidelines

Scania has moved on and developed its own Fleet

continue to be a perennial problem. It is also evident that

Management Services (FMS) software to connect

vehicle renewal must remain an industry priority. Companies

with every unit in the fleet, offering three different

are beginning to place more importance on matters such as

packages. The Monitoring package, included free of

preventive and regular maintenance, which in turn improves

charge for up to four years with all new Scania units

the customer perception of the transportation sector. The

at the moment, is the most basic product, offering an

customer experience that we provide is far more advanced

easy overview of a fleet through weekly, monthly, and

than other countries, with the provision of commodities

yearly reports. Every vehicle in the fleet is included

such internet connections and power points. As a result,

in the report, recording its performance regarding

our high standards have awakened a demand among

fuel consumption, idle time, speeding, coasting,

consumers for quality services that was not previously

and CO2 emissions. That way, all vehicles can be

present within the industry. By providing customers with

compared with each other and with previous reports.

a first-rate experience, invariably our reputation improves

Furthermore, this package gives the client access

significantly. We are beginning to see requests for vehicles

to the Scania Fleet Management Portal, where the

thanks to this type of feedback, meaning that customers

service planning tool can help companies schedule

have a significant input into the design.

service appointments for each vehicle. The Analysis package on the other hand, gives drivers a complete

Q: What strategies has CANAPAT adopted in terms of

interpretation of the data obtained through the

vehicle and road safety?

Monitoring package, analyzing trends and helping

A: CANAPAT analyzes road accidents and proposes

improve coaching and maintenance timeframes. This

suggestions for potential improvements to the structure

package gives 24-hour access to all key details of

of vehicles, according to manufacturing processes and

fleet performance directly through the Scania Fleet

regulatory compliance. In terms of passenger safety, the

Management Portal, enabling users to sort and filter

challenges that we face are mostly cultural, such as the

specific data for more detailed reports. Finally, the

use of seatbelts. With the help of authorities, we have

Control package offers the most complete information

provided education campaigns and messages displaying

connecting the data from Monitoring and Analysis

the importance of seatbelt, placing advisory notices in most

with geographic locations in real time. This adds

bus stations across the country. Regarding road safety,

geo-fencing and vehicle tracking capabilities to the

companies internally manage preventive examinations of

program, improving the fleetâ&#x20AC;&#x2122;s overall efficiency. With

both vehicles and drivers, with training courses that involve

the Control package, the Scania Fleet Management

development of mechanical, safety, first aid, accident

Portal can show the exact location of every unit, and

prevention, and human relations skills.

even show when the operator is driving, resting or loading, apart from all the information you can obtain

With a complete overview of the transport arena,

from the Monitoring package.

drivers are better equipped to make smarter decisions, and that is what companies are trying to provide. As a

Apart from the Scania Fleet Management Portal,

preventive measure, every operator must undergo a

all three packages can be managed from the Scania

medical examination before and after each trip they

Fleet Management App, providing mobile access to

make, which is a requirement by the SCT. In addition,

the entire fleet. However, Scania took one step further

according to federal licensing, operators must have a

creating the all-new Scania Watch, integrating the

full medical evaluation every two years and, although it

capacities of FMS with a SmartWatch 3 from Sony,

is not formally regulated, companies frequently apply

which displays the truckâ&#x20AC;&#x2122;s performance in real time.

random drug testing procedures among operators.

Its simple design and minimalistic approach offer only

Furthermore, several companies have set up checkpoints

the necessary information to the driver. The Scania

along transportation routes in order to evaluate operators

Watch offers instant overviews of the current fuel

during journeys, ensuring also that replacement drivers

consumption, comparing this with the average from

are available if necessary. We have had multiple meetings

the previous seven days. Additionally, it offers driving

and implemented several campaigns in collaboration with

behavior analysis through scores regarding speed,

the government with a view to minimizing these issues

braking, and other values that improve fuel efficiency

through legal frameworks.

and wear in the truckâ&#x20AC;&#x2122;s components.

149

| VEHICLE SPOTLIGHT: VOLKSBUS 15.190 OD Complementing the Euro V bus family, the Volksbus 15.190

for its four cylinders, and a Wabco 238 air compressor.

OD was presented in Mexico during the 2013 edition of Expo

Furthermore, it offers excellent fuel efficiency without

Transporte ANPACT. This model is assembled in the MAN

using Diesel Exhaust Fluid (DEF), thanks to its exhaust gas

Truck & Bus plant in Queretaro and offers enough flexibility

recirculation system. This also reduces NOx emissions by

to work with the most important body builders in the

decreasing the final temperature of the exhaust gases.

country. With a length between 9.4m to 11m, and a capacity for 36 to 48 seats, this model was created as an intercity

The Volksbus 15.190 OD uses a 6-shift manual ZF 6S 1010BO

bus that meets the highest standards of maneuverability

transmission, which offers great comfort for the driver due

and reliability for the driver. It is equipped with a 4-cylinder

to its servo-assisted â&#x20AC;&#x153;push-typeâ&#x20AC;? hydraulic clutch. Its drum

MAN D0834 rear engine with a displacement of 4.6 liters. It

brakes are activated pneumatically supported by a MAN

provides 186HP at 2,400 rpms, with a torque of 700 Nm at

EVBec engine brake that helps to increase the productive

1,100 to 1,600 rpms. This engine has COMMON Rail injection

life of the brake pads. The power steering is a hydraulic

ZF 8091, and in terms of its suspension, the Volksbus has

are evolving to meet Euro V standards, and even in a

front and rear rigid axles with semi-elliptic suspension

natural gas-favorable environment like Mexico, this diesel

springs, as well as hydraulic shock absorbers to offer a

model is destined to be well accepted. Its four cylinders

smooth ride for the passengers and enough sturdiness

and exhaust gas recirculation technology will fit perfectly

to lower maintenance costs. The front axle is constructed

in this new environment, giving it a competitive advantage

with a forged steel beam, while the rear axle is made with

over models still working with Euro IV standards. Regarding

stamped steel. This provides the necessary stability for the

technology, the Volksbus also offer advantages in terms

chassis, preventing it from deforming due to challenging

of efficiency and safety. The bus has a travel computer

road conditions.

embedded in its system, keeping track of the unitâ&#x20AC;&#x2122;s fuel consumption in real time. Additionally, the computer keeps

The Volksbus 15.190 OD is a perfect example of how the

track of failure codes, alerting the driver if the unit needs

heavy vehicle industry is progressing in Mexico. Engines

maintenance before its scheduled appointment.

| VIEW FROM THE TOP

SETTING SAFETY AND SUSTAINABILITY STANDARDS FOR SCHOOL BUSES ELÍAS DANA ROFFE Director General of Transportes LIPU Q: What defines LIPU’s growth strategy?

and prevent practices that reduce the tire’s lifespan. We have

A: Given that Mexico City is a stable market, we are focusing

a renovation strategy that doubles the lifetime of our tires

on important business opportunities in other states. We

when implemented properly. Fuel theft represents a huge

are also targeting growing sectors such as the automotive

cost, too. We have a whole division dedicated to fuel control,

industry, especially in response to the opening of new

comprised of gas station attendants, auditors, and an

plants in the country. We have a strong social responsibility

information capture and analysis team that offers statistics

focus and we like promoting national brands. As our main

and historical data regarding the performance of every

supplier, Dina is working with Cummins and MAN to develop

unit. In terms of logistics, we often check that our clients’

environmental projects. Given that diesel prices have

routes are efficient. Also, we have developed a program

duplicated since 2008, currently making up 30% of our

to rent buses to other companies while they are not being

operational costs, we are planning to buy Euro V compliant

used by schools. This service is cheaper since it adapts to

buses in 2015 in order to meet stricter EPA standards.

our schedule, and it enhances our efficiency and profitability.

Ten years ago, when SEDEMA (Ministry of Environment)

Q: What new technologies are you incorporating to

issued its first analyses revealing the correlation between

provide better services?

the use of schools buses and lower pollution levels, we

A: We made a significant investment when GPS first arose

realized the benefit a project like this could bring to our

ten years ago, and we have tried to keep up with state-

society. Many studies supported the initiative to make

of-the-art technology ever since. Nowadays, our software

school bus transportation mandatory, showing a significant

allows us to track buses and stop the engine remotely, to

improvement in air quality by replacing 35 cars with a single

measure traffic, estimate travel timeframes, and track unit

bus. School buses represent an extra cost, but incentives to

efficiency and route fulfillment. Even though these services

make this service 100% deductible would make it an attractive

might be expensive, they have helped us to minimize costs

alternative. In terms of fuel, it is relatively easy to get ultra-

and enabled us to extend the lifecycle of our buses by ten

low-sulfur diesel (ULSD) in Mexico City, where our operations

years. Other accessories such as security cameras, entry

are located. We have agreements with different gas stations,

control systems, and Wi-Fi are occasionally demanded by

and a direct PEMEX line for our base. The availability of ULSD

our clients, but we do not want to make our service more

has not restricted our operations; unfortunately, the same

expensive by adding these features permanently. Of course,

cannot be said for natural gas. There are only four natural gas

we do make them available at the request of our clients.

stations in the city. Nevertheless, we are running some tests with these types of units, and we are hopeful that natural gas

Q: What distinguishes LIPU from its competitors?

availability will improve following the Energy Reform.

A: Safety has always been our biggest advantage. Rather than having a back door, our buses have a left side door

152

Q: Apart from diesel, what are your main operational

that allows children to descend safely. In case of an

costs, and what strategies do you have to lower them?

emergency this allows us to pass students from one bus to

A: Our second most important costs are salaries, while

another without having to get them off the bus. Also, we

maintenance takes the third spot. Salaries are mostly a fixed

are extremely careful and selective with the people we hire.

cost, but we have always tried to establish sales contracts

We do background checks, socioeconomic studies, and

with extensive post-sales services to lower maintenance

we regularly test our drivers with anti-doping and medical

costs. These are divided in five categories: preventive,

check-ups. Regarding training, every six months the driver

minor corrective, major corrective, image, and tires. Major

goes through first-aid and firefighting courses, instruction

corrective costs represent the largest expense, while tires

on defensive and preventing driving, emergency routines in

account for about 25% of the total costs. Therefore, we have

case of social unrest or natural disasters, and a protocol in

implemented controls to verify tires regularly, avoiding theft,

case of car-tailing or kidnapping attempts.

| VIEW FROM THE TOP

TAILORED LOGISTICS SOLUTIONS FOR A STREAMLINED MARKET JOSĂ&#x2030; ANAYA General Manager of Omnitracs Q: What unique features does Omnitracs provide within

constantly improve customer operations. Secondly, our

the Mexican market?

product portfolio covers all basic requirements within the

A: Since Omnitracs established its Mexican operations back

transportation industry, offering a modular, integrated

in 1988, it has been a market leader providing advanced

approach that accounts for all eventualities. Thirdly, our

and tailored solutions for the unique requirements of the

new routing solutions provide state-of-the-art services

Mexican market, with a vision to transform transportation

for the implementation of optimal distribution routes that

through technology and insight. Our focus is to provide

satisfy multiple delivery requirements, such as delivery

load safety and fleet management solutions based on

times, cargo restrictions, delivery priority, and proof of

hardware, software, and data analysis solutions to the

delivery, while optimizing operational costs.

transportation industry. We offer a satellite tracking and localization service with national coverage, as well as two-

Q: What are the major challenges that clients face in Mexico,

way communication between managers and every unit in

and what solutions is Omnitracs offering to help them?

their fleet. That way, our clients are provided with real-time

A: The Mexican industry faces a variety of challenges

data regarding the use and maintenance of their vehicles.

like safety, fuel management, operational control, and

On a global scale, we have more than 30,000 customers

cost implications. Our approach is to propose optimum

in over 60 countries. We provide services and support to

operational processes supported by our technology and

approximately one million entities, which means that we

insight, with safety measures such as definition of secure

carry out 100 million transactions on a daily basis.

routes and stops, as well as the required reaction protocol upon risk identification. Our technology delivers operational

Our solutions include routing services, track and trace,

alerts if any protocols are broken, provides critical

operational control through engine data management,

information in order to prevent dangerous driving behavior,

operational alerts to facilitate day to day fleet management

and employs vehicle tracking in case of an incident. Regular

requirements, as well as business intelligence tools to

reports provide an analysis of driving behaviors, which

increase efficiency for short- and long-haul fleets. We

gives our customers key indicators in terms of training gaps

provide cutting edge solutions tailored to any size of fleet,

and the implementation of disciplinary actions if necessary.

with the primary goal of improving logistic flow, as well as

This information prevents the driver from stopping in high

reducing operational cost and maximizing security for our

risk areas that present a potential threat to the integrity of

clients. We serve customers with full coverage throughout

the cargo. An additional benefit is that driver compliance

the country, with more than 100 dedicated employees and

to these protocols results in more effective asset utilization,

the necessary infrastructure to cater to their needs on a

therefore increasing operational profitability.

continual basis. Our customers also benefit from our 24/7 service and support through our Network Operation Center

Q: What innovations are you planning to introduce to the

(NOC) infrastructure in Mexico, which uses redundant

country in the near future?

systems to ensure a constant and reliable service. Our

A: Innovation is a priority area for Omnitracs. We are adding

cloud solutions require a lower system investment from

a new feature to our portfolio that provides route design,

our customers, providing a seamless service for their

territory planning, and dispatching performance. Our

dispatch and security areas, while including data access

telematics solutions also recieve regular updates based on

through web services for their system integration needs.

market needs. We are expanding access to our services for smaller fleets, adding vertical markets, and increasing our

Q: What are your strategies to attract and retain clients?

geographical presence. Innovation represents an integral

A: Our strategies for attraction and retention of clients

feature of our internal business, which can be seen through

are threefold. Firstly, we provide an excellent service

customer experience and the continuous improvement of

with a talented team, equipped with the knowledge to

our processes to increase efficiency and productivity.

153

PROXIMITY TO CLIENTS AS A CRITICAL SUCCESS FACTOR Commercial

entire

González. The geographical location is also a considerable

commercial vehicle segment including heavy-duty trucks

Vehicle

Group

(CVG)

serves

the

advantage; the majority of competitors are not local and

for the construction and agricultural markets. After years

parts may even need to be imported from China or India if

of growing through acquisitions, the company changed its

not sourced locally.

focus to emphasize organic growth. CVG decided to create a company to manage its operating process, employing

The seats, upholstery, and headliners produced by CVG

a compilation of the best practices of the conglomerate.

are among the best in their class. In the three years since

Emiliano González, the Saltillo Plant Manager, began as

launching these creations, 12 diversified processes have

Engineering and Maintenance manager when the facilities

been launched, such as the manufacturing of an entire

were no more than four walls at the beginning stages of the

seat or a piece of carpet. CVG now produces various

construction process. The business has grown since then and

2D processes including cutting, sewing, trimming, and

a further 30,000ft2 expansion has been planned, indicating

finishing methods for upholstery, a broad range of plastic

impressive growth in less than ten years since the foundation

and fabric parts, including a variety of cost and design

of the automotive parts manufacturer.

options to match program needs and brand image. “Our

“Our expertise include 3D processes such as injection molding, low pressure injection molding, urethane molding and foaming processes, compression molding, heavy-gauge thermoforming, and vacuum forming” Emiliano González, Saltillo Plant Manager of Commercial Vehicle Group

CVG currently operates two facilities in Mexico; a plant in

expertise includes 3D processes such as injection molding,

Saltillo manufactures seating and interior trim products

low pressure injection molding, urethane molding and

and another in Agua Prieta, Sonora, specializes in wire

foaming processes, compression molding, heavy-gauge

harnesses. Establishing in Saltillo was a strategic decision

thermoforming, and vacuum forming,” says González. He

based on client locations. CVG wanted to be close to

cites the company’s large R&D Center at the headquarters in

existing customers as they expanded their operations in

Ohio as being responsible for technology and competence,

Mexico, and consequently the company has been able to

which is distributed across the different facilities around the

gain market share in Saltillo as well as the surrounding area.

world. Each country then improves and customizes these

This was not an easy feat, however. González confirms that

innovations based on their local market needs, although

winning clients’ trust as a new entrant to the area, unknown

the designs are owned by CVG in the US. A strong Mexico-

to most potential customers, was difficult. Through offering

based engineering team helps tropicalize processes and

tours and visits to the plant to exhibit its manufacturing

matches them with national quality standards.

capabilities, persistence, and good customer service, the

154

request for quotations started to trickle in. The company

“We have already outlined a publicly available and ambitious

is now well established in the region and says it is turning

growth plan up to 2020,” says González. The Saltillo plant

these quotes into solid deals. The sales team’s success

will be focused on organic growth in the commercial

has been evident. Diligence in organizing customer visits

vehicle and truck segment. Economic growth in the US has

almost every week has led to increased brand recognition

triggered increases in sales for the heavy truck market, and

for the manufacturer. Aware of the importance of first

the Plant Manager thinks that the market will continue with

impressions, the team immediately presents KPI charts

the same energy for at least 12 months. An enduring pursuit

with current trends, as soon as a potential client visits

has been to share best practices throughout the group’s

the CVG facilities. The company takes measures to make

manufacturing facilities worldwide, which will ensure the

sure that each product meets the individual client’s quality

company holds a competitive advantage among the many

expectations within a reasonable cost frame, knowing that

existing and potential buyers that are moving production

this will generate loyalty and attract more customers via

to Mexico. These companies know that the country offers

recommendations from existing clients. “They come back

excellent quality and manufacturing capabilities, and CVG

with business proposals because they know we can meet

believes that the Saltillo plant is well positioned to rise to

quality requirements within their budgets,” continues

the occasion by capturing these new opportunities.

| VIEW FROM THE TOP

ADAPTING GLOBAL PRODUCTS TO REGIONAL NEEDS LYNCH GRATTAN Sales Director of Fruehauf

Q: Since most trailer companies specialize in certain types

Q: Who are your major automotive clients in Mexico and

of trailers, what gives Fruehauf the ability to be successful

how do you manage exports?

when managing a wider product portfolio?

A: Our customers are trucking companies that supply or

A: Fruehauf has always operated this way, since it has

haul for automobile plants or their suppliers. The Bajio

allowed us to enter niche markets where particular trailers

region is now full of new OEMs, and trucking companies

are needed. We may produce one product line at a slow pace

are supplying the freight for them. We designed a drop-

because this is the way the industry works, but we are able to

deck trailer for Nissan with certain height dimensions and

move our personnel from one product line to another if there

cubic capacity, which was the one occasion we worked

is a huge surge in demand for a certain product. This is an

directly with that company. Usually, trucking companies

advantage we have always offered the market.

come to us with requests for a specific design to meet the needs of their automotive industry clients. We have the

Q: What have been your flagship accomplishments during

engineering and manufacturing capability to meet any of

Fruehaufâ&#x20AC;&#x2122;s 48 years in Mexico, and how important is the

these requirements.

market for your global operations? A: We introduced the 40-foot dry van, when it became

Fruehauf is not manufacturing anywhere else in the world.

popular in the US as a replacement for the 48-foot dry

In 2012, we exported about 200 specialized units to South

van. Furthermore, we introduced the 53-foot dry van

America and are now exploring the US market, specifically

and a lighter scissor dump trailer in Mexico. Perhaps our

the petroleum drilling industry, to expand our export sales.

flagship vehicles for the trucking industry are dry vans

To this end, Fruehauf has strategies and campaigns to

for general cargo, as well as platforms and dump trailers

encourage fleet renewal and safety awareness, as well as

that are usually for the construction and mining industries.

encouraging owner-operators to look beyond price.

We also have all kinds of tanks for hauling petroleum products, refined products, acids, and also food products

Q: To what extent is Fruehauf investigating innovations to

such as vegetable oils and molasses. Our manufacturing

design and manufacture?

practices make our trailers durable and sturdy, adapted to

A: We are eager to innovate and are now working on a

Mexican conditions, including overloading, as well as poor

new design of dump trucks for the mining industry, since

road conditions on some routes. Our trailers are made

it is increasingly conscious of weight limits. To meet

for longevity and overloading even on the poorest road

their design, we are developing a much lighter dump

conditions. The border area is particularly full of used US

trailer that does not sacrifice strength or durability. We

trailers. However, closer to the center of Mexico they do

have introduced a dry van with increased interior width,

not work to the same standards, since US-spec trailers

since some US companies specifically request this type

are not adapted to our terrain and loading conditions. The

of trailer. In terms of packaging companiesâ&#x20AC;&#x2122; needs, cubic

US used trailer market affects us, but we are holding our

capacity is paramount, as well as strength, durability,

own, and our competitors are doing well too, thanks to the

and light weight. This creates a particularly challenging

need for different specifications for the Mexican market.

engineering task to make lighter vehicles with more

The automotive industry is very important for Fruehauf

capacity and the same strength. We have a very good

in Mexico, and it always has been. We have several trailer

engineering department and we have made a lot of

designs that are used specifically for the transportation of

advances in Mexico that have not yet been applied in the

automotive parts and components, as well as platforms that

US or Europe. To reach the US market we have a trailer

are used to haul steel and aluminum rolls, and curtain side

that is ideal for the oil drilling industry, and we would like

trailers for car components racks. The latter are drop-deck

to use this as a springboard into that market. However,

designs that offer a lot more capacity to be able to haul

our strategy is to keep doing what we do well, which has

more racks.

kept us here for the last 48 years.

155

| PLANT SPOTLIGHT: FCA TOLUCA With more than 40 years in Mexico, FCA México’s Toluca

production line. Nowadays, these vehicles are exported

Complex is one of the oldest manufacturing plants in the

to more than 80 countries, and between January and July

country and has one of the richest traditions. This facility

2015 the company’s total production was of 140,693 units.

was built in 1968, and throughout the years it was the

Furthermore, according to FCA’s CEO Sergio Marchionne, the

production site of some of the most emblematic vehicles

Toluca Complex inaugurated the production of the Fiat 500

like the Dodge Dart Valiant, Chrysler Le Barón, Plymouth

in record time, just 17 months after the project was approved.

Barracuda, Dodge Dart K, Dodge Phantom, Dodge Shadow, Dodge Spirit, Dodge Stratus, Dodge Neon, and

The Toluca Complex includes two plants: an assembly

the Chrysler PT Cruiser. The production of this last model

plant with an area of 691,780m2, and a stamping plant with

ended on July 9th, 2010, after more than ten years and 1.3

a productive space of 25,468m2 that manufactures body

million units.

panels for each of these vehicles. A total of 2,606 people work at the assembly facility, while only 203 work in the

Starting in December that year, the company started to

stamping plant. Out of the combined total, approximately

manufacture the Fiat 500 and in March 2011, the Dodge

2,300 people receive hourly wages, the rest are paid a

Journey and the Fiat Freemont were added to the

fixed salary and work in either one of two shifts.

In terms of technology, thanks to its more than 700

quality of the product and enough flexibility to respond

robots, the Toluca Complex has enough flexibility to

to the customers’ needs at all levels of the company,”

produce more than 600,000 vehicle combinations

says Mauro Pino, Director of World Class Manufacturing

including engines, transmissions, and colors. Furthermore,

at FCA Group.

as part of the alliance between Fiat and the Chrysler Group in 2009, Fiat introduced the new World Class

World Class Manufacturing encourages employees to

Manufacturing methodology to the plant. This initiative

provide alternatives on how to improve their jobs and

was created by Fiat in 2005 with the goal to reduce

plants. By 2011, 282,000 employee suggestions were

waste, increase productivity, and promote a sense of

made in the entire Chrysler Group, of which 70% has been

pride among employees. Now, this methodology has

implemented. In March 2015, the Toluca Complex was

become a key factor for all plants in the FCA Group, with

awarded the Bronze level in this methodology, making it

more than 1,500 employees from 40 plants around the

the second facility in Mexico and the ninth in the NAFTA

world receiving training in the company’s World Class

region to receive this recognition. Moreover, this plant was

Manufacturing Academy in Warren, Michigan. “This focus

recognized as the best facility in the whole FCA Group in

creates added value to our clients’ business, ensuring the

terms of water consumption reduction.

Although the number of heavy vehicles produced in Mexico is twenty times smaller than the country’s light-vehicle production, Mexico remains among the global leaders in this sector. Even so, the country is facing a difficult situation in the domestic market, with used heavy vehicles constantly crossing the border from the US. To confront this situation, the government is now revamping its scrapping program, looking to update the aging heavy-vehicle park. Furthermore, Mexico has yet to install the necessary infrastructure to make ultra-low-sulfur diesel (ULSD) widely available to facilitate the transition of Mexico’s heavy-vehicle fleet to Euro V and Euro VI standards.

This chapter analyzes the main drivers behind the development of the Mexican heavy vehicle market, measures to be taken to stimulate both domestic production and demand, and how the heavy vehicle market can contribute to Mexico’s emission reduction goals. The leading OEMs in this segment present their opinions on these key industry trends, while also outlining their latest innovations in safety and efficiency for heavy vehicles.

HEAVY VEHICLE OEMS

Miles ahead • Maximum yield • Better performance • Large distribution network

CHAPTER 6: HEAVY VEHICLE OEMS 162

VIEW FROM THE TOP: Miguel Elizalde Lizárraga, ANPACT

164

VIEW FROM THE TOP: Stefan Kürschner, Daimler Trucks Mexico

166

VIEW FROM THE TOP: Carlos Pardo García, Navistar

168

VIEW FROM THE TOP: José David Godínez Hernández, Volvo Group

171

VIEW FROM THE TOP: Ignacio García, Cummins

172

VIEW FROM THE TOP: Leonardo Soloaga, MAN Truck & Bus México

174

PLANT SPOTLIGHT: Arbomex

175

VIEW FROM THE TOP: Jan Hegner, Daimler Buses México

176

VIEW FROM THE TOP: Enrique Enrich, Scania Mexico

178

VIEW FROM THE TOP: Jun Nabahashi, ISUZU

179

INSIGHT: Jaime Muñiz, DINA

180

TECHNOLOGY SPOTLIGHT: Volvo Group, Emergency Braking System

181

VIEW FROM THE TOP: Paulo Andrade, Polomex

182

VIEW FROM THE TOP: Paulo Dellanoce, Novacapre

183

VIEW FROM THE TOP: Julián Becerra, Beccar

184

VEHICLE SPOTLIGHT: Polomex Paradiso 1800 DD

161

| VIEW FROM THE TOP

PUSHING FOR PROGRESS IN THE HEAVY VEHICLE MARKET MIGUEL ELIZALDE LIZÁRRAGA Executive President of ANPACT

Q: What have been the major changes within the heavy

(US$33,000), which could constitute the cost of the down

duty segment over the past year?

payment on a new vehicle. Additionally, since only Mexican

A: In 2014, the heavy duty domestic market fell by 1.4% in

vehicles can be purchased with the fiscal incentive, there

wholesale, and 9.8% in retail sales. This was mainly caused

will be a more effective system in place regarding the

by three factors, the first one being the fiscal reform, which

importation of used vehicles from the US.

primarily impacted us during the first semester. The second was the importation of used vehicles from the US since,

We can certainly see potential for growth in the internal

although we sold around 37,082 new vehicles, around

market. We expect that more trucks will be sold in 2015 than

17,000 used trucks and buses were imported from north

last year, although we are still 37% behind our 2007 record,

of the border. Finally, the third factor was the stagnation

when we sold close to 52,000 units. We see the scrapping

of the Mexican economy. As the economy grows, transport

program as being the main catalyst for an increase of 20,000

companies begin to acquire more work, which leads to

units in the domestic market over the next few years. The

fleet renovation and conversely, if the economy moves

federal government also announced a new financing program

slowly, fleet renovation decisions are postponed.

oriented toward owner-operators, which we expect to have a significant impact on the domestic market.

Wholesale and retail sales of heavy duty vehicles are directly proportionate to the economy’s development.

In terms of exports, 2014 was our record year to date, with

Approximately 56% of Mexican cargo is transported by

124,015 exported units representing a 27% increase from

truck, while 98% of all public transit passengers in Mexico

2013. We continue to be the fourth largest heavy duty vehicle

use buses. Regarding wholesales, the country sold 37,082

exporter in the world, as well as the second tractor trailer

units in 2014, dipping slightly from the 37,619 achieved in

exporter just behind Germany. The information provided by

2013. Similarly, there was a decrease in wholesales from

Global Trade Information Services (GTIS) shows that Mexico

2012 to 2013, moving from 39,465 to 37,619 units. In terms

exported 80,471 tractor trailers, in comparison to Germany’s

of retail, the impact was much more severe, decreasing

81,808. Furthermore, the export potential for Mexican

from 39,074 units in 2013, to 35,937 in 2014. However, the

companies in markets like Colombia could also improve our

federal government’s announcement of the renovated

ranking. In the past, we exported around 9,000 tractor trailers

scrapping program is one of the positive changes of 2015,

to Colombia, but due to internal regulations, we are now only

with the new regulations increasing the fiscal incentives by

exporting around 1,000 vehicles per year. An estimated 90%

50% for cargo trucks, and almost 80% for buses.

of Colombia’s fifth-wheelers are Mexican, and the decisions made by the Colombian Ministry of Transport not only impact

Q: How might the scrapping program affect development

the renewal of Colombian fleets, but also the Mexican heavy

of the domestic market and the import of used vehicles?

duty vehicle exports. If the Colombian government adapts its

A: Old trucks and buses represent more than 35% of the

regulations to encourage transport companies and owner-

federal fleet. The scrapping program is normally reserved

operators to renew their fleets, Mexico will definitely become

for Class 7 and Class 8 vehicles, representing 20% of the

the leading exporter for these types of goods, something

new trucks and 30% of the new coaches sold, meaning that

that will also be supported by the Pacific Alliance and the

these subsectors will feel the strongest impact. The program

Trans-Pacific Partnership agreement.

not only applies to the purchase of new vehicles, since it

162

can also be implemented for used trucks and buses with

Q: What conditions should Mexico meet in order to

a maximum age of six years, which at times can be a more

become the third biggest exporter and sixth producer of

feasible solution for owner-operators. Another noteworthy

heavy vehicles?

aspect of the program is that destruction of two vehicles

A: The domestic market is the key to improving our whole

now generates a double fiscal incentive up to MX$500,000

production process, since there is potential to grow by

approximately 20,000 to 30,000 units. Due to unexploited

the government’s emissions goal while also renewing the

internal opportunities we have identified, it is more

country’s fleets. If we do not make the right decisions now,

appealing to increase our production for the domestic

the number of used vehicle imports from the US will rise

market than it is to increase our exports. The average age

and the federal government will not be able to attain its

of a common fleet is around 18 years, and there are more

goals. We need to use the most suitable technology for

than 150,000 vehicles in the country that are 21 years

Mexican transportation companies. There are still some

or older, representing more than one third of all heavy

regulations that could be published, and we will continue

duty vehicles in Mexico. In order to reduce the average

to push for updates regarding the fleet age. Finally, we

fleet age in the country, there has to be a regulation that

must continue working hand in hand with the industry,

controls imported older vehicles while also promoting the

other associations, and state and federal governments on

acquisition of new units. These could bring benefits like

the professionalization of small companies.

emission reduction, road safety improvements, enhanced vehicle efficiency, and improved transportation and

ANPACT’s vision for Mexico is to become a leader in the

logistics competitiveness.

Americas, overtaking Brazil and the US, with a production of 300,000 units. Although we are projected to achieve this

Q: What are ANPACT’s plans and objectives for 2015?

by 2030, we believe that the process will be accelerated

A: We have to promote the implementation of the

since we are well on our way to accomplishing the goal.

scrapping program announced by the federal government.

Ten years ago, we accounted for 17% of heavy duty vehicle

government

production in the NAFTA area, and last year that number

regarding the improvement of NOM-044 and NOM-086.

rose to 35%, which shows a massive production increase.

In addition, we will work within an interdisciplinary group

There is enough potential in both the Mexican and

with the government agencies that include PEMEX, CRE,

Colombian market to increase our production percentages,

SEMARNAT, the Ministry of Economy, and the Ministry

especially considering that Mexico produces 170,000 units

of Communications and Transports, on how to achieve

out of the 5-7 million manufactured internationally.

must

also

work

with

the

federal

163

| VIEW FROM THE TOP

COAHUILA PLANT EXPANSION PREPARES FOR SURGE IN TRUCKING DEMAND STEFAN KÜRSCHNER President and CEO of Daimler Trucks Mexico Q: What does the expansion of Daimler’s Coahuila plant

A: This is one of the challenges we have to deal with, and

mean for the company’s Mexican operations?

it is one of the main reasons we support the different

A: Our manufacturing plants in Santiago Tianguistenco and

government initiatives to improve the country’s regulations

Saltillo are crucial for our company, since they produce more

in the automotive industry. We have been working for more

than 50% of all Daimler trucks sold in the Mexican market, with

than 40 years on alternatives for our local clients that involve

approximately 58% of the total production being exported.

financial schemes with customized scenarios. Sometimes our

For this reason, we find that it is essential to constantly

clients’ business strategies require a semi-new truck, and we

invest in development. Only a couple of years ago, Santiago

can help satisfy this necessity. Through the many years that

Tianguistenco’s plant received a US$45 million investment to

Daimler has been operating in Mexico, we have strengthened

expand the workforce and to optimize production processes.

our distributor network to obtain national coverage, but

In 2009, when we opened our Saltillo plant, there was no

there is always room to expand. Our network is comprised of

need for expansion, however, due to the success we are

over 90 sales locations that include aftersales services ready

experiencing with the Cascadia DD15, this is happening now.

to meet any requirements in a quick and reliable way.

We are experiencing intense demand, so production has been boosted and we anticipate that capacity must be extended.

Although we have established solid relationships with our dealers, we are constantly aiming for process improvement

Q: The productivity of your Saltillo plant exceeds other

in terms of communication. The company has specific

North American plants. To what factors do you attribute

programs focused on providing clients with comprehensive

this phenomenon?

service, and our dealers receive theoretical and practical

A: In 2014, Daimler sold a total of 2.55 million vehicles,

training sessions to deliver first-class attention.

495,000 of which belonged to the trucks division. The Saltillo plant produced over 180,000 Cascadia trucks

Q: The heavy duty OEM manufacturing segment is

since its opening, and the Santiago Tianguistenco plant

increasingly competitive. In what areas can Daimler

has manufactured 350,000 Freightliner units to date. This

Trucks make its mark and achieve a steady profit margin?

is the result of having the adequate machinery and talent.

A: We are conscious of the future of the transportation

The Saltillo plant produces 200 to 250 trucks per day using

industry, which is why the company is investing in new

advanced manufacturing techniques to guarantee high

technology systems for autonomous driving, such as

quality and dependable safety standards in each truck. It is

the Highway Pilot. This is the only system available for

also strategically located in a city close to the source of basic

trucks that provide a sensor and a camera to facilitate

raw materials used in this sector, and is more accessible for

safe driving. The Inspiration truck is another inventive

our clients and suppliers due to its modern infrastructure.

vehicle that has the highest self-sufficiency degree in the Americas. Our connectivity platform, Freightliner Link,

For Daimler, product responsibility requires a combination

is capable of reading minute by minute information sent

of three things: the greatest customer benefit, the highest

from the truck’s engine, transmission, brakes and cabin, in

safety standards, and maximum eco-friendliness and

order to increase business productivity and profitability.

efficiency. Our Saltillo plant meets the most demanding requirements, including residue treatment, co-processing

Freightliner has also developed the Real Cost of Ownership

through advanced technologies, and the recycling of 90% of

guidelines, a collection of key productivity factors such

all materials used. This manufacturing plant is an ecological

as fuel efficiency, technological integration, security, and

standard for our production sites across the continent.

quality. As part of our commitment to our clients in Mexico, and in accordance with our goal of becoming the leader

164

Q: How are your distributors, particularly in the north,

within the Mexican market, we create solutions to contribute

affected by local preferences in used trucks?

to business growth and profitability. In response to our

clients’ requirements, we are the first automotive company

fast performance. These units are equipped with the most

to have a price list in Mexican pesos, offering certainty and

advanced technology that increases durability and provides

easeing the financial planning for companies operating in

safety to the drivers. These sporting events present a

the country, regardless of the fluctuating exchange rate.

challenge in terms of quality, efficiency, safety, and vehicle

Overall, one of our main goals is to continue driving the

performance, and create an opportunity to prove Daimler’s

development of the Mexican automotive industry, as it aims

technical ability on a global and local stage.

to become an international exporting power. Q: What is Daimler Trucks doing to be an employer of Q: Are the authorities doing enough to enforce tighter

choice, given the competitive automotive labor market in

vehicle age and emissions standards to stem the flow of

the State of Mexico and Coahuila?

used trucks across the border?

A: Daimler Trucks has a strong commitment to the Mexican

A: The Mexican federal government, supported by

community. As part of the company’s aim to become

different

automotive

market leader, Daimler continues to invest in its two

industry, implemented a passenger and cargo vehicle

manufacturing plants to increase productivity, and create

renewal program with the objective of easing the process

more job opportunities for local people. We try to involve

of used vehicle exchange. Last year, Daimler allocated the

surrounding academic institutions to promote the abilities

most units to this program, adding up to a total of 1,935

of younger generations in the business environment. We

trucks and buses for replacement. It is the responsibility

have created different programs with the State of Mexico’s

of OEMs to evaluate and propose strategies that promote

CONALEP to help students gain work experience and

effective

institutions

that

governmental

regulate

regulations

the

Mexican

improve their knowledge. In 2013, CANACAR, UTL, and the

market. Mexico is one of the most valuable countries for

the

Federal Training Institute (IECA) started the Grassroots

the automotive industry, and in 2014 over US$21.5 million

Operator Training program, which trains potential truck

worth of freight motor carriers were exported, making

drivers through practice centers and has developed a

this country a global leader in this sector. According to

generation of graduates in just one year.

the World Trade Organization, factories based in Mexico provide eight out of every ten vehicles imported to the US.

Moreover, we also take care of the people already working

OEMs must offer attainable financial terms and programs

with us. For over 30 years, Daimler’s production plant in the

to invite freight and passenger transport companies to

State of Mexico has operated a social center dedicated to

renew their fleet.

employees’ wives and children, where they can take English and Computing courses free of charge. It also has one of

Q: How many trucks will be manufactured by Daimler for

the biggest training centers for developing talent through

the Super Copa Telcel?

service, product, and manufacturing workshops. Until now,

A: Daimler has a long history of being part of automotive

Daimler Trucks have generated more than 82,700 direct jobs

sporting events and we are one of the main sponsors of

worldwide, 16,000 of which are in the NAFTA region with

Super Copa Telcel. The company will participate with 12

Mexico representing more than 6,000. In September, the

Business Class M2 Freightliner trucks, created with special

new plant in Aguascalientes will create further employment,

characteristics and configurations to achieve safe and

as part of our strategic alliance with Renault-Nissan.

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| VIEW FROM THE TOP

SUCCESS DEPENDS ON OFFERING MORE THAN GREAT TRUCKS CARLOS PARDO GARCÍA Director General of Navistar Q: What are the main factors influencing the development

in real time what is happening with the truck, as well as

of the Mexican heavy vehicle sector?

determining the driving habits of the drivers. This is one

A: 2014 was a complex and unusual year because, while the

of the key issues to help our customers to become more

country was doing well from a macroeconomic standpoint,

profitable in the future. We currently have over 1,000

the overall heavy vehicle market decreased by almost 15%.

units running with our OnCommand™ tool and our goal is

Consumption indicators went down almost 4% in 2014,

to increase that figure to more than 5,000 this year. An

directly impacting the transportation of goods, and the

additional feature of OnCommand™ Connect is the Repair

lack of incentives within the reforms has not convinced

Advocate, which can monitor our customers’ trucks 24/7,

companies to renew their fleets. These two factors were

enabling us to react to any issues in the shortest time

some of the main reasons for this decrease in the market.

possible.

For a country the size of Mexico, 30,000 units is nothing; there should be a market of 80,000 or more. By the end of

Q: In what ways does Navistar approach the design of its

2014, we had sold around 8,000 units, which was a huge

dealerships in order to accurately convey the goals of the

success in terms of volume. The important result of the

brand and the benefits for the customer?

year was that Navistar was the only brand that gained

A: This is one of the paradigms that are changing

market share. We grew three points in market share in that

in the industry. In the future, I do not see customers

tough time, so we were very successful in this competitive

frequenting dealerships as often as they do now. Even

and challenging environment. This year we are targeting

so, our dealerships have been designed for simple and

around 8,500 units sold because the market has plateaued.

fast transactions. Showrooms are becoming less and less necessary as we are taking demo trucks to our customers.

There are constant constraints on our customers’ profits,

This gives them a better overall experience with the vehicle.

which cannot be raised since their costs and expenses

Our dealerships are primarily used for service and for parts,

are growing. The increasing price of diesel is hurting

so trying to create a unique experience is very difficult.

them in this respect, as well as the cost of drivers. In

We have developed a system called SAVI, which is a quick

order to be more successful and profitable in the market,

guide that takes our salespeople through the questions and

transportation companies will have to be more efficient,

answers that arise during a sale. This has been positive for

which means having better trucks, better maintenance,

the company and has produced extraordinary results. We

and better solutions to issues before they arise.

also have a team that evaluates our dealerships around the country, certifying that they are all operating in the

Q: How is Navistar planning to approach these challenges

same way. Creating the best dealership experiences is

and deliver solutions to its customers?

very challenging, very demanding, and very costly, but the

A: Navistar has the widest set of services in the sector,

rewards we get from our customers make it worthwhile.

and our slogan is “more than great trucks”, which we

166

truly believe in. We understand that we have to develop

Customers expect the dealer to bring the vehicle to them,

the best truck in the market, but even that is not enough.

rather than visiting the dealership themselves. Customers

Our portfolio therefore also includes financial services,

are also becoming more knowledgeable, which is changing

insurance services, roadside assistance, and dedicated

the game. At the same time, the concept of brand loyalty

maintenance. The latter enables us to take control of our

is changing, but it is not disappearing. In the past, heavy

customers’ workshops and perform the maintenance for

vehicle customers were loyal because of a working history

them, leaving them to focus on their core business. Now

with the brands, but also because of personal connections

we are looking at the next step, which is our OnCommand™

with the dealers. The new generations will only be loyal to

brand services, one of which is called OnCommand™

the brands that help them to be profitable through value

Connect, which uses a full telematics tool that can tell us

added services.

Q: How was CityStar welcomed in the Mexican market

A: They have not yet seen the value of it. We have been

after its launch in 2013 and what new models are you

working with NAFIN for many years and we love to work

launching in 2015?

with development banks because we truly think that this

A: Even though we have never been big players in this

is the only way to grow the market. We have to get into

segment, the International power of the brand helped to

markets that have been forgotten by the industry for years.

enter the market with ease. Mainly in class 5, the buyers of

The average age of the Mexican fleet is over 18 years, but this

these trucks are completely different, so we had to adapt

will be difficult to change without the help of development

our sales force and our dealers in order to help them.

banks. Last year, we launched a program called Truck-A-

Class 5 was like a match made in heaven for Navistar. Our

Punto, which is our effort to become a big player in the used

growth was very fast in the first year, reaching almost 8%

truck market. We are developing used truck dealerships

of market share, even in such a competitive market with a

that, depending on the territory, are sometimes behind our

lot of players. Our plan this year is to reach a double-digit

current new truck dealerships while in other cases these will

market share. We will also be launching a Class 4 and

be completely new and independent dealerships. The idea

a Class 6 this year, in order to have the most complete

is to offer an experience that is similar to the experience

portfolio. Additionally, we are preparing to launch a new

we provide for new vehicles. Used truck customers will have

engine for Class 3 with more weight capacity.

access to credit, warranty, insurance, and all the other things that we offer. In order to be successful in this field, we need

Q: How is your relationship with NAFIN helping to develop

the development banks to support us. As a company, we

Navistarâ&#x20AC;&#x2122;s new generation of trucks?

believe that the used truck market has to professionalize in

A: We had a great year with our finance company,

order to grow the new vehicle market.

financing almost 50% of the trucks that we sold. We launched a fair market value leasing program which was a

Q: Which programs are you most proud of, and what goals

complete success as we leased almost 1,000 units through

do you intend to reach during your time at Navistar?

that program. Now, we have developed a new program

A: The two things that make me proud, and that will

with NAFIN for owner-operators and smaller fleets, as

make a difference to the company in the future, are the

well as a program with the Mexico City government for

Integral Solution Initiative and the launch of the light trucks

food trucks, also with NAFINâ&#x20AC;&#x2122;s collaboration. Navistar

segment. The Integral Solution Initiative is a strategy to

is the only brand offering these programs right now.

build solutions for the whole portfolio, shifting the way that

There are four programs that we run in total, one with

business is viewed in the future. This includes Vision 2020,

CANACAR, one with CONATRAM, one with the Mexico

which will represent large growth for us in the market and

City government, and now we are the only brand working

within our overall economic mainframe. I was personally

on the scrapping program that was just launched with

there from day one for the launch of the light trucks

NAFIN.

segment, which was a game changer for Navistar. Mexico is the only country where this is happening so we currently

Q: Why do you think the other brands are one step behind

have the attention of the entire corporation to see if they

on the scrapping program?

could apply this strategy to other countries.

167

| VIEW FROM THE TOP

VOLVO AND MACK FOCUS ON GROWING THEIR CUSTOMER BASE JOSÉ DAVID GODÍNEZ HERNÁNDEZ Governmental Relations of Mexico at Volvo Group Q: How has the Volvo Group’s T1515 strategy evolved in

plant in Mexico at the moment. Nevertheless, most of our

2014 and how likely will it be for the company to reach

suppliers are based in Mexico including Eaton, Meritor,

its goals?

Goodyear, TREMEC, and Metalsa. Thanks to the NAFTA

A: Currently Volvo Group Mexico has two brands: Volvo

agreement, around 60% of our components come from

Trucks and Mack Trucks. Mack’s initial strategy for the

within the region.

Mexican market was to partake in the construction segment, with its Class 8 products from the Baby 8 line. During our

In terms of our operations in the domestic market, we

most successful years, sales would typically reach between

want to increase our customer base with suppliers from

1,500 and 2,000 units per year. However, those numbers

the automotive industry. These companies are having

have recently dropped to 700 and 900 units, given the

truly lucrative years, so we must ride in the wake of

recent drop in activity in the construction industry. Within

their success. We closed 2014 with 13,000 units sold

the Class 8 segment, our tractors typically reach 15,000

in the tractor trailer segment, and we believe we can

units, while trucks oscillate between 7,000 and 9,000

reach 15,500 units by the end of 2015. Regarding Class

vehicles. The T1515 strategy is mostly focused on tractors,

8 distribution vehicles, we sold 8,000 units in 2014 and

which represent our biggest sales volumes, with a 12%

we expect to reach 11,000 in 2015. Additionally, there

market share for Volvo and 3% for Mack. Previously, Mack

is a new segment where we are trying to position our

only handled construction and long-distance vehicles, until

vehicles. Current weight and dimensions regulations

2014 when it finally entered the tractor segment.

allow a maximum of 75 tonnes and 31m, respectively, and there is a new trend to have flat-nosed trucks that

There are big growth opportunities for Volvo Group, but

use the extra length for longer boxes. To address this,

the Mexican market has slowed considerably between

we are bringing FH units from Europe to supply clients

2014 and 2015. At the moment we have only scrapped

like Bimbo and FEMSA. Even though the construction

300 units, which is a huge step back from the 8,000

segment is improving, the segment is quite small for

reported in 2014. The main reason for this reduction is

Volvo since it represents only 8% of our sales. Therefore,

that clients are waiting for the new scrapping program, as

Mack’s focus has changed to incorporate long-distance

it will offer twice as many incentives as the previous one.

trucks. Moreover, until the scrapping program stabilizes,

The objective with the new decree is to reach 6,000 units,

we are planning to offer rebates and discounts to support

with 3,000 of them stemming from owner-operators.

our clients.

Furthermore,

the

difficult

exchange

rate

situation,

coupled with low oil prices, has also affected our clients

Q: How can the Mexican government and the automotive

and our operations. We initially forecasted that our sales

industry cooperate to tackle emissions?

would reach 2,500 units this year, but those numbers

A: The problem in Mexico’s transportation sector is the

have now been hindered by all these obstacles. The T1515

age of our vehicles, since the current average is 19 years.

is currently beyond our reach, although it still remains our

This is mainly due to NAFTA regulations regarding used

ultimate goal.

vehicle imports. In fact, in January 2015 used vehicle sales surpassed new vehicle numbers, with a penetration in the

168

Q: How is Volvo Group matching production and sales

tractor segment of 45%. Every two years this regulation

volumes, and what are your Mexico sales targets for the

updates, allowing newer vehicles to enter the country.

near future?

Furthermore, the US is expecting to sell 260,000 tractors

A: Our plant in Mexico focuses on buses, so all our trucks

by 2015. We are working with the Ministry of Environment

and trailers are brought from our New River Valley

and

plant. This facility is 100% automated and has immense

regulates emissions for new vehicles. Mexico is still using

production capacity, so there is no real need to have a

EPA 04 and Euro IV emission standards for its engines,

Natural

Resources

regarding

NOM-044,

which

but a new regulation coming into force in January 2018

in Mexico has a load capacity of 46,000lb, while the US

will change Mexico’s standards to EPA 10 and Euro VI.

works with close to 30,000lb.

Nevertheless, if we want the technology to work, we need ultra-low sulfur diesel (ULSD). It is a known fact that by

Q: Given the condition of Mexican roads, how does Mack

2016, we will see private companies entering the Mexican

test its products to ensure they can endure them?

fuel distribution market. However, we will have to wait until

A: We have three classifications from an engineering

2018 for them to bring their own fuel at international prices.

standpoint: Class Operation 1, Class Operation 2, and

At the moment, there is ULSD in Mexico City, Guadalajara,

Military. All our products aimed at the Mexican market are

Monterrey, and according to PEMEX, from September

developed with Class Operation 2 specifications, allowing

2015 we will have 75% to 80% availability of this fuel in the

us to tackle those obstacles. We submit all our vehicles

whole country.

to reliability and acceleration tests under challenging conditions, to make sure they comply with all safety and

Q: One of Mack’s greatest advantages is its flexibility to

quality requirements. Furthermore, Mack’s specifications

adapt to various applications. What has been the greatest

exceed those standards. We have also recently integrated

challenge to achieve this flexibility?

electronics into our operations, and we are currently

A: NOM-012 defines weight and dimension regulations,

improving those components to reach our Military

and for long-distance trucks we must comply with a

classification. In addition, we just won a tender with the US

75-tonne requirement. However, once we cross the

government to oversee certain military vehicle production.

border to the US, the permitted weight is 45 tonnes.

When our products have a golden bulldog on the bonnet,

Furthermore,

landscape

our customers know that it is 100% Mack produced. If

presents many challenges in terms of gearboxes, making

the

Mexican

mountainous

the bulldog is chromed, then at least one component has

the 18-shift transmission the most popular product in

not been developed by Mack. The US market is keen on

Mexico, while the US is used to a 9-shift product. In

purchasing golden bulldog products since it shows their

that sense, Mack has developed the 12-gear mDRIVE

pedigree. Additionally, in terms of engine, transmission,

transmission, which fits both markets perfectly thanks

and axle design, Volvo Group gives a unique distinction to

to its engine calibrations that can reach higher levels of

each brand to ensure that they continue to be recognized

torque and power. On the other hand, an average axle

as the quality machines that they are.

169

| VIEW FROM THE TOP

STRENGTHENING THE ARGUMENT FOR NATURAL GAS IGNACIO GARCĂ?A Vice President of Mexico & Central America at Cummins Q: How has Cummins evolved since 2014, and what new

with the latter. Furthermore, natural gas engines have the

trends have you detected in the industry?

advantage that fuel cannot be stolen. The only problem

A: Cummins did not have significant presence in the bus

we have with natural gas engines is the resale process.

segment, but by the end of 2015 we will reach a market

Most clients do not know how to sell their units, and even

share of 25%, and we expect to exceed 50% by 2016. The

with these new regulations it might be a difficult process.

popularity of natural gas engines has also skyrocketed,

Nevertheless, people are accepting this technology and

and now they represent close to 30% of our business in

we expect to see significant engine replacements by 2018.

the bus segment. There are real economic advantages of

Furthermore, with these new regulations we are looking to

natural gas, given that it represents fuel cost reductions of

evolve to Euro VI and EPA 2017, bringing our market in line

around 40%. Natural gas is a growing trend in the industry,

with international standards. We will have this technology

and we have now commercialized more than 1,000 of

ready to be implemented in Mexico by 2018.

these engines in the market. Q: Which role does Mexico play in Cumminsâ&#x20AC;&#x2122; global R&D Q: What are the highlights of the recent business growth

strategy?

of Cummins in Mexico?

A: American companies are now creating technology hubs

A: In terms of new business, we have gained an important

and Cummins is following suit. At the moment, we have four

presence in the light truck segment. We are collaborating

R&D centers, one in the US and the others are in England,

with International for their JAC and City Star production,

China, and India. China and India were chosen because

and have therefore grown to a 23% market share. We are

they had really specific requirements in terms of repairs

selling 3.8l and 2.8l engines, which is a completely new area

and maintenance. Furthermore, specialized engineers are

for Cummins, and we are starting production of our new

much cheaper in India, and there are several simulators in

5l engine that will be used in the new Nissan Titan 2016.

this country that eliminate the need for excessive testing.

Current invoicing of our Mexican plants is close to US$1.2

Following that strategy, we develop every component in

billion annually, and our internal sales represent US$900

China, England or the US, and afterwards we send them to

million. Considering that 80% of the local production

India to be tested with testing models. This limits the R&D

is destined for export operations, Mexico represents

possibilities we could have for Mexico, but does not mean

approximately US$2 billion for Cummins. We just added a

we have no plans for the country.

really modern DPF line in Ciudad Juarez and our filter plant is expected to produce 40 million units by the end of 2015.

Nowadays,

San

Luis

Potosi

maintains

the

global

manufacturing process for Cummins, and is where we Q: Which technology trends define the future development

repurchase our engines before replacing them with

of the heavy-duty vehicle industry?

remanufactured units. That way, we can reuse most

A: The preferred technology in the passenger segment will

components, implementing them into customer units

be natural gas, but diesel will remain strong in the truck

with the same warranty as any other new product. The

market. Nevertheless, we are already carrying out tests with

advantage is that these engines are 60% to 70% cheaper

natural gas engines for trucks, and our clients are extremely

than completely new units. With this process, we are

pleased; the problem is how to recharge the units quickly

currently producing close to 240 engines daily, significantly

in any location, given that we do not have the proper

extending the productive lifecycle of our equipment. We are

infrastructure. By 2018, the government will introduce a

working closely with CONACYT to support remanufacturing

new emission norm that will make ULSD mandatory for

technologies, and all these developments are coming from

every unit. However, the cost of a diesel engine, with all its

Mexican engineers. Additionally, we are developing a

necessary components, is exactly the same as a natural gas

technical center that will be opened by the end of 2015, and

engine; the only difference is that you get 40% fuel savings

is dedicated to these remanufacturing processes.

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| VIEW FROM THE TOP

AMBITIOUS GOALS FOR GLOBAL TRUCK AND BUS BEHEMOTH LEONARDO SOLOAGA Managing Director of MAN Truck & Bus MĂŠxico Q: What recent products has MAN Truck & Bus launched

light commercial vehicle segment in Mexico, where 2,700

in the market and what were the main drivers behind their

units are sold annually.

introduction? A: A few years ago, the Volkswagen brand encountered

Over the next two years, MAN Truck & Bus is planning to

a few difficulties due to the emission laws in Mexico

launch around 6 new products with an investment of US$20

changing from Euro III to Euro IV. During that time, we

million that will be allocated to processes, infrastructure,

were developing technologies for Euro V in Brazil, so we

and product offerings. At the moment, our production is

did not participate as much in the Mexican market since

at 50% of installed capacity so there is a lot of room to

we only had two products based on Euro IV technology. In

grow, and in 2016 we plan to double our production level

response to this situation, we introduced the Volkswagen

to reach 2,000 units, annually. In July 2014, we held 1.5%

Constellation to cover the 13 to 57 tonne segment, and

market share in the truck segment, and we were in fourth

the Volkswagen Worker that is tailored to the 8 to 31

place in the bus segment with a 12% market share. For

tonne category. This year we introduced the Volkswagen

2016, we have set our sights on capturing 5% of the truck

Delivery in order to complete the Volkswagen brand line.

market, and 18% in the bus segment.

The Delivery is a versatile product that adapts to both rural and urban conditions, thanks to its Cummins ISF

Q: What are the main advantages of the Volkswagen-MAN

Euro V engine of 160hp and its SCR technology. With the

Dual Brand concept, and how has it helped MAN Truck &

introduction of the Delivery, we expect to grow 30% in the

Bus better position itself in the Mexican market?

A: Our dual brand concept allows us to offer a varied product line that caters to a wide range of segments in the industry, easily adapting to the clientsâ&#x20AC;&#x2122; requirements. The MAN brand has over 200 years of history in the automotive industry, and the customers that know MAN Truck & Bus do not need to relate it to Volkswagen. On the contrary, the brand has always been associated with top German engineering. In the case of customers that might not be familiar with MAN, Volkswagen gives them the reliability and confidence that they need. Q: How has the Mexican market responded to the chance of driving the European vehicles that MAN Truck & Bus provides? A: One of the peculiarities of the Mexican market is that it prefers big nosed trucks with the engines at the front, since most drivers have the misconception that a long front will offer greater protection in case of an accident. However, when comparing different types of trucks in terms of technology, fuel consumption, efficiency, and overall TCO, we realized that our products are highly competitive. We have given some of our customers the opportunity to try our trucks to change their mindset about the European concept. We know that our dealership network needs to expand in order to cater to the whole country, as we only have 13 sales and aftermarket support points at the moment. Additionally, the company has introduced many innovations, such as Adaptive Cruise Control. This system automatically adjusts driving speed, as well as the distance to the vehicle ahead, in line with pre-set settings. We were also the first company to introduce Intarder transmission brakes, which slow down the truck to improve fuel consumption and parts functionality. Another interesting innovation is the retractable rear axle, which can decrease fuel consumption and improve the performance of both tires and brakes. We always adapt our products to the particularities of the Mexican market, especially when it comes to road conditions. Q: How is MAN Truck & Bus evolving to no longer rely on foreign suppliers for key components? A: In Mexico, 70% of our production is exported to the US, and 75% of Volkswagenâ&#x20AC;&#x2122;s production heads to the US as well. This has created a solid and reliable supplier base in Mexico and encouraged us to develop a strong localization program. We currently source 20% of our components locally, but we want to reach 50% by the end of 2017. Our potential suppliers must go through quality testing where we evaluate their design, production, and development processes. An important part of our US$20 million investment will be allocated to the development of the local supply chain.

173

| PLANT SPOTLIGHT: ARBOMEX Founded in 1977, Arbomex is a 100% Mexican company

working on simultaneous engineering to obtain a functional

focused on producing crankshafts, camshafts, and other

prototype. After that, mass production relies on three

casted parts for the light- and heavy-vehicle segments, as

different activities: foundry, tooling, and machining. After

well as for the aftermarket. With two plants in Guanajuato,

the prototype is accepted, Arbomex designs the tools and

the company has become one of the main Tier 1 providers,

molds needed to manufacture these products on a larger

supplying North America, Europe, and Asia. Additionally, it

scale. The components are then cast and machined it in

is one of the only Mexican companies competing with the

order to obtain the specific dimensions required by the OEM.

worldwide leaders in the segment. Among its current clients,

In its foundry, Arbomex has two induction furnaces and an

Arbomex has relationships with some of the most important

installed capacity of 32,000 tonnes of metal per year. Its

OEMs and OE suppliers in the market, including Daimler

no-bake molding processes can deliver 80 sand molds per

Trucks, AAM, Kawasaki, Copeland, and Trane. Within the

hour through four pouring lines, for parts between 1.5kg and

light vehicle industry, the company has worked for 35 years

15kg. Furthermore, it has core manufacturing capabilities,

with the now FCA Group, 25 years with Volkswagen, six

obtained with a shell-and-cold-box process. Additionally,

years with GM, and one year with the recently established

the lost-foam process supplies 35 molds per hour with

Mazda plant in Salamanca. Both of the companyâ&#x20AC;&#x2122;s plants

eight foam-molding machines, designed for components

are located close to each other in the region of Celaya. The

between 2kg and 150kg.

first facility is in Celaya itself, with a total workforce of 543 employees, while the second plant is in the neighboring

Arbomex is one of the three worldwide top suppliers

Apaseo with 425 people supporting its operations. Apart

with an integrated foundry and machining process, giving

from camshafts and crankshafts, these manufacturing

the company the capacity to promptly respond to any

sites produce shafts, axle sleeves, carriers, brackets, water

demands from its customers. This approach has additional

pumps, cylinder sleeves, and eccentric shafts.

advantages in terms of costs and logistics, given that the client can obtain the design and the final product

One of the main advantages that Arbomex can offer

from the same supplier. Overall, Arbomex can produce 6

its clients is its fully-integrated manufacturing process.

million components annually, with an available capacity for

Arbomex has access to Magma software, computer-

800,000 more. The company currently works with nodular

aided design, computer-aided manufacturing, and casting

and gray iron alloys, although it also has experience with

flow digital simulation through SIMTEC. The company is

compacted graphite and HiSiMo cast iron, which is used

completely involved in the customerâ&#x20AC;&#x2122;s design process,

specially for high-temperature components.

| VIEW FROM THE TOP

PREPARING FOR ADVANCED STANDARDS IN URBAN TRANSPORTATION JAN HEGNER CEO of Daimler Buses México Q: How has your strategy to gain a greater market share

cost increase in the chassis, depending on whether you go

within the coach segment evolved over the past year?

from Euro IV or Euro V to Euro VI. Therefore, we need to

A: Daimler Buses remains a market leader in the urban

determine if we can absorb 20% extra costs, and if the client

transportation segment, currently holding a 50% market

will be capable of tackling a 20% price increase. This links

share. The coach sector is a bit more challenging due to

to the third factor, regarding the incentives the government

the difficult exchange rate situation and the tax increases

could offer to support this technology.

that have directly affected our operating costs. The strategy of changing our invoices from dollars to pesos was an

Q: What opportunities is Daimler Buses pursuing in the

important move to stabilize our business, eliminating the

fields of natural gas and hybrid technology?

risk that our clients might perceive. The problem remains,

A: Natural gas is still a growing market and we are currently

but we can help our customers during this challenging time.

participating with the Torino CNG and the Gran Viale LE CNG. Given the exploitation and production operations in

Q: How does your Nuevo Leon plant collaborate with

the country, as well as the huge availability of natural gas

Daimler’s Mexican operations?

reserves, this technology is perfect for Mexico, especially in

A: This facility shows our engagement with the Mexican

BRT systems. Nevertheless, the country still needs the proper

market and it gives us an opportunity to show our top-

network infrastructure to function properly. These units are

quality production to our clients. Customers can get

an important part of our business, but there will always be

involved in the manufacturing process from day one, so

remote areas in the country, which means that diesel will

they can be sure of the quality standards in Daimler’s

remain the main fuel to transport cargo and passengers. In

production. For us, quality does not start with inspections

Europe, we have seen that hybrid unit sales are overtaking

or when we deliver the vehicle to the customer, it goes

natural gas buses. Nevertheless, the infrastructure for

all the way back to the materials and the most basic

these products is not yet complete. Furthermore, we need

production processes.

to train our dealer and our service network to understand these systems, given that they deal with high-voltage and

Our coach line was added to the Nuevo Leon production

other applications that require a truly specific level of

in 2012, introducing Euro V technology to our units. We

expertise. The biggest benefit these vehicles offer is fuel

plan to complete our portfolio with this standard by the

efficiency, and part of Daimler’s strategy is to improve the

end of 2015, strengthening the leadership position we have

total cost of ownership of all its units. Manufacturing the

established over the last few years. Together with our joint-

vehicle is the easy part, but we want to be involved in the

venture partner Marcopolo, we provide a total of 5,000

whole lifecycle of the unit.

direct and indirect jobs in Nuevo Leon. Furthermore, if we add all segments within Daimler Group, we employ more

Q: How have your online and mobile platforms developed,

than 7,000 directly.

and how are they changing your value proposition? A: Our new Bus Builder app can interact with the different

Q: What barriers need to be overcome in order to advance

parts of the vehicle, allowing the clients to configure their

units from Euro V to Euro VI standards?

bus according to specific requirements. The software offers

A: There are certain conditions that need to be met in order

diverse choices regarding the complete driveline, as well

to allow this evolution. Firstly, all operators need ultra-low-

as details like curtains and seating colors. Furthermore, the

sulfur diesel (ULSD) availability throughout the country. If

platform takes into account all the financial alternatives

companies are going to invest millions on this new technology,

the client can use, to create the most adequate plan for the

they need to make sure the infrastructure is ready to support

unit. Online platforms are a global trend in the company,

it. The second factor is how ready the market is to receive

and every branch of the group is introducing a mobile

these new products. A Euro VI unit represents a 10% to 20%

solution in its operations.

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| VIEW FROM THE TOP

BETTING ON MEXICO’S NATURAL GAS FUTURE ENRIQUE ENRICH Director General of Scania Mexico

Q: Given that the bus segment is Scania’s strongest market

energy sources. I believe that by 2025 over 50% of the

in Mexico, which products have been the most popular?

country’s urban vehicles will run on natural gas. There are

A: Traditionally, Scania in Mexico has been truly successful

currently some small gas vehicles in Queretaro, but we

with long-distance buses, holding 54% of Mexico’s market

want to introduce vehicles that can handle a large amount

share in 2015. Given that this is already a strong position,

of people. This transition will possibly lower pressure on

Scania is now focusing on urban buses. We are strong

fares, as well. Fuel represents 40% of the total operating

players in this segment in Latin America, Europe, and Asia,

costs in most bus networks. Therefore, if the energy source

but we still have to develop our share in Mexico outside

is cheaper, fares will be too.

of Mexico City, Puebla, and Leon. We have been really successful with this strategy during 2015, since only Scania

Mexico is now also requesting low-entry buses in many cities.

buses were used in the Mexibus project in the State of

These units are built so they do not need any steps at the

Mexico, as well as in Puebla’s BRT program. We are now

entrance, making boarding faster and easier. This reduces

working on new projects in Mexico City, including one

emissions from the bus and from the cars waiting behind it.

of the main avenues in the city. In addition, Queretaro,

They also have the advantage that unlike low-floor buses, they

Monterrey, Guadalajara, Torreon, and several other states

have a significant ground clearance, allowing them to function

have interesting developments in the pipeline where

on all roads in Mexico City. Furthermore, the chassis price

Scania is obviously looking to have strong participation.

difference between normal and low-floor buses is 5%, making

We are now seeing proper structural planning with our

low-entry units a common trend in public transportation.

clients, which means that with the right vehicles we could develop proper routes designed for the exact number of

Q: What unique advantages do Scania’s natural gas

people that will use them.

engines offer to its clients? A: Mexico City is located at 2,200m above sea level and

Q: What fuels do you see becoming the next trend in the

Scania’s natural gas engines are able to run at 3,000m.

transportation industry?

Eighteen years ago, most vehicles powered by natural gas

A: Scania’s vehicle portfolio includes buses with diesel,

could only operate at 700m. We are the first company

natural gas, and ethanol engines. The latter is not

to have developed this technology, while most other

regulated in Mexico, which makes it impossible for us to

companies can reach only 1,800m. Additionally, our

offer it in the market. We are working with the Ministry of

engines can generate the same torque as our competitors

the Environment and Natural Resources (SEMARNAT) on

with fewer revolutions, which translates to less energy

this, but it will take some time to develop. We also have

consumption and less maintenance for the vehicle.

biodiesel capabilities; in fact, every Scania bus sold during

In terms of natural gas, most locations have different

2015 has the capacity to run on both diesel and biodiesel.

gas specifications, forcing manufacturers to develop

We are the only company that offers this flexibility.

their engines accordingly. This might create problems

However, our strongest bet for Mexico is natural gas. At

when traveling out-of-state, which is precisely why this

the moment, natural gas units have marginal revenues, but

technology was developed for inner-city transportation.

we expect 35% of our sales to be based on these engines

To address this issue, our engines have a sensor in the

by 2020. The industry has a strong tradition of operating

fuel tank that detects what type of gas is being used,

with diesel, which might hinder the transition. Even so, we

automatically adjusting the engine to run optimally.

are promoting tests that will show the efficiency of these

176

vehicles. Particulate matter is the biggest health concern

Q: Do you see a bright future for gas engines in the coach

in Mexico City, and in that regard, gas engines are 98%

segment?

more effective than diesel. If you add price range into the

A: Mostly, I see a future in the short and medium term for

equation, it is absurd not to think about moving to different

staff transportation and suburban buses. Nevertheless,

there are still some challenges we need to face in the coach

their trucks on the go. There is a lot of growth potential

segment. Natural gas units take away space for luggage,

in Mexico, but there are still many barriers for us. Given

which is a must in the Mexican market. In addition, coaches

that 100% of Scania’s truck production follows short cabin

need a higher horsepower output, which is difficult to

specifications, we did not even consider selling our trucks

generate with natural gas. Our engines currently generate

in Mexico before NOM-012 was implemented. Measuring

340hp, but we would have to increase that to 400hp.

trucks bumper-to-bumper is now a global trend, but it took

Nevertheless, if natural gas prices remain as they are right

a while to enter North America due to the influence the US

now, gas vehicles will be the victors. It will all come down

has on Mexico and Canada.

to energy prices. Q: How has Scania evolved in terms of sales and after Q: Besides low-entry buses and gas engines, what other

sales services?

developments is Scania currently working on?

A: Just as in every other location around the world,

A: In terms of safety, every bus we manufacture has

service is Scania’s main focus in Mexico. In April 2015, we

ABS braking systems. In addition, we have developed

inaugurated our spare parts hub called Middle American

an electronic emergency brake that reacts automatically

Parts Center, allowing us to cover 95% of our clients’

if it detects a drastic distance reduction between the

demands straight away. We have our own service network

bus and a random object. Visibility is also becoming an

with 47 points of sale and workshops in San Luis Potosi,

issue, so we have created flat nose or short cabin buses,

Puebla, Monterrey, Guadalajara, Torreon, and several

which improve both the visibility and handling of the

other locations, none of which are third-party distributors

unit. Additionally, we are now distributing our Scania

except for Cancun. Additionally, Scania has a total of 600

Communicator system with every new vehicle, linking

employees in Mexico of which 520 are focused on after-

directly with Scania Fleet Management Services. Line 2

sales services. All these strategies give us a 65% after-

of Mexibus in the State of Mexico has this device, and

sales penetration among our clients, with more than 2,800

it has been a huge support for the management and

signed maintenance agreements with Mexican customers.

maintenance of every unit. We are also working on the

This is a record for the domestic market, as many of our

new Scania Watch where customers can see data about

competitors do not reach a 5% share.

Convencidos en crear soluciones de transporte.

PROVEEDOR TOTAL DE SOLUCIONES

Hoy en día, Scania es uno de los principales fabricantes de camiones pesados, autobuses, motores para aplicaciones industriales y marinas. Ofrecemos una amplia gama de servicios, que van desde la asesoría, hasta el servicio postventa. Tenemos la visión de proveer soluciones a la medida de las necesidades del transportista y ser un aliado estratégico en la preferencia del usuario y su satisfacción. Soportamos a nuestros clientes con productos tecnológicamente avanzados, ecológicamente amigables y operativamente rentables.

Talleres/Refacciones Mantenimiento óptimo, en manos de profesionales. Piezas legítimas Scania, le garantizan larga vida útil de su unidad.

Tecnología/Conectividad Herramientas que le permitirán monitorear la ubicación, consumo de combustible y uso de motor en tiempo real.

Capacitaciones La capacitación de los conductores, mejorará el rendimiento de su vehículo y la rentabilidad de su empresa.

177

| VIEW FROM THE TOP

GENERATING BRAND RECOGNITION WITH FOCUS AND EFFICIENCY JUN NABAHASHI Director General of ISUZU Q: What have been the highlights of 2014, and how did

them understand how we work and how we offer our

the year compare with 2013?

services. We are currently showing these vehicles in our

A: During 2013, clients were hesitant to buy our products,

dealerships in Pachuca, Monterrey, Cancun, Tepic, Culiacan,

but in 2014 they started to purchase again. Our success

and Tijuana, and the feedback that we are receiving is

can be attributed to the support services that we offer

always the same. We focus on making our products really

to our dealers and customers. Isuzu’s main strategy is to

different from the competitors, while also offering better

take care of its customers. A few years ago, our customers

design and fuel economy. We are thinking of adding a new

had contracts with other corporations, but they have since

bus to our line-up but there are still no concrete plans.

returned to our brand. In terms of trucks, the best-selling model of 2014 was the ELF 300. Most of the trucks were

Q: Isuzu also introduced a heavier vehicle, how is this

sold to our fleet customers for transportation and payload

truck positioned in the market and what share are you

purposes, given that it is the most suitable model for this

expecting?

kind of application. All of our models from the ELF and

A: At the moment, we are not thinking about a specific

the Forward series offer the same value and are attractive

market share, given that the market is relatively new to us,

trucks that offer substantial fuel efficiency. We also offer

which is why we have released our models progressively, and

the Eco-Day program on the second Saturday of every

we expect to continue doing this on a yearly basis. Generally

month, where we instruct operators on how to properly use

speaking, the tendency nowadays is to downsize products

their units and how to handle the transmission. Being diesel

and strive for fuel efficiency. In that aspect, we have received

engines, these trucks should not be used in the same way

positive feedback from our clients, especially since we are

as gasoline engines; otherwise they will not achieve their

the only brand in this segment that offers a 4-cylinder 5.2l

highest fuel and power efficiency.

engine. Usually, a 6-cylinder engine is more popular, but being more compact means that our engine is lighter and

Q: Last year, Isuzu introduced the 600-Bus line to Mexico.

more powerful, allowing operators to carry a heavier load.

What led to the company’s sudden interest in this market? A: We only offer six truck models and we do not have any

Q: What are Isuzu’s main priorities and targets for the rest

interest in manufacturing larger or smaller buses. The only

of 2015?

product that we are marekting within this segment is the ELF

A: We are going to focus our efforts on support services

600-Bus. We know the challenges of this business and our

and letting the Mexican people know about Isuzu. When I

limits in terms of resources, which is why we are taking this

came here three years ago, I saw that there was potential to

step by step. Most of the clients end up buying the ELF 600-

increase the number of Isuzu vehicles on the road because

Bus after a test drive. That is why the best way to sell this

of the lack of brand recognition. Our trucks have better

vehicle is to let the customers drive it and feel the difference.

visibility and maneuverability compared with other vehicles, and we need to show visiting customer and available

178

Q: What are the most common characteristics that you

prospects the advantages of our products. During 2012, we

look for in your potential clients?

reached total sales of 20,000 vehicles, while by the end of

A: Since 2012, we have not changed our target market,

2015 we expect to achieve total sales of 36,000 units since

since we do not have any interest in addressing the public

2005. Last year marked a solid year for sales, but we did not

transportation market. This market is usually price driven

do as well as we had originally anticipated, which was true

and we do not have the capacity to supply an enormous

for the entire heavy vehicle industry. In terms of new designs

amount of units at the same time. We do not want to take

and innovations, our cabin in the Forward series is already

on that kind of risk, which is why our market remains with

the biggest in its category, and we are planning to introduce

schools, hospitals, personal transportation, and shuttle

an even bigger one. This means that operators are going to

buses. Those segments and the operators working within

be more comfortable and their fatigue will be reduced.

LEADING THE CHARGE IN SUSTAINABLE MOBILITY Sustainable solutions are currently a key driver in terms

Currently, DINA has a 14% market share in the Mexican

of mobility developments in Mexico. Some companies are

bus market, making it one of the leaders in terms of

focusing on improving their technology to incorporate

manufacturing and commercialization of natural gas

ULSD, which is expected to be 100% available no later than

engines. The company has been developing this business

2018. Meanwhile, others are betting on alternative energy

model over the last five years, ever since it presented

sources, commonly choosing natural gas as the newly

the Linner G product line for the first time in 2009. Since

preferred heavy vehicle fuel for urban transportation. In the

then, the strategy has progressed, adding more operators,

midst of this transition, a Mexican company has decided

authorities, and even civil associations to the promotion of

to enter the fray, with hopes of leaving its mark on the

these vehicles. By the end of 2015 DINA expects to have

heavy vehicle market. More than just a normal bus supplier,

close to 1,000 natural gas units circulating in the country.

DINA has set the goal to become a sustainable transport

However, for this strategy to be successful, there needs to

solutions provider, as well as a generator of new ideas

be a change in the industry’s mindset. Muñiz claims that

and technological innovation. Jaime Muñiz, Purchasing,

DINA’s commercialization program has changed, favoring

Quality, and Engineering Director of DINA, stated that

large projects and the growth of emerging SMEs, and

DINA’s commitment to the needs of its customers is based

leaving the owner-operator scheme behind. This has been

on improving the level of satisfaction the company might

a notable trend in the market, with a huge impact on the

perceive. In line with that strategy, DINA’s ambition is to

development of new technology for buses and other heavy

become a consultant and business partner for all its clients

duty vehicles. With a lower number of clients to address,

in the fleet management sector.

companies can move away from unit differentiation,

“One of the most important decisions we have made is to work on innovations and the development of new technological platforms, which would allow us to address the needs of the domestic and the international market” Jaime Muñiz, Purchasing, Quality, and Engineering Director of DINA

According to Muñiz, DINA is committed to creating an

focusing on improving fuel economy and the overall

integral product offering that is able to compete against

performance of the units.

any international player in the country. “One of the most important decisions we have made is to work on innovations

Evidently, a lower number of clients does not mean less work

and the development of new technological platforms, which

for the company, given that sales and post sales services are

would allow us to address the needs of the domestic and the

two of the most important factors to ensure future customer

international market,” he states. This is a huge endeavor in an

loyalty. With that in mind, DINA has focused most of its

industry where most competitors work beyond the quality

efforts on listening and interpreting the needs of its clients

standards demanded by national regulations. Nevertheless,

correctly, ultimately offering a better product with every

DINA is now one of the companies driving the change

renovation. “We want to provide our clients with the best

toward sustainable mobility, and is aware of the challenge

products and the best savings program. That is why we are

that population growth poses for Mexico’s main cities,

focused on delivering buses with the highest performance,

as well as the necessary improvements to infrastructure

whether it is by implementing sustainable and economic

required to align with international best practices. “We

fuels like natural gas, or by offering better prices through

need proper transportation systems and a well-supported

components that make our vehicles more affordable,” says

network that guarantees efficiency, connectivity, safety,

Muñiz. “Our distribution and service network has been a

and a true commitment to the environment in urban and

huge advantage to our clients, since it allows us to be close

suburban areas,” adds Muñiz. “We must also rearrange

to them, understand their requirements, and make quick

routes so that more people will want to use public transport,

decisions if the situation demands it.” This responsibility to

leaving private vehicles as their second priority. The country

its clients is one of DINA’s main advantages, enabling the

is slowly creating a better understanding in terms of

company to offer personalized training, proper attention

sustainable mobility, and DINA is fully committed to this

in authorized service centers, global maintenance policies,

transition.”

and a range of after sales services.

179

| TECHNOLOGY SPOTLIGHT: VOLVO GROUP EMERGENCY BRAKING SYSTEM

slowing down the truck in imminent collision situations.

When it appeared in the market, Adaptive Cruise Control

With a radar sensor located directly behind the grill, the

(ACC) was a major innovation in the automotive industry and

truck knows how close it is to the nearest vehicle. At the

a huge step toward autonomous driving. Nevertheless, this

same time, a camera located at the top of the windscreen

technology alone could only function in certain conditions,

gives information on what type of vehicle the truck has

and was sidelined as an aid for normal driving situations. One

ahead. This data normally feeds the ACC system, in order

of the major challenges for automation technologies is how to

to keep a fixed distance with the next vehicle. However, in

make driving safer, preventing as many accidents as possible,

case this car brakes without warning or if another driver

and it was with this goal in mind that many companies

cuts in front of the driver, the Collision Warning System

started to work on better safety electronics. Systems such

activates. In either of those cases, the first thing the system

as Lane Keeping Assistance (LKAS) and Driver Alert Support

does is alert the driver with a fixed signal in the windscreen.

help the driver focus on the road. Additionally, features like

If there is no response from the operator, this signal starts

Anti-Block System (ABS) and Electronic Stability Program

to blink and a loud audio alert is activated. If still the

(ESP) that help the vehicle keep its balance in emergency

driver does not hit the brakes, the system autonomously

situations. However, none of these systems are capable of

starts to apply them with a limited force. In an imminent

absolutely preventing an accident, and they are of no use

collision situation without any response from the operator,

if the driver does not respond to the emergency. For that

the emergency brakes are fully activated, avoiding the

reason, Volvo Group has now developed a system included

crash or at least diminishing the speed of the impact. The

in its trucks, to be able to act in these situations even if the

system has been engineered to deal with stationary and

driver is not aware of the danger.

moving obstacles, and at relative speeds of up to 70km/h. Obviously, these emergency braking situations can be

The Collision Warning System with Emergency Braking has

abrupt, perhaps unnerving drivers behind the truck. For

been a sensation in the industry. This feature is now included

that reason, Volvo has also introduced its new braking light

in the Volvo FH Series, and it has helped to reduce rear-end

system, alerting other vehicles on the road in case of an

collisions significantly by autonomously braking or at least

emergency situation, by flashing the brake lights rapidly.

| VIEW FROM THE TOP

BODYBUILDER’S DNA CENTERED AROUND PRODUCT CUSTOMIZATION PAULO ANDRADE Director General of Polomex Q: How has Marcopolo progressed with its 20-25% growth

Q: In order to provide that flexibility, how have you grown

objective for 2015?

your manufacturing and production capacities since 2014?

A: From the year 2000 to 2008, Marcopolo reached 35%

A: Back in 2008, we achieved global production of 11,000

coach and urban market share, but when the financial crisis

units, with 3,500 of them being manufactured in Nuevo

of 2009 came along, as well as some additional factors,

Leon. After that year, we invested a lot of resources in our

that share decreased considerably. In 2014, while our goal

installations, and we have improved our processes ever since.

was to hit 25%, our overall result was 21%. Despite that,

We now have a total production capacity of 4,500 units, and

we saw a significant improvement in the coach market,

we only need to recruit more operators to reach that mark.

helping us close the year with 35% in that segment. This was thanks, in part, to the introduction of the G7, of

Q: Which of your products represent the most successful

which we sold over 400 units. Even so, we did not see

and attractive offerings in the Mexican market?

any significant growth in our urban share, which is why

A: Typically, our Torino urban bus has had the biggest

our overall participation remained at 21%. For the rest of

success and the biggest sales volume. However, the G7

2015, we will undoubtedly continue to promote our coach

portfolio is growing substantially and it has been gaining

line. We have worked extensively on improving our industrial

ground within the market. For any product, there is a

processes to increase our capacity, and we have made

relative response depending on the market’s demand,

important investments in commercial strategies to expand

which fluctuates from year to year. Therefore, we have an

our bodybuilding service. Moreover, in March we announced

important philosophy to not produce in order to sell, but

a more flexible business model, enabling us to build bodies

to sell in order to produce. This is a great advantage for

with other chassis. Although we will continue to work with

our clients that want to customize the product from its

Daimler as partners, our strategy is to diversify our options,

inception. It is important to first create demand, and then

allowing us to work with other companies and giving us the

increase your production portfolio accordingly.

power to regain our combined 35% market share. In addition, we are now making the necessary product modifications

Q: The industry is currently demanding more efficient

to increase our portfolio with products from Scania, MAN,

and environmentally friendly buses. How does Marcopolo

Volvo, Volkswagen, and every other chassis manufacturer.

direct its R&D efforts toward these requirements?

This is the most important renovation project for Marcopolo

A: Our top priority for every vehicle is weight reduction,

since the company arrived in Mexico, and we see it as a new

but also maintaining the necessary structural strength,

beginning for the company. Our DNA is completely wired

which is only possible by using special materials for their

toward product customization, and everything is in our favor

construction. If the bus weighs less, the need for engine

to make this strategy work.

power decreases and fuel consumption drops. The company also has an important environmental strategy

Given its non-standardized industrial process, Marcopolo has

that includes the necessity for all our materials to be

invested heavily in training, which in turn has increased our

recycled for future products. In addition, the design and

retention rate. This has given our workforce a lot of maturity

aerodynamics are important points in our strategy as well,

within the company, while also preparing us to answer every

especially within the coach segment. Our research mostly

need in terms of volume and product specifications. Our

targets reduction in the CX or drag coefficient, which

current portfolio goes from double-deckers, with 60-70

determines the vehicle’s wind resistance. This coefficient is

person capacities, to a 20-passenger minibus. Thanks to this

obviously at its lowest in race cars, but we have been able

new flexibility, we will be able to continue manufacturing our

to lower it to 0.42 in our G7 line, which is an extremely low

current product line, including special products like the BRT

resistance in a vehicle of this size. We cannot impact the

buses that we have built in Chile and Colombia, thus bringing

engine’s functionality, so we must continue to do our best

our whole product line to the country.

in terms of design and bodywork.

181

| VIEW FROM THE TOP

CUSTOMIZATION AS TOOL FOR GROWTH PAULO DELLANOCE Director General of Novacapre

Q: How has the company progressed toward the objective

without compromising strength. There are available

of becoming the number one bodywork manufacturer in

materials on the market that could make the buses lighter,

Mexico by 2019?

but most customers are still not willing to pay for them.

A: In 2014, we developed 17 variations of the existing models.

Mexican suppliers import aluminum and sell it at a high

Our first strategy was to provide products for all segments

markup, meaning that we can purchase the metal directly

because offering a complete product range is essential

from China significantly cheaper. This also happens when

in this market. We also established a presence within the

you buy electrical components from reliable suppliers in

microbus segment, particularly with Ford and GM. In terms

Mexico, they cost significantly more than if you buy them

of exports, we have at least ten projects up and running in

from China. The quality might be higher, but not enough

South America, Central America, and the Caribbean, so we

to justify the extra cost. The other challenge is to make

are well on our way to reaching our 2019 goal. This segment

buses more comfortable for the passengers. The shift

produces around 8,000 units per year in Mexico, which

towards lighter vehicles will be driven by companies like

are divided between five players and six brands, and our

Novacapre, but the concepts to improve the design and

market share is around 15%. However, we made the strategic

comfort of the entire bus should come from the brands.

decision to grow in a disciplined manner, not just to pursue sales. As a result of this approach, we implemented the

Q: How successful is Novacapre in other markets, and how

Toyota Production System (TPS) and transformed the

is this affecting your repair and maintenance services?

company from a family business into a company that now

A: In Colombia we are working to get orders for about

has a board, a president, and outside auditors. The owners

700 buses which will be delivered over the course of 15

want Novacapre to have a strong foundation, a strong, high-

months. We also have projects in Central America, the

quality product line, customer satisfaction, and a steady

Caribbean, and South American countries. Our repairs

increase of sales.

are being conducted wherever the buses are located. Part of our strategy is to have workshops in different regions

Q: Aside from the exterior geometry of the buses, what

with available technicians who understand our products

are the main differences between the units you produce?

and can charge our clients for any necessary work. Once

A: Our level of verticalization enables us to customize to

Novacapre is more successful in other Latin American

our clientsâ&#x20AC;&#x2122; needs. For instance, we make our own windows

markets, we will duplicate this business strategy.

and seats, as well as vacuum formed and thermal formed plastics, making it very easy to move things around the

Q: How could Novacapre optimize its production capacity?

plant. This also limits the ordering of products from third

A: With the present mix we could hit our maximum

party suppliers, reducing overall costs. As an example of

production capacity without significant CAPEX; we would

the diverse market segments we serve, buses in Mexico City

need to add manpower and shifts. However, the major

must meet certain prerequisites while these are different in

constraint has been working capital due to the large cycle

other states. These requirements range from the position

between the time we pay for materials and labor, and the

and size of the doors, to the type of windows, the length of

time we actually get paid. On occasion, a dealer might face

the unit, and the height of the bus, meaning that our flexible

problems with their customers, so the payment could be

assembly line is perfectly suited for such orders.

delayed until the situation is resolved. Many companies have gone bankrupt because of this, so we have to be

182

Q: What new technologies and processes need to be

careful. We intend to reach a capacity of 3,000 units,

introduced in order to meet industry demand?

but only if the company can finance it. This year will be a

A: The most important thing to manage is weight

turning point since we planned the ramp-up phase for 2014

reduction, a challenge the light vehicle segment is facing

and 2015 by working on the foundations, and by the end

too. The quest for lighter buses is difficult to achieve

of the year we plan to be producing 120 units per month.

| VIEW FROM THE TOP

STRONGER BUSES AND LIGHTER MATERIALS JULIĂ N BECERRA Director General of Beccar

Q: In 2014, Beccar manufactured approximately 60

Q: How much flexibility do you need in your facilities to

different body models. How has production evolved in

move from one product to another?

the past year?

A: We currently operate four production lines, aligning

A: We have many different body families, and each one has

them according to the working hours that every model

eight or nine models. In 2015 we added two new buses:

requires. Additionally, there are important differences

the URBUS G3 with a front engine and the URVIABUS

between our available features, which have a repercussion

G3 with a rear engine. These units were redesigned, and

on the production costs for each model. In terms of

every five years we are updating our product portfolio.

automation, we are now introducing a robotic arm that will

We are also working on a light weight coach, which has

help us speed up our new-unit production. Additionally, we

been quite popular. This is a lighter bus adapted for short

are improving our production of new molds, reducing the

distances, offering better performance and durability.

process from six to three or four months. Currently, cleaner

Our process starts with our design department, based on

bodyworks are becoming a trend, with very few bends

the information we get from our clients, the production

and details. This enables a faster cleaning process of the

line, and the people from our maintenance area. At first,

interior and the exterior, making operations more efficient.

new units are fabricated outside the production line, and

Furthermore, it simplifies repair processes, without losing

they are slowly introduced into our normal production

the unitâ&#x20AC;&#x2122;s image and design.

until they become regular models. We made a significant investment in 2014 and we had plans to increase it in 2015.

Q: How does Beccar collaborate with its clients during the

However, we had to stop those projects because of market

design process?

changes. We also bought more equipment, renovated our

A: The brands give us certain guidelines, and as long as we

entire computer network, and implemented a new ERP

comply with them we can suggest any design we consider

system. Additionally, we are planning to add a new facility

appropriate. Most limitations relate to weight and how the

in Zapotlanejo, Jalisco, to manufacture steel and plastic

body is going to link to the chassis; other than that, it is up

components both for our own production and for other

to Beccar. These companies have tested their platforms

companies, leaving only assembly operations in our current

rigorously, and they know their specifications. The chassis

facilities. However, that project will most likely advance at

is the core of the vehicle and since there are many models

the end of 2015 or early 2016.

that use the same platform, the specific details give each brand its personality. Beccar has started working with several

Q: Aside from these renovations, what new products have

new materials to make our products lighter and improve

you introduced to your production line?

mechanical properties. We are currently working with a

A: We are currently working on new assemblies with brands

high-resistance electrogalvanized profile, which allows us to

like Mercedes-Benz, International, Scania, MAN, Volvo,

use a thinner plate in the body with the same mechanical

and Volkswagen. We also have business with ISUZU and

characteristics. That way, we can reduce each unit by 100kg

Hino, but of low volume, given that there are no assembly

or 200kg, improving fuel efficiency significantly or adding

operations for these units. We have enough flexibility to

more space for two or three extra passengers. We have

fabricate any vehicle between 8.40m and 12.80m, with all

performed several modular tests with this material focusing

the necessary equipment and customization. This involves

on impact and torsion effects, and even though we have not

certain risks in terms of time and volume, but in return we

tested a complete unit, we are working to have 100% of our

receive the clientsâ&#x20AC;&#x2122; trust and loyalty. We have moved past

modules tested in every possible aspect. In collaboration

small operators, and now our business is more oriented to

with a university in Guadalajara we are researching resistance

small fleet managers with route coordinators. That means

and other mechanical properties, while keeping a certain

fewer clients to coordinate with, hence a more structured

confidence margin in our design to make sure that the vehicle

manufacturing process.

can withstand any obstacle at any speed and acceleration.

183

| VEHICLE SPOTLIGHT: POLOMEX PARADISO 1800 DD The Paradiso 1800 DD amplifies the pleasure of traveling with

modern design and luxury, and its advanced features within

high-quality standards, comfort, and safety. This busâ&#x20AC;&#x2122;s overall

the intercity bus segment. The vehicle possesses a total width

hardiness is coupled with exemplary levels of efficiency, as

of 2.6m and a height of 4.23m, allowing for interior heights

well as a maximum passenger and luggage capacity that

of up to 1.8m on the upper and lower decks. Furthermore,

sets it ahead of the competition. Overall, the Paradiso 1800

at the lowest weight in its category, the Paradiso 1800 DD

DD maximizes cost effectiveness through environmentally

is a distinctly environmentally friendly option. The Euro V

friendly design, fuel-efficiency, and a level of personalization

certified technology, easy access to engine and maintenance

to meet the needs of any passenger.

Marcopolo has

spots, and new external light assembly including LED and

produced a double-decker that exudes an attentive focus

daytime indicators, all contribute to the safety and reliability

on technology and comfort, thanks to its combination of

of this vehicle.

This double-decker can be equipped with night lighting

Practically the entire exterior is made of plastic reinforced

in the parcel rack and in the corridors, individual

with fiberglass, while the exteriors below the window

reading lights, and lighting on the stairs. The seating

line are composed of smooth aluminum panels. The

meets national and international safety and comfort

conventional sliding windows are equipped with a

standards, and the Paradiso can be optionally fitted

manually operated locking system, and are also made

with super-soft armchairs, sofa beds, and semi recliners,

of fiberglass reinforced plastic, but are mounted on an

with a choice of master or executive, each having four

aluminum structure. Passenger access is via a pantograph

reclining positions. These options ensure the maximum

door that can be remotely triggered by the driver, adding

level of comfort appropriate for the journey length that

to the security features designed into the Paradisoâ&#x20AC;&#x2122;s sturdy

the vehicle is intended for.

structure.

While OEMs are investing in facility expansions and new plants in Mexico, direct suppliers are gearing up to meet the growing demand while meetings industry leading quality standards and keeping the logistics cost to a minimum. Success stories range from tire manufacturers investing over US$2 billion in Mexico to produce more than 12 million tires per year in order to meet local demand while exporting to the US. Similarly, the arrival of KIA to Nuevo Leon is followed by a wave of Korean suppliers, while the expansion of the Renault-Nissan facility will likely bring more than 75 new Japanese companies to the country, each requiring local materials and skilled labor.

The main opportunities for Tier 1 suppliers are explored in this chapter through the eyes of industry experts and invested parties, and the absolute necessity to deliver constant high quality and efficiency, while applying cost reduction requests from OEMs, is examined in detail. The chapter also discusses the way in which modern manufacturing is increasing the complexity of manufacturing and supply chain processes and intensifying the importance of proximity to OEM plants.

DIRECT SUPPLIERS

Demonstrating our commitment to Mexicoâ&#x20AC;&#x2122;s automotive industry

In 1995, MAHLE became the first OEM piston supplier with a presence in Mexico. We now supply pistons and complete power cell units, cylinder liners, piston rings, engine bearings, connecting rods, air intake modules, air cleaner modules, tank ventilation modules and heat exchangers for engines and transmissions. MAHLE has shown our committment to supporting the growth of our customers in Mexico over the past twenty years. With its unique systems competence in the areas of engine systems, filtration, electrics/mechatronics, and thermal management, MAHLE ranks among the top three automotive systems suppliers worldwide. In the original equipment industry, MAHLE provides technologically innovative solutions for automotive, commercial vehicle, machinery and other industrial applications. The Aftermarket business unit also serves the independent parts market with MAHLE products in OE quality. www.mx.mahle.com

CHAPTER 7: DIRECT SUPPLIERS 190

VIEW FROM THE TOP: Rene Schlegel, Robert Bosch México

191

VIEW FROM THE TOP: Toshio Tanaka, Aisin Mexicana

192

INSIGHT: Felipe García Salinas, MAHLE Componentes de Motor de México

193

VIEW FROM THE TOP: Mario Rodríguez, Arbomex

194

VIEW FROM THE TOP: Antonio Herrera, TREMEC

195

VIEW FROM THE TOP: Hiroyuki Kai, JATCO México

197

INSIGHT: Antonio Hernández Jardínez, Corporativo Shernand

198

VIEW FROM THE TOP: Armando González, Nelson Global Products Monterrey

198

VIEW FROM THE TOP: Patricio Gil, Blackhawk

200

VIEW FROM THE TOP: Humberto Juárez, Ryobi Die Casting (RDCM)

202

VIEW FROM THE TOP: Erwin Polo Feldmann, Gestamp Mexico

203

VIEW FROM THE TOP: Máximo Vedoya, Ternium México

204

VEHICLE SPOTLIGHT: Volvo XC90

206

VIEW FROM THE TOP: Martín Rosales, Goodyear Mexico

207

TECHNOLOGY SPOTLOGHT: Epicor Mattec MES

208

VIEW FROM THE TOP: Jorge Vázquez, Continental Automotive Guadalajara

209

VIEW FROM THE TOP: Javier Mendoza Altamirano, Continental Tire de México

210

VIEW FROM THE TOP: Tom Gravalos, Pirelli Mexico

211

VIEW FROM THE TOP: Raúl Armenta, Autoliv

212

INSIGHT: José Sanromán Tovar, Kautex Textron de México

Hauke Jungnitz, BOS Automotive Irapuato 213 VIEW FROM THE TOP: Carlos Casado, BOS Automotive Irapuato 214

VIEW FROM THE TOP: Stephan Joachim, REHAU Mexico

215

INSIGHT: Elimelec Villicaña Chatelain, Grupo Amaya Telleria North

216

VIEW FROM THE TOP: Raúl Suárez, MANN+HUMMEL Mexico

217

VIEW FROM THE TOP: Juan Roberto Aguirre Sosa, TUPY Mexico

218

PLANT SPOTLIGHT: MAHLE Ramos Arizpe & Celaya

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| VIEW FROM THE TOP

STEADY INVESTMENT TO KEEP UP WITH GROWING DEMAND RENÉ SCHLEGEL President of Robert Bosch México Q: Out of the products that Bosch manufactures, which

them to be sourced locally, especially if their vehicles are

represent the highest value for Bosch in Mexico?

exported to multiple markets. In line with this, we devised

A: The electromechanical components often have long-term

a localization plan together with the customers, helping

and stable high value. This is because electro mechanics have

to formulate the ideal handover steps for both imported

a high requirement of precision, are less affected by price

products and locally produced products.

erosion, and possess high material value. Furthermore, since the requirements for precision and quality are increasing

Q: How does Bosch approach the challenge of competing

around the world, expectations of product performance are

with the influx of cheap, low-quality, imported aftermarket

rising alongside them. On the electronics side, there is high

products from Asia?

value at the moment of innovation, but that value decreases

A: The aftermarket in Mexico is going through a

as soon as certain products go to mass market. In terms of

metamorphosis. There is high demand for auto parts and

semiconductors and PCBs, volumes are very high, with some

workshop retail in Mexico because of the amount of old

manufacturing processes being demanding and critical from

cars on the road. However, with the increased availability of

an environmental point of view. This means that plant side

new vehicles through financing, we see a growing market

investments are often major and the scale of production

that will favor branded dealerships. In between these two

is crucial. This fact, combined with the incredible volumes

extremes, our large chain of Bosch Car Services has a

that must be produced, means that a solid amount of

considerable opportunity to grow. Since quality is crucial for

world demand is now produced by us and others in China

safety, Bosch will focus on training at a workshop and retail

to reach a scale that many other countries may not reach.

level to ensure that price and quality differences are clearly

Mexico’s opportunity lies in combining these base products

communicated to the customer. To this end we need to have

and platforms into many customer-specific variants that are

shorter training sessions, and higher interaction frequency.

often quite high-tech. While we can produce some PCBs here, as well as importing others, it is important to finish the

Q: What kind of new innovations can we expect to see

final product in the same location because of the high value

from Bosch in the coming years?

added and the high number of variations.

A: Bosch produces a new patent every 30 minutes and we spend almost 10% of our sales revenue on R&D. Consumer-

190

Q: What steps has Bosch been taking to ensure that it

oriented, visible products become more practical and more

can meet the increased manufacturing demand from the

well-known as they are used. This is not innovative in terms

automotive industry?

of technology only, but in terms of thinking harder about

A: The overall plan for Mexico was to invest around €460

how to create products’ features that have immediately

million (US$515 million) between 2012 and 2017. Bosch tends

clear and visible benefits. Energy and energy conversion

to have major build-outs occurring at two sites at the same

is another subject in which we can innovate well and the

time - one in progress and one in the starting phase. In line

amount of ideas we are developing in this field is large. We

with this structure, part of the investment was committed

must use less, store more, and regain more energy in order

to our Toluca plant, which is now complete. Juarez is in

to increase customer value while decreasing environmental

the development stage, with San Luis Potosi up next,

impact. Within the automotive sector, we are working on

followed by Aguascalientes. The company’s approach is to

technology that will stop a motor when going downhill.

pace our plant investments based on demand, localization,

We call this sailing, which is a way of saving considerable

and complexity, usually giving us a stable investment level

amounts of energy, and is similar to our start-stop system

in Mexico of about US$100 million per year. This steady

that many are now experiencing in their cars. These

pace is what gives the company more confidence that it

innovations are just a couple of our many examples that

is handling these investments well. Some of the products

show how Bosch can save money for the user, while making

that we supply to OEMs are of high value, so OEMs need

mobility more environmentally friendly.

| VIEW FROM THE TOP

MEXICOâ&#x20AC;&#x2122;S BATTLE TO OVERCOME CHALLENGES OF COST COMPETITIVENESS TOSHIO TANAKA President of Aisin Mexicana Q: How does your integrated production system ensure

A: In North America, we are making body parts for many

product quality?

companies, such as sunroofs, door frames, and moldings.

A: We have an original assembly process that we have

We also make outside handles, and seat adjusters, as well

been mastering for over 16 years. Four years ago, we

as engine components such as water pumps, oil pumps,

transferred the assembly, injection, and press process

transmission cases, and transmission clutch covers. In

from Mexico City to Celaya. We were very successful

Mexico, we are only making door components. The fact that

in passing on the knowledge of press maintenance and

our competitors are making body and engine parts in Mexico

machining to the new location. Compared with local

and shipping them to the US is a big problem. We would

suppliers, our in-house costs are competitive and our

like to start producing bigger products in Mexico in order to

products offer an exceptional quality to cost ratio. This

increase our chances of selling to Mexican customers.

is partly due to the fact that our processes are wellsupervised, making it very easy to identify a problem,

Q: Which steps are you taking to increase your local

isolate it, and deal with it. The injection and press systems

sourcing to be more cost competitive?

are interconnected, making it simpler to fix any problems

A: Many of our eight plants globally do pressing, which

as soon as they arise.

allows us to compare a simple cost path, checking each component to see where it is cheapest. We usually find the

Q: What new products would you like to introduce to the

cheapest components, not in Mexico or the US, but in Asia.

Mexican market?

We want to have 100% of our suppliers in Mexico for our

A: If we have the chance, we would like to start producing

Mexican plants. Unfortunately, the cost competitiveness

bigger parts, such as sunroofs or doorframes. Clients look

of each component does not make NAFTA or Mexico

for suppliers that are situated near their factory in order to

the cheapest sourcing option. We use Asian parts for

reduce logistics costs for large components. Aisin knows

benchmarking, and we try to find suppliers that can

the products and manufacturing processes very well, so if

make them for the same price in Mexico, but so far we

our plants in China and the US can manufacture the bigger

are struggling with this. If we set the benchmark for local

parts, so can Mexico. Even though we would have to open

suppliers with the prices of Asian products, it might be an

a new plant to produce these parts, we are eager to close

incentive for them to innovate. However, it is complicated,

a business deal, as it is an opportunity to produce them

because even though human capital in Mexico is cheap,

cheaply for any potential clients.

the costs of components remain expensive. This makes it hard for suppliers to be cost-competitive.

Q: With many OEMs expanding their capacity in Mexico, what effect is this having on Aisinâ&#x20AC;&#x2122;s business strategy?

Q: What will be the main focus of Aisin over the course

A: Many of our related companies in the US currently

of 2015?

ship their products to Texas, Mississippi, or California,

A: We need to protect our actual business as many

which creates enough considerable competition for the

competitors are coming to the region and are presenting

time being. However, in the near future, competitors will

competitive prices to the customers. To take care of our

produce products in Mexico and ship them to the south of

customers, we need to reduce our costs, which is our

the US at a lower cost. If our competitors begin expanding

main goal for 2015. A point in our favor is that we have

into the US market, where we already have a presence, we

been manufacturing the same parts in Mexico for 16 years,

would have to diversify our product portfolio to hold on to

perfecting the process and doing it in the most economical

our clients in that country.

way possible. Many new Korean and Japanese companies are entering the market, but even though they may offer

Q: What are the most important products Aisin produces

similar assembling and injection processes, it will take

in North America?

some time to match us.

191

PROXIMATE SUPPLY STRATEGY DRIVING EXPANSION Certain global manufacturers had the vision and the

air conditioning and engine cooling systems, MAHLE’s

foresight to begin supporting their OEM clients from the

product portfolio has grown significantly. This merger

get go, giving Mexico a real head start in achieving the

brought complete exhaust gas recirculation modules, as

reputation it holds today. MAHLE made the decision to

well as intake systems with integrated charge air coolers

establish a manufacturing presence in Mexico in the early

to MAHLE’s inventory.

1990s. At that time, the company’s automotive customers were looking for local supply as they began expanding their

With such a broad range of products, MAHLE’s structure

engine production in Mexico. However, the decision to build

has to be comprised of a number of business units. In

the first facility in Mexico was based on a broader strategy,

Mexico, the company has four business units and a

which is the company’s commitment to supplying products

service area. The first, BU1, produces pistons, connecting

from facilities that are close to its customers’ manufacturing

rods, liners, piston rings, and bearings. BU2 is responsible

locations. “The company’s presence in Mexico has played a

for filter systems, manifolds, and oil coolers. BU3 covers

significant role in the group’s overall sales growth since its

thermal

arrival,” explains Felipe García Salinas, Director of Finance

exchangers. Finally, BU4 is dedicated to the aftermarket

and Administration at MAHLE Componentes de Motor

side of things. The Ramos Arizpe service area provides

de México. “Since 2008, sales have tripled out of MAHLE

finance, accounting, treasury, human resources, IT, and

production facilities in this country. Last year MAHLE’s total

legal services to all the other business units. MAHLE also

sales were more than US$10 billion, while sales in Mexico

has a sales office that maintains close contact to its local

were around US$1.1 billion. During 2015, we are expecting a

customers.

systems,

radiators,

compressors,

and

heat

sales increase of around 5%. Not only have we participated in the increased vehicle production that has taken place here,

In line with MAHLE’s growth strategies, the company held

but we have also increased our level of exports.”

the grand opening ceremony for a new US$59 million,

“During 2015, we are expecting a sales increase of around 5%. Not only have we participated in the increased vehicle production that has taken place here, but we have also increased our level of exports” Felipe García Salinas, Director of Finance and Administration at MAHLE Componentes de Motor de México

When MAHLE began supplying pistons out of the

367,000ft2 plant in Ramos Arizpe in June 2015. The

Ramos Arizpe facility in 1995, it became the first OEM

facility produces HVAC modules and heat exchangers for

piston supplier with a presence in Mexico. The company

passenger cars and commercial vehicles, and is part of

originally bought 11.5 hectares, but had visions of

the company’s thermal management business unit. “The

permanently growing in the area. The first phase included

subject of efficient thermal management is particularly

just one building with one piston machining line, but the

significant for new generations of vehicles, as fuel

plant is now working at 85% capacity, with 75% of its

consumption and CO2 emissions can be further reduced,”

production being exported to the US and Canada, and

states García Salinas Sr. “This can also be seen in the

the remaining 25% targeted toward the domestic market.

increasing significance of alternative drive systems, from hybrid cars to vehicles with purely electric or fuel cell

192

MAHLE is now supplying nearly all major OEMs that are

drive systems.” Also in June, as part of MAHLE’s Filtration

producing engines and vehicles in Mexico, including FCA,

and Engine Peripherals business unit, the company

Ford, GM, Honda, Nissan, and Volkswagen. The company

officially opened a new US$19 million, 193,000ft2 facility

supplies them with a wide array of products, including

in Celaya. The plant is expected to employ 450 people by

pistons and complete power cell units, cylinder liners,

2019 and will produce air ducts, air intake manifolds, air

piston rings, engine bearings, connecting rods, air intake

cleaner systems, and carbon canisters. With Audi, BMW,

modules, air cleaner modules, tank ventilation modules, oil

Ford, Mazda, and Toyota all choosing areas near Celaya

coolers, thermostats, and heat exchangers for engines and

for their operations, MAHLE is presented with ample

transmissions. Thanks to the company’s recent acquisition

opportunities to continue its reign of success, while also

of Behr, a German company specializing in automotive

bolstering the local supply chain in the region.

| VIEW FROM THE TOP

CAMSHAFT MANUFACTURER EXPANDS MARKET WITH NEW IDEOLOGY MARIO RODRÍGUEZ CEO of Arbomex Q: What barriers do you encounter when approaching

better for the engine. Normally, it takes about a year and a

OEMs and Tier 1 suppliers?

half for OEMs to accept and incorporate our suggestions,

A: For manufacturers, building a relationship with clients

since the process has to undergo several trials to ensure the

typically takes a long time. When an OEM decides to

compliance of every specification.

change a type of engine, the design process can take five to six years. Sometimes very small and detailed changes

Arbomex has recently collaborated on a project with a

are made based on the assumption that manufacturers

casting company of Textron called CWC, in order to produce

can make these changes with low costs while delivering

camshafts in large volumes. We presented a prototype that

the same quality. This is why most OEMs must rely on

could reduce costs by 30% and we started production

their existing suppliers, and why switching suppliers is a

with an aim to reach a 500,000 unit goal. Additionally, we

tough decision. Our main customers have been Chrysler,

are working on a joint venture with a Japanese company

Nissan, and Ford. Chrysler relies on Arbomex for its entire

to develop camshafts for Nissan. Our business associate

camshaft supply of V8 engines, and 80% of its camshaft

already supplies Honda, Mazda, and Nissan in Japan, and

supply for V6 engines. We have already started production

we would like to start supplying those clients in Mexico.

for Mazda, and BMW is studying our quality standards and manufacturing capabilities.

Q: How have the success stories of Mexican companies like Arbomex helped to develop the local supply chain?

Q: Considering the variety of operational cultures that

A: We have three suppliers of scrap material that previously

foreign OEMs possess, how does Arbomex adapt its

had small sales volumes. Arbomex helped these companies

internal processes to suit its clients?

grow, we rely on small labs to do metallurgical evaluations,

A: The differences in business cultures within OEMs are

and we also encourage small shops to develop their own

fascinating. For Japanese executives, simply shaking hands is

technology with attractive costs. Our philosophy is to push

a sufficient sign of commitment, and there is no need to sign

the development of smaller players.

any papers or involve lawyers. For European companies, on the other hand, after much talk there is still a need for more

Q: Which of Arbomex’s ambitions and goals is the

formal and contractual obligations. Even so, regardless of

company focusing on in the short term?

the cultural background, the first thing you have to show any

A: Arbomex is focused on manufacturing. We started

customer is your workers’ education levels, but you also need

working according to the concept that manufacturing

to learn how your customers operate. The third aspect we

comes from the mind, shifting our focus from the

had to learn is that translation is very important. For Mazda’s

manufacturing processes, in order to find ways to

production line we brought translators in to interpret every

manufacture with ideas. With this mindset, we have already

operation into English, Spanish, and Japanese.

convinced a team to adopt Single-Minute Exchange of Die (SMED), a method that Japanese companies have

Q: What sort of new innovations and technologies are you

followed for years. With this model we aim to shift from

suggesting to OEMs?

the production of one model to the next in the quickest

A: Arbomex is currently suggesting new processes to produce

possible way. Another goal in our innovation process is

better parts, and pitching materials that could improve a given

to always think of new and better solutions that properly

application. Engines depend on certain forces to relieve the

adapt to the client’s requirements. We recently had a

chamber and the pistons, such as cam followers and lifters

project where we were able to offer a camshaft solution

that work against the face of the camshaft. This contact puts

that can reduce manufacturing costs by US$4 million. The

a lot of pressure on the camshaft, providing a chance to look

end product has much smoother surfaces and can increase

for better materials to lower costs for the customer, as well

the engine’s RPM. We have already installed the machinery

as finding different options on valve profiles that could work

to begin production for this camshaft in December 2015.

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| VIEW FROM THE TOP

ADAPTING TRANSMISSION TECHNOLOGIES TO FLUCTUATING DEMAND ANTONIO HERRERA Managing Director of TREMEC Q: How has TREMEC progressed from a sales perspective,

Q: How do companies choose which transmission to use

and which markets have driven your growth?

in their new models? transmission

A: They need to consider the size and the power of the

assemblies, of which 52,000 went to OEMs, and 15% of those

engine, as well as the size of the whole car. After that, there is

served the Mexican market. While much of our production

a big internal discussion because some OEMs like automatic

goes to the US, we are now seeing some further business

transmissions and others like CVT transmissions, and they

opportunities in Europe. In Mexico, we target some pickup

all have their technical reasons for choosing either one. In

trucks in Silao, but most of the assemblies that use our

the end, it is the engineers that make the final decision; it

transmissions are in the US. Nevertheless, we know that

would be very surprising to see Nissan, for example, change

some of those US-made vehicles will ultimately end up in

from CVT to manual transmissions, particularly considering

the Mexican market. Right now, we are trying to target the

the investment it already has in place.

2014,

TREMEC

produced

62,500

European market with a niche product. Manual transmissions have become an occasional commodity, so we are trying

Obviously everyone wants fuel efficiency, so TREMEC

to expand their reach, not only in the US, but also in the

supplies the lightest 10-speed transmission on the market.

European market. The manual transmission is losing ground,

We are also working on a lot of new component designs

so we need to look for markets that still demand our products.

while using hollow shafts and producing smaller gears with greater strength capacity. Belgium is currently improving

Q: With new luxury brands coming into the country, what

our designs with carbon and organic-based materials for

are your plans to target these companies?

clutches and synchronizers.

A: TREMEC is currently focusing on rear-wheel drive and

194

high-torque applications for niche markets, including

Q: As more truck clusters appear in Mexico, is TREMEC

solutions for commercial vehicles and performance-

planning a bigger contribution for the heavy vehicle

oriented vehicles. TREMEC is the expert in these solutions,

segment?

and we know how mass-production brands operate, so it

A: TREMEC is currently working on 10-speed manual

would be really surprising to see them purchasing a different

transmissions with an advanced design we call TR-

transmission to what they currently use. It would have to be

10. Thanks to its aluminum housing, this heavy-duty

something completely different, with big changes in costs

transmission really trims the weight without sacrificing

and technology, and I think most OEMs see it that way. We

the system’s strength. Within this segment, we are trying

are capable of achieving this level of innovation, but we

to develop new lighter transmissions, but already possess

are a little behind, especially with small cars. However, we

a line of medium-duty and heavy-duty applications, as

are focusing a lot of our efforts on innovation for power

well as pickup truck transmissions. For this particular

vehicles, as the company searches for the next evolutions in

market, even without the full transmission we can use

transmission technologies. TREMEC’s products are already

our capabilities to help with different components. For

used in muscle cars like Corvette, Camaro, Challenger, and

commercial vehicles, our most popular product in Mexico

Mustang, and our TR-3160 and TR-6060 transmissions are

is the AMT transmission. On light vehicles however, the

used in Cadillacs. Our unit in Belgium is currently developing

trend is to move toward CVT systems that we do not have

DCT transmissions for luxury vehicles in Europe and we are

at the moment. This is because most OEMs have their

using mechatronic and control software tools for brands

own products or companies that fabricate transmissions

like Ferrari and McLaren, as well as Mercedes-Benz’s AMG

especially for them. Nissan, for example, has JATCO all

models. There is fierce competition in the European market,

to itself, and this company only produces CVT products.

but we are focusing on what we can offer to the clients. Our

Therefore, our main focus will be with DCT transmissions

expertise is with power cars, not mass production and small

for other markets and AMT products for Mexican

vehicles, so that is what we are focusing on right now.

commercial vehicles.

| VIEW FROM THE TOP

MEXICO, STRATEGICALLY IMPORTANT FOR ITS CRUCIAL LOCATION HIROYUKI KAI Director General of JATCO México Q: With the new production capacity from JATCO II, how

extreme accuracy in the development of each component,

close are you to reaching your 1.7 million unit goal?

which is the most difficult aspect from a technical standpoint.

A: Last September we began operations at our second

On the other hand, our production line must have highly

site which increased our volume capacity significantly. At

skilled people and state-of-the-art technology. Half of our

the beginning we only ran one shift because we did not

workforce have been with the company for three years,

have enough workforce to maintain regular operation, but

which is a short period of time, and requires education on

that slowly changed and we are now running two shifts

the production processes of a complicated product. After

at both sites. JATCO II has reached a maximum capacity

hiring our employees, we teach them some basic knowledge

of 400,000 units per year, while JATCO I is producing 1.3

in our Regional Training Center (RTC), where they learn the

million. With this in mind, the 1.7 million mark has already

specifications of our products and production processes.

been exceeded. Nissan North America is allocated 70% of

Thereafter, we provide additional training for our assembly,

our production, while the remaining 30% goes to Nissan

machining, or casting procedures before placing our new

Mexicana. Currently, our biggest focus is Mexico, with

employees in the actual production line.

production and provision to the NAFTA region based from this strategic point.

Q: How are you promoting the advantages of CVT with automakers?

Q: Now that Nissan’s A2 plant is also running at full

A: High fuel efficiency is the biggest benefit that a CVT

capacity, how capable are you of handling the demand

transmission will offer to small vehicles. In addition, we must

that comes from Nissan?

keep a standardized size for our products, as manufacturers

A: JATCO’s current maximum capacity is a little lower than

will not be able to perform installations if the CVT is bigger

Nissan’s A2 plant, but those small margins are compensated

than expected. Our CVT has ideal dimensions, but if an OEM

with the support of other regions. We have already invested

has different requirements we can adjust to them.

a lot of resources in East Asia, and our production there is higher, which allows us to experiment with volumes.

What

challenges

have

you

faced

with

hybrid

technology, since it is relatively new to Mexico? Q: Are you interested in establishing additional business

A: Our hybrid model is similar to the conventional CVT, the

relationships to complement your relationship with Nissan?

difference being the use of a motor instead of a torque

A: Most of our volumes go to Nissan, but we are holding

convertor. The motor is imported from Japan due to a

negotiations to attract new business. OEMs have the same

difficulty of sourcing this technology in Mexico, which

requirements in terms of quality, cost, and delivery, but as

makes it hard to produce the hybrid model. Our main

with any new business venture, systems can vary among

market for this product is the NAFTA region.

manufacturers, and we must adapt to those differences. Our products can be technically adapted to fit their specifications,

Q: What are the specifics of the Jatco Excellent Production

but we must find ways to create a mutually beneficial link

System (JEPS)?

in areas such as delivery information connectivity. We have

A: We established JEPS about 15 years ago in Japan and

well-established connections with Nissan, but if we began

as soon as Jatco was founded in Mexico, we applied this

working with a company that has a different communication

approach. JEPS is designed to simplify our production

system, we would have to match their structure.

processes, helping us to further minimize our inventory, while ensuring that our facility continues to operate

Q: What challenges have you faced while developing CVT

fluidly. It is relatively easy to minimize our inventory, but if

transmissions?

deliveries are disrupted, operations become problematic.

A: CVT is simpler than Step AT, but it is highly complicated

JEPS encapsulates a complete process to make the

compared to a manual transmission. There is a need for

production system efficient, and is similar to JIT strategies.

195

American Textil is an internationally recognized fabric producer within the manufacturing and automotive industries. Founded in 1941, the company has since become a leader in the Mexican textile industry. To date, American Textilâ&#x20AC;&#x2122;s product portfolio includes highly specialized textiles, to be used for automotive interiors: seating and headliner systems as well as accessories.

Designing the future and knitting the present

Tel.: 5556 992200

196

www.americantextil.com

MOVING UP THE SUPPLY CHAIN TO SERVE OEMS DIRECTLY With so many players entering the Mexican market, there is

Corporativo Shernand decided to move American Textil’s

a perfect opportunity for local companies to expand their

operations to Puerto Interior, Guanajuato. “Obviously,

business in the automotive segment. While some are trying

this presented new opportunities for the company. If you

to become Tier 2 and Tier 3 suppliers, others want to expand

already have a market, an identified need, and a product

their existing operations, targeting OEMs directly with their

with the necessary recognition, the only thing you need

products. Furthermore, there are those who seek to make an

is a supplier that meets all your requirements,” explains

entry into the automotive industry, acquiring companies that

Hernández. In terms of its client network, one of Corporativo

already have a strong presence in the market. Within this last

Shernand’s priorities for American Textil was to work on

category, Corporativo Shernand has found a robust niche.

its presence within its existing network. The company is

“Mexico currently has 17 OEMs, and even though other textile companies are establishing in the country, we have expertise and market knowledge as our main advantages” Antonio Hernández Jardínez, Accountant of Corporativo Shernand

Corporativo Shernand is an investment group that includes

now focusing on supplying the necessary products for two

many business divisions, one of them related to automotive

of Volkswagen’s models, which would generate a 20-25%

fibers and bonding technology. The corporation initiated

growth for American Textil on a global scale. Meanwhile,

this project in 2015 through the acquisition of American

the company already holds an established position in the

Textil, a Tier 2 supplier with more than 500 employees and

Asian segment thanks to its agreement with Sage. As a

74 years of experience in Mexico. American Textil has been

supplier of Tachi-S, the company has developed a strong

in the automotive segment for 35 years, beginning with 20%

relationship with Nissan, meaning American Textil has a

of its business in this sector. Now, through American Textil,

significant presence in Nissan’s plants in Aguascalientes.

Corporativo Shernand can service companies like Johnson

“Even though other textile companies are establishing in

Controls and Sage Automotive Interiors with specialized

the country, we have the expertise and market knowledge

textiles for seating, headliner systems, and other accessories.

as advantages for working with any OEM in Mexico,” states

These two companies now represent 60% of American

Hernández.

Textil’s business, allowing it to target final customers like Nissan, Honda, Chrysler, GM, Volkswagen, and Ford. At

The real challenge to take American Textil to a highly

the moment, Corporativo Shernand is working on a global

competitive level was the automation of its entire

strategy for American Textil, which would take the company

manufacturing

from a Tier 2 to a Tier 1 supplier status. Tachi-S awarded

include weaving, knitting, tentering, dyeing, cutting,

Sage Automotive Interiors a quality recognition that also

and bonding, and Corporativo Shernand’s goal was to

made American Textil a valuable Tier 2 supplier. This is one

increase the efficiency of all these stages. Weaving is a

of the main reasons Corporativo Shernand decided to invest,

purely technical process and American Textil is one of the

according to Antonio Hernández Jardínez, Accountant of

few companies in the region that can offer tentering and

Corporativo Shernand. However, the corporation is now

dyeing solutions, but knitting required specific sensors

looking to establish new relationships to allow American

to detect weight, resistance, tension, and density of the

Textil to target the OEM market directly. “Most OEMs

fabric. The ultimate goal is to reduce American Textil’s

already have two or three textile suppliers as part of their

waste, improving the current 6% it creates. “Our clients

business strategy. For example, Volkswagen, Audi, and

are always looking for the most profitable process, which

Porsche have four different textile suppliers, the main one

means there is an opportunity to improve and become

being Johnson Controls. We are suppliers for this company,

more efficient,” declares Hernández. “Particularly in our

but we are working to establish a direct relationship with

dye house, we have worked on water treatment strategies

these OEMs, starting in 2016,” states Hernández. “However,

to make our process more sustainable, and we have two

given that these manufacturers work in various locations

artisanal wells for all of our water extraction operations.

throughout the world, we need to find proper partners in

Nevertheless, automation could reduce our consumption

each of these sites.”

significantly.”

process.

The

company’s

operations

197

| VIEW FROM THE TOP

US MANUFACTURER EXPANDS ITS NORTH AMERICAN FOOTPRINT ARMANDO GONZÁLEZ General Manager of Nelson Global Products Monterrey Q: What have been the the company’s development and

We are bringing brand new equipment into the Monterrey

marketing strategy highlights since its arrival in Mexico?

plant, including state-of-the-art machinery for tube laser

A: The development of the plant has been very dynamic

cutting, and flange plating. We presently have a joint

and high-paced. We signed a leasing contract in February

venture with Crippa, an Italian company, so most of our

2014 and by April we were already shipping products.

bending equipment will be acquired from them. This plant

We were scheduled to start production in May 2014, but

currently has five bending machines, robotic welding, a

our customers asked us to begin operations six weeks

sheet laser, and stamping and pressing capabilities. Our

beforehand. There were four major competitors in the area

future plans are to incorporate a system line for powder

when we first established our plant. We are currently taking

paint and increase our muffler manufacturing capabilities,

over the market with our quality, price and technological

as well our stamping capacity.

advantages. Our main clients are close to Monterrey and Saltillo, and our geographical position has made it very easy

Q: How are you catching up with your competitors in

for us to supply Polaris, Navistar, and Caterpillar, among

areas such as human capital, local suppliers, and local

other customers. We are currently manufacturing structural

market knowledge?

tubing and exhaust system components for Polaris, as

A: Some people on our team have up to 20 years of

well as acoustic mufflers and metal encapsulated exhaust

experience. Our management team has a deep knowledge

systems. Our most important clients are heavy vehicle

of the industry and is highly qualified to provide Nelson

OEMs, so our market strategy has focused on starting off

the base for its expected growth. We have already been

with them and then moving on to heavy duty light vehicles.

working with Cummins, Navistar, and GM in Ramos

| VIEW FROM THE TOP

MANUFACTURING CAPACITY REACHED AS FOUNDRY GAINS MOMENTUM PATRICIO GIL Director General & CEO of Blackhawk Q: What are the quality and process requirements that

it is not our niche. The customers’ demands are relatively

OEMs demand when approaching you with a project?

similar, regardless of the OEMs country of origin, and

A: The medium- and low-volume market demands a lot

generally require 100% compliance in On Time Delivery

of flexibility, which happens to be one of our competitive

(OTD) and excellent casting quality. Additionally, it is

advantages in this segment. When comparing Blackhawk

becoming more common for customers to require added

to other foundries in Mexico, there are companies that

value, such as painted or fully machined castings and

specialize in either high volumes or low volumes, but our

minor sub-assemblies.

supply level sits somewhere in the middle. We do not

198

focus on light vehicles because their high volumes are

In terms of heavy machinery, the trends are similar. With

very demanding, and although it is an attractive segment,

light vehicles, weight reduction achieves efficient fuel

Arizpe and Silao. We have a deep understanding of our

on Six Sigma was absorbed into Nelson, it has allowed us

products and we are in constant contact with customers

to solve problems in tube bending that were previously

to fulfill their needs. The growth that we have had this

unknown. Six Sigma is very important to us, and the

year, coupled with the plans we have for 2016, are highly

support provided from head office to train our workforce

motivating, and our clients are reacting positively. We

how to use it has been very valuable.

have been controlling our growth process by expanding in phases, starting in Monterrey with simple components

Q: To what extent is the group counting on Mexico’s plant

and eventually moving up the ladder to more complex

to anchor its future growth?

exhaust tubes with larger diameters that require welding

A: This plant will be the flagship for Nelson on a worldwide

and leak testing. With these systematic steps, we are also

scale. Our global executives foresee that this plant will be

ensuring the skill development of our local workforce. Our

a world leader in safety, quality standards, and delivery.

base labor force has been sent to our sister plants in the

We will use the best available technology in the world,

US for basic training, giving them an understanding of our

not to mention the most talented workforce in Mexico. In

products and the ability to share their knowledge with the

addition, this plant is implementing our new manufacturing

rest of the plant through mentoring programs.

methodology that will open the market. Our customers’ demands are leading us to expand our core business

Q: What defines the balance between human labor and

beyond exhaust systems and mufflers. We always knew that

automation in the plant?

the Mexican plant would have an aggressive growth. Now

A: Automation is cost-effective, but our ultimate driver is

that the company has a profitable facility in Mexico, the

quality, which is why we have chosen to use technicians

group is investing considerably. Based on the knowledge

for the majority of our processes. The only robots that

and experience of our plants in the US, all the processes that

we have are here to perform very specific tasks. This

are launched here in Mexico include improvements in the

includes the thorax of the Polaris engines, as it is a crucial

way they manufacture products. For mufflers, we are using

component that must be strong and resistant, and the

molding and welding fixtures, as well as base tables where

welding must penetrate the pieces perfectly to support all

we check all the dimensions of the mufflers and tubes to

the strain. Additionally, Six Sigma has been a great tool

make sure they fit customer’s specifications. The end-users

for us since we acquired the exhaust division of Cummins

can also enjoy mufflers with a longer lifespan than the

six years ago. Since Cummins’ knowledge and expertise

market average, as well as significant noise reduction.

consumption, while in the heavy truck sector, companies

market, and with so many closed foundries, there was

look to reduce the weight of their vehicles so that more

significant potential for production in the country.

cargo can be transported. The end goals may differ, but all companies wish to reduce costs and optimize profitability

Q: What does Blackhawk expect from its operations in

and efficiency, so helping our customers to achieve this is

2015, and what challenges will the company face?

our main aim.

A: We are extremely busy, and this year looks promising for the company so far, but we cannot lose momentum. We

Q: How did the financial crisis influence the international

are operating at optimum capacity of three shifts a day, six

development strategy of Blackhawk?

days a week. Without the expansion into a third facility, our

A: In 2009, the market crisis caused us to lose some

projected 30% annual growth will not be achievable because

manufacturing and sales volumes, so we decided to

our existing plants are already operating at maximum

concentrate our efforts on the US market. This was due,

capacity. We have the engineers ready for this development

in part, to its size, but also because we were aware of the

and we are evaluating methods that will enable us to finance

profound impact that the crisis had on US companies,

the investment, while also taking into consideration the

which gave us a market advantage. Around 300 US

two-year timeframe necessary for construction. We do not

foundries were closed as a result of the crisis, but, just as

foresee an expansion in terms of our value-added product

the market was starting to recover in 2010, products and

offerings, but we are looking to increase the size of the

processes in China became more expensive. Subsequently,

company. Blackhawk will continue to offer an array of options

manufacturing volumes began to shift back to the US

at competitive prices in order to promote its steady growth.

199

| VIEW FROM THE TOP

CASTING GIANT BOLSTERING MEXICO’S ALUMINUM SUPPLY HUMBERTO JUÁREZ General Manager of Ryobi Die Casting Mexico (RDCM) Q: What new opportunities have you identified in the

customer very high-resistance and high-strength parts

Mexican automotive industry, and how have they impacted

to replace certain steel parts that were used in the past.

your ambitions and growth strategies in Latin America?

Previously, there were some structural frames in the

A: Mexico is becoming a very attractive market for

vehicles that needed to be made out of stamped steel, or

OEMs to set up their manufacturing facilities, so for

welded steel, like shockers, engine supports, and frame

companies like us, which represent the lead suppliers on

supports. These are now being replaced with HV2® parts

aluminum castings for transmission housings, we see the

which are lighter, allow welding, and can replace three or

opportunities that those OEMs are bringing with them.

four components with one. One large OEM manufacturer

Our customers are taking advantage of the technology

is already using this technology in the US. The technology

we provide, coupled with the experience that we have. We

represents a perfect way for OEMs to both reduce costs

have been in the die castings business for over 60 years, so

and produce lighter vehicles in one fell swoop.

we are able to provide the right expertise, knowledge, and technology, as well as the state-of-the-art products that

Q: Ryobi uses aluminum as one of its primary materials for

we produce. Ryobi also brings jobs to the local areas, we

manufacture, so since Ryobi has arrived in Mexico, has the

offer competitive prices and services, and we provide just-

company increased its supplier base for the metal?

in-time delivery, which helps our OEM partners to reduce

A: The die casting business is not new in Mexico; there are

their costs and to be more competitive in their business.

companies that have been operating here for a long time and it has grown over the past few years. 20 years ago

Q: How did Ryobi form relationships with its clients in

there were very few suppliers with very limited capacity

Mexico since the company entered the country?

in terms of supplying aluminum ingots to die casters. Not

A: The relationships began because OEMs needed a

only that, but the quality was also unreliable; we had to

reliable supplier of die casting aluminum transmissions.

do a lot of our own in-house blending to ensure that the

Ryobi’s name is associated with manufacturing excellence

alloys met the required specifications. Now we are helping

and the company is known around the world as a leader

Mexican aluminum suppliers to grow alongside us. Ryobi

in die casting. When our customers find out that there is

has a partnership with a company in Mexico that started as

a Ryobi plant in a nearby location, they will consider us

an aluminum supplier before setting up their facility next

as a potential supplier. That is a testament to the name,

door to our plant. This vendor can now send us molten

the quality, and the service we provide. After they first

metal directly to our machines thanks to the proximity

approach us, we start working with them to develop parts

of their facility, thus reducing smelting costs in our

and design tools that will be required for those parts. During

manufacturing process. We are also developing another

2014, Ryobi had an outstanding year in terms of quality and

supplier in Queretaro, which is going to provide us with

of the relationship with our customers. The qualifications

even more molten metal. Tests of this metal have so far

from our customers, as well as the performance of our

been successful, so we expect to be working with it more

facility, were excellent. We have just finished an expansion

in the near future. Furthermore, our demand is sufficient

to generate more business in this facility, and the forecast

enough to give business to both of these companies. This

for the next five years looks pretty aggressive in terms of

whole process of developing aluminum suppliers is now

growth. This facility will keep growing at the same pace

being mirrored in the US. Our supplier here has already

that the automotive industry is growing in the area.

built its facility in the US and will start providing molten metal to our nearby plant in that country. Ryobi in Mexico is

Q: As demand for lighter vehicles increases, how is Ryobi

proud to say that we are helping to grow these companies.

helping to create lighter parts to meet growing demand?

200

A: There is one called HV2®, which stands for high vacuum,

Q: How much of your aluminum is imported at this stage,

high speed. This technology allows Ryobi to offer to the

and how would you like to see that change in the future?

A: At this stage we handle two different types of alloys:

A: Guanajuato has seen a boom in companies coming to the

aluminum A380 and aluminum A383. Around 90% of

state to establish their businesses over the last few years.

our A380 is being imported from the US because it

The state authorities have been helping us with different

is much cheaper to buy there. As more aluminum die

programs that offer fiscal or tax benefits, as well as support

casting companies entered Mexico, the demand for A380

in terms of logistics, coaching, legal advice, and relationships

increased, so the availability was reduced and the price

with personnel. We are working with at least three different

went up. It has been difficult to find enough support in

programs with the state government. For example, we

Mexico to provide for the volume that we work with, so

have a scholarship program with the state university and

we were acquiring that metal from the US. Our A383,

with CONALEP, through which they supply 10-15 people

on the other hand, is 100% sourced from Mexico and we

to work at the plant. When the scholarship ends, we then

have found good quality with the suppliers that we are

provide them with a job in very specific and unique areas

developing. However, they have not been able to fulfill the

of work. Government support also facilitates our import and

demand of aluminum and there are now foreign companies

export processes. We bring in equipment from countries like

looking at Mexico as a potential investment location. One

Japan, China, the US, and we supply parts to Europe, South

of the largest aluminum companies in the US is setting up

America, and the US, and the help from the government

a facility in Aguascalientes. The presence of the die casters

gives us the correct tools that we need to be legally sound

coming into Mexico to serve the automotive industry is

when performing international business transactions.

definitely helping the aluminum market to grow. We are helping to develop a company in Leon which will enable us

Q: What goals and objectives does Ryobi have for 2015?

to obtain good quality metals, locally, at a very reasonable

A: We want to be the number one supplier for automotive

price. So far, this company is the second largest supplier

die casting. We will achieve this by expanding our facility,

of A383 that we have, and we started this project from

bringing in more equipment to increase our capacity, and

scratch in 2014.

by providing excellent quality. Our targets for 2015 are extremely high in terms of PPMs and internal returns, so

Q: While die casting companies are helping to attract more

we have implemented a strategic deployment to achieve

aluminum suppliers into Mexico, how is the government

those targets. This strategic deployment focuses on profit,

either helping or hindering that progress?

customer satisfaction, community, and legal compliance.

DIE CASTINGS Ryobi leads the world in die casting manufacturing and supplies products, including cylinder blocks and transmission cases, to the automobile industry and various other industries.

81-847-41-1111 201 www.ryobi-group.co.jp 762 Mesaki-cho, Fuchu-shi, Hiroshima-ken 726-8628, Japan

| VIEW FROM THE TOP

HOT STAMPING AND PRESS HARDENING REMAIN VITAL FOR INDUSTRY ERWIN POLO FELDMANN Vice President of Gestamp Mexico Q: How have recent advancements in the industry helped

properties that cause it to behave completely differently.

Gestamp to grow and develop within the Mexican market?

Press hardening material can be heated up to 900oC,

A: Gestamp maintains a special focus on the Asian and

allowing the material to be formed before it is cooled. The

North American markets, but Mexico is a key part of that

two processes cannot really be compared because they vary

strategy. Our sales have multiplied ten times in the last

so drastically, meaning that each stamping process requires

ten years within Mexico, which is extremely impressive.

dedicated technicians. The press hardening process creates

The company is a European-based supplier, so we have

the stiffness of the material and the higher tension. We have

firm relationships with most European OEMs, as well as a

developed a new technology called Soft Zone, where the

strong foothold within North America, and we are starting

desired harness on the final part is regulated so that any

to create links with Asian OEMs too. Our growth has been

deformation of the part can be controlled. We perform this

constant, with our expansion in Puebla in 2005, Toluca

during the same press hardening process as the tooling,

in 2008, a further expansion in Puebla in 2009, and the

while our competitors complete it post process.

inauguration of Puebla II in 2014. The Puebla II plant began production in 2014 and was initially focused on stamping

Q: In terms of manufacturing, how flexible is the plant

external panels or Class A body panels for Volkswagen.

when adapting to different designs and standards?

We are now undertaking a major project on behalf of Audi,

A: The process itself and the equipment we use is relatively

which will enable us to stamp most of the body in white

similar all over the world. We have almost 60 identical lines

(BIW) components, as well as hot stamping components

for press hardening worldwide that work to a standardized

for OEM production which is scheduled to start next year.

process, so we can interchange the tools between our

When Gestamp started operations in Mexico, we began with

facilities. In December 2014, we opened a new tool shop in

traditional cold stamping, but we are now focusing on press

Puebla that will have the capacity to manufacture 45 press

hardening or hot stamping. There has been a significant

hardening tool sets per year. In addition, we are already

rise in Mexican automotive production, so naturally there

building four dies for the Audi project in this new facility.

is increasing demand for press hardening content. Two

We mainly have tool shops in Europe, but also in Asia and

generations ago, a Volkswagen vehicle would have had four

Mexico, which compliments our strategy for creating our

or five body components, whereas nowadays we are seeing

own press hardening tools in our own tool shops.

12 body components in cars such as the Golf VII. Q: How is Gestamp managing a dependable supply chain

202

Q: What innovative technologies are you adding to your

that guarantees product quality in Mexico?

product line?

A: The quality of raw materials is extremely important to

A: Currently, we are introducing soft zones, which allow

the automotive industry, which translates into the specific

the customer to establish deformation areas during the

type of structural and security related components that we

engineering phase, such as the rails, or B-Pillars. It also enables

manufacture. In most cases, the material characteristics

the customer to have controlled deformation on the structure

are established by the customer during the design phase

of the material in the event of a crash. We are also bringing

or within their technical requirements. Unfortunately, the

tailored rolled blanks, which is the steel rolling process that

availability of these kinds of materials is relatively low in

enables varying thicknesses. This process also allows us to

Mexico, so most of the steel comes from Europe, North

add weight-reduction efficiency, without compromising

America, or Asia. Gestamp recognizes the lack of resources

the stiffness of the material. The traditional cold stamping

of tooling suppliers, so in order to secure the market, we

material is normally carried out with a thinner material that

took the decision to establish our own tool shop. I am

has higher elongation characteristics, even though it can be

satisfied with the Tier 2 and Tier 3 small components

classified as ultra-high-strength steel. The press hardening

suppliers that we currently use, but it was no easy task to

material uses a much thicker ultra-high-strength steel, with

develop them to the certified quality standards.

| VIEW FROM THE TOP

STEEL BEHEMOTH COMMITTED TO NATURAL GAS FUTURE MÁXIMO VEDOYA CEO of Ternium México Q: How much of Ternium’s recent investments have been

have radically increased over the last few years thanks to

directed toward supporting the growing automotive

these certifications. Aluminum is a topic that is really hot

industry in Mexico?

right now. I think that steel has many advantages compared

A: Ternium provides steel through strong production

to aluminum, especially considering its environmental

integration. Its mills cover the complete manufacturing

benefits. Aluminum production emissions are four times

process, from the extraction of iron ore to high added-

larger than steel production, even with international values.

value products. As a leading steel producer in Latin

Therefore, if you want to use aluminum to reduce emissions,

America, we manufacture and process a broad range

you must also consider the cost of production for this

of value-added steel products, including hot-rolled flat

material. In the end, the emission reduction in the vehicle

products, cold-rolled products, galvanized, pre-painted,

does not compensate the emissions produced during the

welded pipes, bars and wire rods, as well as slit and cut-to-

manufacturing process.

length offerings through our service centers. Q: What strategies is Ternium implementing to reduce Two years ago, the automotive industry represented 10%

energy use and improve its environmental footprint?

of Ternium’s business; today, that figure has reached 20%,

A: The steel industry consumes large amounts of energy

showing significant growth for the company in this sector.

and operative costs are not cheap in Mexico. To combat

Even though we have always been the main local supplier in

this, we are constructing a natural gas-fired, combined cycle

the country, the industry was previously highly dependent

power plant in Pesqueria, which will produce about 15% less

on imported products. Nevertheless, our investments

emissions than fuel oil based plants. With this investment, we

are now more focused on the automotive industry. For

are planning to power not only Pesqueria, but all our facilities

example, our new plant in Pesqueria required an investment

in the country. In fact, in addition to this plant we are building

of US$1.1 billion, and we are assigning US$100 million to

a second thermoelectric facility with an investment of US$1

our Churubusco plant in Monterrey in order to improve

billion. This project is still in construction, and we have

the quality of our products and expand our portfolio. This

enough room for future expansions. In addition, Pesqueria

plant opening has enabled us to add new products that

is going to be one of the few industrial facilities in the world

specifically target our automotive clients. We have a whole

with a LEED industry certification. We are currently trying to

team dedicated to the automotive industry that is in charge

replace every fossil fuel used in the plant with natural gas,

of targeting all companies in the production chain.

which considerably reduces emissions and energy costs.

Q: In 2014, Ternium announced its FB-540 steel and now it

Q: What are Ternium’s expectations for its presence in

is presenting the new JIS-540 steel. What advantages do

Mexico’s automotive industry over the next few years?

these materials offer, compared to conventional steel and

A: Over the last four years, Ternium has invested almost

other materials like aluminum?

US$3 billion, resulting in better production and more

A: These and many other products we are developing are

competitiveness, and we plan to continue with this strategy

designed to make steel lighter. We want to reduce the

for as long as the automotive industry demands it. Through

plate’s thickness, while making its structure stronger and

the state-of-the-art production lines at our plant in Pesqueria,

increasing its reliability. FB-540 is for heavy vehicle rims

we will keep producing high-end steel that is mainly aimed

and the JIS-540 is for chassis applications, but both of them

at the automotive industry, with annual processing capacity

have a structure that improves the product’s life cycle with

of 1.5 million tonnes of cold-rolled steel and 400,000 tonnes

a reduced weight. These are only two products of a wide

of galvanized steel. The increased utilization rates of these

portfolio of 110 products that we are currently certifying

facilities, following their ramp-up during 2014, means we

with companies. The feedback we have received from them

expect to achieve record shipment levels in 2015, nearing 10

has been amazing, and our sales in the automotive sector

million tonnes of finished steel products for the whole year.

203

| VEHICLE SPOTLIGHT: VOLVO XC90 In the SUV and crossover segment, there are SUVs, there

with its massive grill, a remarkable panoramic roof, and

are crossovers, and then there is the Volvo XC90. Even with

attractive rims that can range from 18-22in. Even with

all the comfort and practicality that Volvo’s XC60 provides,

such impressive specs, the most exciting part about the

the XC90 has succeeded in multiplying this tenfold. Even

XC90 is the cabin, which includes Volvo’s Sensus concept,

though it is 4.95m long and 2.14m wide, this giant can

centralizing all the features into a dashboard tablet. The

make anyone feel at home on the road, generating enough

XC90 has integrated Wi-Fi to keep drivers connected at

power to keep up with any sports car out there, without

all times, and it includes voice activated commands to give

sacrificing safety or stability. The XC90’s 2.0L, 4-cylinder

absolute control to the driver without having to divert their

engine meets Euro 6 standards, and is capable of delivering

attention from the road. In terms of entertainment, the

320hp at 5,700 rpm, with a fuel consumption of only 8L

Bowers & Wilkins sound system is able to reproduce the

per 100km and a top speed of 230 km/h. Impressively, the

acoustics of Sweden’s Gothenburg Concert Hall. Regarding

car has both a supercharger and a turbocharger, and its

technology, the brand outdid itself with a unique heads-

powertrain works with a Geartronic 8-speed transmission.

up display that allows drivers to check the speed limit

In terms of its exterior design, the Volvo is equally stunning

and navigation advice directly on the windshield. These

images are semi-transparent and are capable of adapting to

the usual adaptive cruise control systems, blind spot

different light environments. The XC90 is practically a spa

detection, and lane keeping assistance systems, Volvo has

on wheels, with a climate system that uses sophisticated

included innovative programs like pedestrian and cyclist

carbon filters to purify the air that enters the vehicle, as well

detection, pedestrian airbags, forward collision warning

as seats that offer comfort beyond measure, as they are

with emergency braking, and Park Assist Pilot to this

fully automated to adapt to any size and weight. Overall, its

stunning SUV. Furthermore, the company includes active

minimalistic yet elegant design adds an extra touch to the

high beam headlights to detect other vehicles and change

luxury offered by the XC90.

lights automatically, as well as a more robust structure fabricated with boron steel, allowing energy to disperse

It is impossible to mention Volvo without talking about

easily in case of an impact. Overall, Volvo has exceeded the

safety, which the XC90 delivers in spades. This machine

expectations of the market with a vehicle that combines

features the IntelliSafe platform, contributing to the

state-of-the-art technology, exceptional comfort, and

companyâ&#x20AC;&#x2122;s ambitious plan to have zero deaths or serious

next-generation safety features, solidifying the companyâ&#x20AC;&#x2122;s

injuries behind the wheel of a Volvo by 2020. Apart from

reputation as a highly reliable and innovative car maker.

| VIEW FROM THE TOP

NEW DISCOVERIES AND NEW INVESTMENTS FOR LEADING TIRE MANUFACTURER MARTÍN ROSALES President and Managing Director of Goodyear México Q: Goodyear tires are installed within all automotive

Our new plant will supply the Americas, and will be the

segments, but which is the most lucrative in Mexico?

finest Goodyear plant in the world, only producing the

A: Our strategy is to handle each segment with a different

most innovative tires. We expect to begin production in

business model. The market that has presented the highest

2017 when we will produce approximately 6 million tires.

domestic growth is the consumer sector, particularly

It will be exciting to be able to satisfy future demand and

focused on light vehicles, light trucks, and SUVs. Part of

show our commitment to the development of the industry.

the reason for this is the evolution of Mexico’s vehicle park

As a global company, we already have R&D and innovation

and the investments entering the country. Mexico’s gain

centers in four global locations. However, this new plant

in momentum has, over a two-year period, enabled us to

will be the most advanced, with the latest technology and

double our market share in the consumer sector. Domestic

closely related to all these research centers. The plant will

demand has accelerated the evolution of Mexico’s vehicle

also contribute to job generation; it is expected to create

park, which, for many years, has been dominated by older

approximately 1,000 direct jobs. The investment required

vehicles. Therefore, Goodyear is focusing on innovation

for the first stage will be between US$500 million and

and technology to prepare for the significant opportunities

US$550 million, which would be one of the most significant

that will arise over the next five years.

investments in the tire industry.

The most popular tire size in Mexico is for a 13-inch rim. For

Q: What advantages can Goodyear offer its customers

the last 20 years, this has been the number one SKU size

that distinguish the brand from its competitors?

in terms of volume, representing 44% of the total market.

A: In terms of the average age of the cars and their rapid

Nowadays, this tire represents less than 20% of the market

evolution in the current market, the complexities of the

and five years from now, it will be less than 8%. The reason

vehicle park in Mexico demands a comprehensive product

for this will be the new production of cars with 15-inch rims

portfolio from us. With our current offering, we are capable

and above, leading us to the projection that 17-inch rims

of satisfying 95% of the market. To achieve this, we will need

and above are the ones that will soon grow fastest in the

a portfolio with over 1,000 SKUs that is completely targeted

industry.

toward the local market, so we launched 12 new product lines between June 2013 and June 2014.

Q: Since Goodyear Mexico closed its original production plant in 2001, what led to this year’s announcement to

Additionally, there is no way we can succeed in this business

open a new one in San Luis Potosi?

without a solid distribution network. For that reason, we have

A: Future demand will require products with greater added

spent a lot of time and resources on becoming a customer-

value, for which new production technology is needed.

focused company. Thanks to our long presence in the country, we have a strong connection with our dealers who are now entering their third generation of owners, and we help them obtain the necessary abilities to properly function within the market. We are also working on non-traditional channels, such as mass merchandising and vehicle dealerships, where we now have an important presence. Q: What progress have you made in your social responsibility initiatives in Mexico? A: The most important program that we have at the moment is the collection, warehousing, and transportation of used products that will later be used in cement

206

production. While we are one of the key players in this

Q: What are your general short-term predictions for the

project, this has been a sector effort in partnership with

automotive industry?

the federal and local governments. We are also involved

A: The forecast is that there will be stable growth across

in the communities surrounding these projects to improve

the industry. Last year, Mexico produced 3 million cars and

the quality of life for the local population.

is expected to produce 5 million units by 2020. Obviously, this will impact the tire industry, so we are also expecting

Last year, we started producing silica from rice peels, as a

considerable growth in the production and replacement

group of engineers found that they could produce energy

sectors.

by burning this product. Every year, tonnes of rice grains are consumed and their peels are discarded, but Goodyear

Another important factor will be the national economy.

found that after burning the rice the ashes can be recycled

The last two years were not as profitable as everyone

to produce silica, which is a fundamental component of

expected, but sooner or later GDP will have to pick up and

tires. There has been a lot of research into this discovery, and

return to 4% growth, which will accelerate the growth of

we are now producing the first tires made from rice silica

the tire industry. Additionally, as the US economy recovers,

in Asia. This is an important example of our commitment

this will motivate expansion in Mexico, which is why we

to sustainability and social development and we hope to

are optimistic as we reinforce our commitment to our

implement this in Mexico. We are taking this project very

customers. Goodyear has been in Mexico for 75 years and

seriously and will continue to process all the products that

is proud to say that the company has helped the industry

have reached the end of their life cycle responsibly.

to become what it is today.

| TECHNOLOGY SPOTLIGHT: EPICOR MATTEC MES Lean Manufacturing and Six Sigma strategies are now a

machine individually, the software can detect failures in tools

standard for most automotive companies, with many OEMs

and equipment, and it can plan maintenance procedures with

requesting Tier 1 companies to work with this approach in

the least effect in production capacity for the plant.

order to become official suppliers. Getting to this stage requires a keen focus on cost reduction, waste management,

Mattec MES production control software collects data

and productivity, which can all be improved by implementing

directly from the manufacturing equipment in real time,

the

Mattec

minimizing imprecisions and wasted time that stem from

Manufacturing Execution System (MES) platform is the ideal

manual data collection. After gathering the information,

option to achieve these goals, offering an unprecedented

the system analyzes the figures 24 hours a day, seven days

level of analysis within manufacturing processes.

a week, utilizing digital and analogic signals from sensors

most

efficient

control

systems.

Epicorâ&#x20AC;&#x2122;s

or PLCs, and connecting with Microsoft Windows Server In terms of planning and programming, Mattec MES allows

and Microsoft SQL Server. In addition, it is designed with

managers to analyze production targets and chronological

an open architecture to allow connectivity between Epicor

developments, updating them easily through a drag-and-

ERP and the plantâ&#x20AC;&#x2122;s interface.

drop interface according to real equipment productivity, specifications.

From a workforce efficiency standpoint, Mattec MEC aids

This helps to identify any problems with the machines, as

managers and operators plan their schedule according to the

well as any possible halts in production activity. Regarding

operative timetables of the equipment. It can also generate

production optimization, the software creates a way to

alerts for specific phases in the process, while generating

organize similar components, as well as to manage equipment

a complete analysis of workforce productivity, waste

loads, inactivity periods, and timetable compliance. Mattec

generation, and every other manufacturing aspect within the

MES also helps companies with their energy management

plant. Finally, the system can influence production quality

requirements, monitoring the consumption rates of each

by tracking every process and component, resulting in an

and every machine. The platform can capture and analyze

easy traceability process. Additionally, the platform works

energy performance indicators to reduce costs, while looking

with statistical quality control and statistical process control,

for ways to improve efficiency. The fourth aspect that Mattec

guaranteeing high levels of replicability and efficiency by

MES impacts is maintenance managing, by analyzing each

approving or rejecting products automatically.

environmental

conditions,

and

product

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| VIEW FROM THE TOP

DEVELOPING NEW GENERATIONS OF EXCEPTIONAL INNOVATORS JORGE VÁZQUEZ Development Director of Continental Automotive Guadalajara Q: In 2014, Continental Automotive started operations at

Q: What business segment has seen the biggest

its new research center in Guadalajara. For what reasons

development as a result of these innovation cells?

did Continental invest so heavily in Mexico as an R&D hub?

A: Due to the technological convergence, the interior

A: While the center is relatively new, our R&D operations in

part of the business, focused on entertainment and

Mexico have been in effect for over 15 years now. Currently,

communication products, is the sector in which we see the

the center employs close to 1,200 people with applications

most room for exploration. Programs like our innovation

in three major fields. The first is safety, accident and injury

cells give us the opportunity to learn and adapt quickly.

prevention, the second covers powertrain and vehicle

We have some applications that might improve the user

propulsion, and the third is the availability of information.

experience and enhance the user interface, like gesture

Three years ago, Continental made the decision to

recognition. As a matter of fact, we are experimenting

formally increase its investment in Mexico, which led to the

with some brainwave applications and ten different

construction of our own R&D center and the consolidation

technologies regarding gesture recognition.

of our Periferico and Tijera plants in Guadalajara into a single building at Continental Santa Anita. Through our

With Agile Product Development, which is very different

manufacturing activities, we realized that the skillset of

to the common processes in the industry, we can develop

our workforce was transferable to R&D, and that Mexico

a competitive state through innovation. We are working

has no shortage of skilled engineers. During 2015, we

directly with car manufacturers to identify current market

expanded our Mexican workforce by 20%, and we were

trends and develop products to meet them. These types

able to transfer some of our knowledgeable engineers to

of operations are called Trend Antenna, and we presently

Guadalajara. Continental also developed link-up programs

have one in Germany, China, and Mexico, each with its own

with universities to create new academic programs, and

particular approach. In our Mexican center we collect close to

a laboratory for electromagnetic compatibility alongside

200 inventions every year, 50-60 of which are transformed

CINVESTAV, leading to a lasting partnership. The university’s

into prototypes, and 10% become patent applications.

flexibility allowed us to develop students within the fields that Continental required over five years, specifically training

Q: What other technology areas have you detected as

R&D professionals. Now we are leaning towards product

opportunities for projects in your R&D center?

development and the conversion of ideas into prototypes.

A: The process of electrification and charging of vehicles has plenty of room to grow. Cars will eventually become

208

Q: How is Continental enabling these students to obtain

intelligent transport systems, and will become the most

the required knowledge and skill levels?

efficient sensor to access and collect information that can

A: To develop the right capabilities, we need students to have

improve the navigation and safety of the vehicle, as well

a solid foundation of knowledge that we can build on. Having

as decrease emissions. Furthermore, Continental’s R&D

entered the innovation field, we do need to change the

developments include diesel and gas engine controllers,

educational structure to thoroughly focus on methodology.

certain products for telematics applications, including

In fact, students have been developing ideas from scratch in

satellite and radio, airbag controllers, and security

what we call innovation cells, which are challenges that are

applications that disable vehicle access to unauthorized

held three times a year. Within these challenges, students

people.

must produce a prototype that shows the economic

that measure the vehicle’s inertia and take decisions

feasibility of an idea, be it related to engineering, design,

accordingly, as well as with transmission controllers and

or business. Through these types of programs we promote

other safety applications related to the adherence of the

communication that leads to innovation, which could

tires, both of which have been worked on by our engineers.

eventually be commercialized, because innovation does not

In total, we have 3,400 projects running at the same time

come from the top, but rather from the bottom.

within those fields of application.

There

new

tendency

toward

sensors

| VIEW FROM THE TOP

INTRIGUING DISCOVERIES IN SUSTAINABLE MATERIALS FOR TIRES JAVIER MENDOZA ALTAMIRANO Director General of Continental Tire Mexico, Central America & the Caribbean Q: How has Continental Tire progressed with its goals for

to worry about their maintenance, allowing them to focus

the light and heavy vehicle segments?

their efforts on their core business.

A: The four brands we manage within Continental are Euzkadi, General Tire, Continental, and Barum, which

Our national accounts are represented by big fleet clients

are divided among the four main market segments of

like Pepsi, Coca-Cola, Corona, Bimbo, ADO, and Flecha

premium, quality, budget, and ultra-cheap. Continental is

Amarilla, who are all looking for a single supplier for their

our premium brand, Euzkadi and General Tire attack the

operations. These companies want one price, one invoice,

quality segment, while Barum targets customers with cars

and the same service throughout the country. Therefore,

older than 10 or 12 years. Our tires must have the same

we are offering a national price for these customers and

level of quality as Original Equipment (OE) and we will

we are training the people in every fleet.

not compromise on this for lower prices. Among the new manufacturers, we are already working with KIA Motors

Q: In terms of R&D, what new products is Continental Tire

and Audi to have our tires approved, and we will most

releasing, and what will be their impact on the Mexican

likely get a contract for the new Audi Q5. Additionally, we

market?

have a longstanding contract with Volkswagen and are

A: One of our main projects is the V.ply tire, which is

involved in all its projects. Continental Tire will certainly

German technology that combines the benefits of radial

be collaborating in the production of the new Tiguan.

tires with conventional technology for port applications. In Rich Sacker equipment, the tire needs to be robust and

We grew 26% in our premium segment by increasing the

with extremely rigid sides to avoid lateral movements.

Continental brand’s market share from 14% to 20%. We will

Similarly, the material needs to be hard enough to resist

not compete against low price articles, since we want to

sharp objects that may endanger the tire. We needed a

attack the premium and quality markets with our premium

product that offered the strongest braking grip at the

mix. In the heavy vehicle segment, currently 55% of the market

lowest cost. V.ply tires were developed with the highest

belongs to other brands with lower quality. Nevertheless,

resistance, with a longer useful lifetime, and with enough

we currently produce the best tires in our segment in terms

grip to prevent slipping even with enormous loads in the

of rolling resistance, and we perform 6m to 7m better than

truck. The basis of this technology and the source for its

some of our competitors in braking conditions. For 2015, we

name is the V design of its multiple layers of high strain

currently expect an approximate growth of 6%, but given

polymer fibers. These fibers are aligned in a V angle, and

the national economic circumstances and the evolution of

they are fixed to the tire by three independent steel cores.

Mexico’s GDP, we might lower that to 4%. Q: What new technologies and processes is Continental Q: Considering the benefits of Continental Tire’s products

Tire applying within these new products?

in terms of fuel efficiency and consumption, how open has

A: Our Taraxagum technology enables us to obtain rubber

the market been to embracing these advantages?

from dandelions. While we have natural rubber in the south

A: The market is becoming increasingly intelligent

of Mexico, Taraxagum can be obtained from Mexico City, San

when it comes to tires. Gasoline prices in Mexico are

Luis Potosi, or the US. The advantage of this technology is

skyrocketing compared with the US, leading clients to

that you can plant its source in any country, offering price

choose Continental’s EcoPlus tires. In the past, fleet

stability and a much higher availability for production.

owners performed their own maintenance service, but

Taraxagum offers quite similar performance to conventional

now they are delegating these activities to specialists. For

rubber, but does not depend as much on price fluctuation.

that reason, we have installed small shops in several fleet

Additionally, given the high demand for natural rubber, we are

companies, responsible for the service, alignment, and

rapidly consuming all rubber trees, so this new material offers

balancing of every unit. That way, companies do not have

a much more sustainable alternative for the environment.

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| VIEW FROM THE TOP

HIGH OPERATING STANDARDS FOR RENOWNED TIRE COMPANY TOM GRAVALOS CEO of Pirelli Mexico Q: What have been Pirelli’s main achievements and

Q: How is the tire market currently evolving, and what

toughest challenges since establishing the plant in Silao?

links this evolution to Pirelli’s production rates?

A: Pirelli Mexico continues to grow at a double-digit pace.

A: Most of the tires we produce in Mexico stay in the NAFTA

We have strong relationships with car manufacturers and

region. From our Silao plant we supply Volkswagen, BMW,

we already have contracts to supply many companies that

Mercedes-Benz, Ford, Lincoln, and the Chrysler group.

are entering the Mexican market. Our replacement tire

Some of our tires are designed for cars with speeds of

business has also grown at a double-digit rate, and we now

up to 320 km/h, and we have produced tires for the Ford

have significant presence in terms of Pirelli branded points

Mustang’s 50th anniversary edition, as well as for the

of sale. When Pirelli announced its investment, we wanted

Dodge Challenger Hellcat. These cars have really specific

to increase our revenue in the premium segment from 55%

standards, so to be able to deliver the proper product we

to 66% in the NAFTA region, resulting in faster growth

must have an extremely modern plant with highly stringent

in this segment than with other products. Currently, the

manufacturing standards.

premium portion represents half of our Mexican business, which translates to higher revenue. Our tires are present

An interesting development is the introduction of electric

on vehicles manufactured by OEMS such as Audi, Bentley,

vehicles, which include a variety of challenges because

BMW, Cadillac, Ferrari, Jaguar, Lamborghini, Land Rover,

they are much more sensitive to rolling resistance. Sizes

Lincoln, Maserati, McLaren, Mercedes-Benz, and Volvo,

will start to change and we will likely see taller and slimmer

because we help these car makers deliver the best possible

tires on mass consumption electric vehicles. Electric cars

performance.

have instant torque, which brings new demands for car and tire manufacturers. If left unmanaged, this could cause

Q: How is the brand participating in the development of a

rapid tire consumption, so there needs to be a joint design

new generation of technology?

process between car and tire producers.

A: Pirelli wants faster, quicker, and more agile cars that use less energy, so we are helping car makers to improve

Q: What does the return of Formula 1 to Mexico represent

rolling resistance. This results in using less fuel, as well as

for Pirelli?

improving elements like braking, handling, and steering, as

A: Formula 1 gives Pirelli a chance to demonstrate its

the quality of the tire can seriously impact the vehicle’s

technology with the most extreme performance conditions.

performance. Depending on the car and the road, tires

In addition, Pirelli has made the Formula 1 viewing experience

could create a difference of up to 7% or more in fuel

much more enjoyable for fans. The teams have to figure out

economy. If we consider the thousands of miles that cars

their strategy around our products, the engineers have to

travel in a lifetime, this becomes a major factor. Car makers

figure out how to get the most of the vehicle with these tires,

have certain expectations regarding traction, handling,

and the drivers need to learn how to manage their tires along

noise, and comfort, so all of this has to be included in the

with the rest of the car. This relationship has been beneficial

tire’s design. This year we launched the P Zero All Season

for Pirelli and we hope it has been the same for Formula 1.

Plus tires, which have leading technology that provides

210

better handling, less rolling resistance, and more durability.

Pirelli is a sporty, fun, and energetic brand that develops high

To produce millions of tires you need to have a good

technology. We are an added value for car manufactures,

technological process, which directly relates to how our

and we have worked hard to obtain that recognition. As a

new plant has evolved. Last year, we produced almost 2

premium tire manufacturer, our focus is on improving vehicle

million tires and this year we will grow to almost 3 million.

performance, while devloping the best car-tire experience

By July 2015, our total production had reached 5 million

with our clients. Pirelli knows that if clients enjoy and

tires, and our goal for 2017 is to produce 5.5 to 6 million

appreciate our approach, we will have a better chance of

tires per year.

selling the replacements when the time comes.

| VIEW FROM THE TOP

SAFETY SHOULD BE EVERYONE’S FIRST PRIORITY RAÚL ARMENTA General Manager of Autoliv Mexico Q: In light of the country’s recent automotive growth, to

mostly to the regulators, such as the National Highway

what extent is safety a growing priority in Mexico?

Traffic Safety Administration in the US. In the end though,

A: The two perspectives of safety in the Mexican market are

governments still determine the actions to be taken.

that of the consumers and that of the manufacturers. Car buyers that place safety as a priority represent a minority,

Q: What factors would lead to Autoliv establishing an

with most buyers prioritizing other benefits while taking

R&D center in Mexico?

security as a given, or perhaps an afterthought. As 80%

A: The most important factor for this is the availability

of our Mexican production is exported, our products are

of sufficient qualified people. Right now, Autoliv’s R&D

made to comply with both US and European regulations.

budget in Mexico is mainly assigned to testing, but, in the

Our safety technology is such that additional features

near future, we will establish engineering centers in the

can easily be added to the base product to comply with

country, which is something that OEMs are already doing.

these requirements. However, while a product such as

In 2013, Autoliv invested US$489 million in R&D worldwide,

a seatbelt may not be expensive, the integration of the

which represents about 6% of our global revenue. If there

safety technology, such as installing airbags that are in

is talent and training, then the centers are sure to follow.

sync with the seatbelts, or correctly calibrating sensors, can be costly. Once integrated, the OEMs must run tests,

There is definitely talent available for R&D in Mexico. We

which are also expensive. Each destructive test costs

currently have expat assignments to send people to our

between US$2-3 million per vehicle. This is one of the

R&D centers in Europe and the US, with people usually

reasons that car manufacturers will not place additional

staying up to two years before heading home. I believe the

safety measures in vehicles where the market does not

valuable part of this is that Mexican engineers are working in

require them.

R&D and contributing to new technologies, later returning to the country with new knowledge and ideas.

The growth we see in Mexico concerning security systems is driven by stricter safety regulations and consumer

Q: How does Autoliv assist OEMs in utilizing innovations

volume abroad. The particularity of the Mexican market is

that reduce production costs?

that customers must decide whether or not they want to

A: In the last few years, OEMs have been investing in testing

pay extra for advanced safety systems.

simulator software in order to reduce testing costs. Once an OEM faces a recall, they regret not having done more impact

Q: How are you incorporating new innovations in airbag

tests, which could have saved them so much time and money.

security into the products you sell in Mexico?

For example, a destructive test will shed light on the exact

A: Autoliv’s innovations are becoming available in some of the

interaction between an airbag and a seatbelt. Working with

vehicles being sold in Mexico, such as the Volvo S40. This car is

OEMs is very demanding as they regularly ask for perfect

now sold with pedestrian airbag, which is designed to protect

products. After all, if a product is not up to quality standards,

their head from the vehicle’s windshield. This feature is not

the supplier must assume the responsibility.

yet popular in the Americas, with pedestrian airbags mostly being focused toward the European market. For the US

Q: What are Autoliv’s objectives for the next few years?

market we have another security feature, which is a seatbelt

A: We are planning to reach an estimated growth rate of 35%

with an integrated airbag. Upon impact, this product inflates,

by 2018, which is in line with the US market that has been

creating a wider area of shock absorption. We divide the

growing rapidly and promises further expansion. Our market

security market in two types of security: active and passive.

is NAFTA, but we do export in low volumes to our own plants

Passive security is most useful in the case of an accident,

in Europe and Asia, and we are exploring the possibility of

while active security works to prevent accidents. After

exporting to Brazil. Ultimately, we believe that being in the

implementing the needs of their clients, the OEMs listen

right place at the right time is essential to success.

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INTRODUCING NEXT GENERATION FUEL SYSTEMS TO MEXICO Kautex is a global leader in the manufacture of low emission

of our NGFS® technology for the OEMs and for the end

twin-sheet-fuel systems and has been well-known for its

customer. Being the enabler for lightweight plastic hybrid

expertise in developing fuel tanks since 1935. The company’s

fuel systems, NGFS® contributes to the success of hybrid

products are manufactured with two different technologies:

technology in the market, assisting in the introduction of

conventional technology and NGFS®, which stands for Next

highly efficient hybrid vehicles with low fuel consumption.

Generation Fuel Systems. The NGFS® process is a twin sheet technology that significantly improves the value of

The SCR technology has become the most acknowledged

a fuel system, and is used in the production of fuel tanks

method for eliminating harmful nitrogen oxide (NOX) within

that are most common in the passenger vehicle segment.

automotive diesel power trains. The infrastructure providing

Conventional technology for fuel tanks previously required

the required emission reduction fluid (DEF) is continuously

that fuel pumps, filters, hoses, and other fuel related

growing in all major regions. Starting as a niche product

components were outside of the tank, but with NGFS®, most

several years ago, SCR is now available in most diesel

of the components are inside, significantly reducing HC

vehicles worldwide. Kautex, together with a global partner

emissions. Not only that, but NGFS® technology also reduces

for the supply module, was a pioneer of this technology

CO2 emissions, as well as reducing the weight of a fuel system

and now has production capacities installed in Asia, North

by approximately 10%. It can also be used in the production

America, and Europe. Since 2006, Kautex has launched

of pressurized plastic tank systems for hybrid vehicles,

more than 50 tank projects for more than ten OEMs. “We

leading to a weight benefit of up to 50% when compared to

are always looking at the opportunity to expand into

the existing steel tanks that hybrid vehicles use.

additional regions in strategic ways that would best meet

“We are pleased to be leading the charge to develop emission reduction technologies in Mexico”

Jose Sanroman Tovar, Director of Puebla Operations at Kautex Textron de México

Kautex develops products for the North American market,

the interests of our customers and Kautex,” states Jose

so must meet the strictest requirements. With that in mind,

Sanroman Tovar, Director of Puebla Operations at Kautex

the emissions from an NGFS® fuel tank are significantly

Textron de México. “Mexico, of course, is one of those

below the planned EPA for 2017, as well as California’s

regions which we continue to examine, so 2015 should be

emission standards of 300g/24h hydrocarbons per day per

a year of continued forward momentum for Kautex. We

car. The demand for PZEV and hybrid vehicles has driven

are pleased to be leading the charge to develop emission

the company to further develop and improve the value

reduction technologies in Mexico,” he concludes.

Administración de Ausencias

Actividades

al or

Tiempo y Asistencia

e la Fue ión d rza c a r t La s i b in

Pronóstico y Programación

200

Recopilación de datos

Análisis 0

Mejore la Productividad de la Fuerza Laboral 212

Tel.: +5255 5002 5000

mph Controle Costos Laborales

Minimice Riesgos de Incumplimiento

Resolviendo 3 Problemas Críticos de Negocios

www.kronos.mx

| VIEW FROM THE TOP

DUAL EDUCATION SYSTEM PROVING ADVANTAGEOUS LEFT: Hauke Jungnitz, Director General of BOS Automotive Irapuato RIGHT: Carlos Casado, CFO of BOS Automotive Irapuato

Q: How far has BOS Automotive progressed in the

Q: What has your experience been in terms of retaining

expansion of its operations in Mexico?

talent?

HJ: We are in the early stages because we have not received

HJ: Our subsiduary has the highest turnover rate for people

any orders yet, but I predict this will happen in the short

who have been in the company for less than six months. In

term. It is now a matter of getting order confirmations for

recent years, our turnover for blue collar positions has been

product development and then we are essentially ready to

reduced. However, we see that external forces having a

go, as long as we are also price-competitive.

stronger impact this year. We have implemented measures to prevent high turnover, such as offering competitive

CC: It is interesting for people in our industry to know that

salaries, investing in the selection and training of new people,

BOS is working on its vertical integration and is therefore

and having the supervisors and project managers talk to

able to reduce times and become more cost competitive.

employees and understand their concerns. Incidentally,

These are elements we want potential clients to recognize.

absenteeism is something embedded in the Mexican law; people can be laid off after three days of not showing

Q: During your expansion process, what has been your

up. However, people can systematically miss two days of

experience with the availability of human capital in the

work per month and legally we cannot do anything. Once

state of Guanajuato?

fluctuation is reduced, we can start taking more measures to

HJ: Regarding the state of Guanajuato, we have had a

retain people. A certain percentage of fluctuation is not bad

positive experience working with the government to

because it allows us to adjust.

create certifications for our workers. For instance, our forklift drivers and welding specialists underwent a

Q: Apart from the first company expansion, what is the

training course, at the end of which they received a state

next step for BOS?

certificate of their professional qualifications in their

CC: The industry is moving really fast in Mexico and we

corresponding field. Another important factor in human

want to be ready for that potential growth. This will

capital development is the dual-education system, which

require more investments beyond our manufacturing

is common in Germany and consists of part school, part

plant in order to develop more technical capabilities that

work. There are a couple of states that have pilot programs

will translate into being able to produce a wider range of

for this system, and Guanajuato is one of them. BOS is

parts. The idea is to increase our value-added functions,

participating in this program and we have six students

for instance, engineering and designing with Mexican

from the dual system in the company.

professionals in Mexico.

CC: Companies like us have to hire, train, and retain direct

HJ: I would say that most companies entering Mexico

labor. At the entry levels of the company, we usually

still engineer new products in their home countries.

hire people with little industrial background. For higher

Volkswagen has a strong engineering team here although

positions the criteria are different. I see a risk in Guanajuato

it is still managed by Wolfsburg. Ford now demands more

in terms of staff because new companies and industries

sourcing from Mexico. BOS has a small engineering team,

are entering the state and we are all competing for the

but within the next two years, I expect to have a fully

same talent. In Queretaro, the Aeronautic University

functioning unit in Irapuato. Maybe this division will not

specifically prepares people for

companies within

work on the most complex products, but it will take care

the aerospace cluster, and the proposed automotive

of the core products made in Irapuato. A local engineering

univesity is expected to do the same. Guanajuato does

unit would be working together with our office in Rochester

not have something similar yet, but if they developed an

Hills, Michigan. Additionally, the engineering division will

equivalent, I think that would strengthen the competitive

be close to us in case there are customer issues, which is

advantage of the state.

always an advantage.

213

| VIEW FROM THE TOP

PRECISION AND DEFINITION ACHIEVED WITH TOP-CLASS POLYMERS STEPHAN JOACHIM National Sales Director of REHAU Mexico Q: Considering REHAU’s wide variety of polymers, what

Q: What are the distinguishing factors that define a high-

distinguishes its product offering in Mexico?

quality polymer?

A: Our specialty in Mexico is extruded polymer products that

A: The polymer material itself does not necessarily present

make up sealing systems for the roof, windshields, windows,

that much of a difference, but OEMs are very demanding, and

and similar components. We are producing sealing systems

expect precise delivery. They will not accept interruptions

for Volkswagen, Nissan, Infiniti, Daimler, Ford, and Chrysler,

in their production rhythm, so all deliveries must be timely,

as well as various other platforms for each of our OEM

and all minor details and product specifications must match

clients. While our products may seem like simple pieces of

their requests. Some luxury OEMs are willing to enter co-

plastic, they involve the combination of different materials

investment agreements if additional pieces of machinery

and precise cuts in an automated manufacturing line. They

are needed to obtain the utmost precision in the production

also require some manual labor, which is why manufacturing

process, or in the aesthetics of certain pieces. However,

in Mexico has given us a competitive advantage. Our

certain other OEMs are not that attentive to detail and will

products that are produced here are used in Mexico, but

settle for less expensive processes. Luxury cars often have

also sent to markets like the US, China, Russia, and Brazil.

more complex designs, and the development of parts for these vehicles require state-of-the-art engineering, which

Q: Which of your products represents the best growth

is actually one of REHAU’s core strengths. We have the

opportunity for your strategy here in Mexico?

infrastructure that enables us to make products for luxury

A: Besides Volkswagen vehicles, which have their own

automobiles, but it would not be a competitive strategy

unique manufacturing processes, all cars require a roof ditch

for REHAU to remain exclusively in that niche. We need a

molding and a weather strip or beltline molding. The question

segment that requires quality and volume in order to be

is whether OEMs use thermoplastic elastomers (TPE),

competitive, be it in luxury cars or mass-market vehicles.

commonly known as polymers, or ethylene propylene diene

214

monomer rubbers (EPDM). Rehau believes that polymers

Q: How is REHAU approaching its immediate growth

are the best, as they allow for more precise and defined

strategy in Mexico?

geometries. The material can also be recycled, it is more

ecological, and it is more lightweight than rubber, which is

evidenced by the fact that we have recently purchased a

a big advantage as cars makers seek to lower the weight of

significant amount of land that has given us enough room

their vehicles. OEMs are looking for trustworthy providers

to quadruple our production. We now have a Mexican

for similar parts, so there is a lot of potential in the polymer

development and process engineering department in

extrusions market. REHAU produces three main products:

close coordination with our corporate organization,

extrusions and sealing systems, exteriors, such as bumpers

whereas all engineering was previously done in Germany

and spoilers, and blow-molded parts for the conduction of air

and Detroit. Beyond this, there are no confirmed further

and liquids. We might later on enter the Mexican market with

investments, but we remain attentive to see if, in the

more complex parts, such as bumpers, which we currently

future, we gather the necessary elements to generate

do not manufacture in this country. These are much more

them, perhaps in a bumper plant. Future investments

expensive compared to sealing products and such a project

will depend on our company’s overall success in different

would multiply our operations, but they are very complicated

markets. Despite being a family-owned business, REHAU

to produce. Bumpers were once just a single piece of plastic,

has become a rather large company. We have different

but now include headlights, indicators, sensors, cameras, and

plants around the world in places such as the US, South

in some cases even the brand’s logo. For now, the Celaya

Africa, Germany, Hungary, and Czech Republic, so

plant will just provide our sealing extrusions product for the

any new investment entails the dedication of a lot of

Americas, but if we have a request for bumpers in the future,

resources. Even so, we remain hopeful that more projects

the parts will be made here in Celaya.

will be developed in Mexico.

The

company

has

been

growing

considerably,

FLAWLESS EXECUTION VITAL FOR RAPID SUCCESS RATES Grupo Amaya Telleria’s unique selling point is its dedication

are also requesting grinding solutions, but according to

to high-quality machined components and a passionate

Villicaña Chatelain the equipment for such process is still

dedication to efficiency, giving it a distinct advantage since

considerably expensive. Even so, the company is searching

its arrival in Mexico. The company designs and manufactures

for the most economical solution. Another challenge that

suspension, powertrain, and engine parts using the precision

must be considered in the grand scheme of things is the

machining techniques of steel forging and ferrous castings, as

new emission regulations being handed down by the US

well as producing aluminum parts by injection and machining,

and other markets. In this environment, Grupo Amaya’s

and is rapidly moving ahead with its globalization plans from

customers have been displaying a keen desire to reduce

its home country of Spain. Having expanded its presence

the weight of their vehicles. “The company is now coming

in Slovakia and Brazil, Mexico is the first North American

up with ideas and initiatives to eliminate weight and

location for the manufacturer, representing a crucial piece

currently there is a trend to move toward aluminum,” says

of the puzzle in its overall global strategy. “Grupo Amaya

Villicaña Chatelain.

Telleria really started from scratch when we arrived in Mexico during 2010,” recalls Elimelec Villicaña Chatelain, Commercial

Innovations such as these require a dedication to R&D,

Manager for Grupo Amaya Telleria North America. “With

which is imperative to Grupo Amaya’s global operations.

the assistance of Ford, our biggest customer in Mexico, we

The company’s Automotive Intelligence Center is located

began operating from a temporary location while we built

at its headquarters in Amorebieta, Spain, and is home to a

our first facility, eventually managing to double our capacity

number of testing labs and its engineering development

in 2012 by moving once more. Right now, we are fabricating

facilities. As such, there are no plans to move any R&D

close to 2 million parts for Ford per year, as well as 1.8 million

to Mexican soil just yet, but Villicaña Chatelain remains

components for two other customers.”

hopeful and optimistic about the possibility. “As we

“We need to go way beyond just being a manufacturer; we need to develop and engineer locally” Elimelec Villicaña Chatelain, Commercial Manager for Grupo Amaya Telleria North America

Besides Ford, Grupo Amaya Telleria’s partners include

grow, there will definitely be a time when we will need to

Daimler, Honda, American Axle & Manufacturing, and

gain more independence in Mexico. We need to go way

Chrysler, among others. The key to attracting these clients

beyond just being a manufacturer; we need to develop and

has been our ability to supply highly complex parts and

engineer locally.”

components at high volumes. This is mostly achieved through machining, which is one of the supplier’s core

Returning the focus to the present day, Grupo Amaya

businesses. By utilizing its turning, CNC, and milling

Telleria is looking to double its production capabilities

capabilities, Grupo Amaya Telleria has been able to export

once more, by increasing its presence with new customers

95% of its production to the US. “We are adept at design

such as Honda, as well as other OEMs and Japanese Tier

and engineering ahead of time, as well as advancing with

1 suppliers. “Grupo Amaya is building the reputation of

proper capital solutions and equipment,” states Villicaña

being an extremely efficient, high-performing supplier,

Chatelain. “Most of the development is done ahead of time

which is greatly increasing our credibility in the market.

and then later implemented at the plant. Additionally, it is

Before 2010, nobody knew about us, but now a lot of

important to put an enormous focus on flawless execution;

companies are aware of the benefits we can provide, and

you could be good at planning, but if you do not execute

our goal is for Mexico to become the largest facility in the

properly and achieve the end result, all of your planning

company. Right now, our branch represents a significant

efforts will have been for nothing.”

percentage of the company’s total revenue.” He concludes by highlighting the exciting times that are present

The next growth stages are the incorporation of new cutting

within the Bajio region, with new companies presenting

tools, five axis equipment, and higher speed spindles

undeniable opportunities for the right kind of suppliers to

for machining aluminum. Grupo Amaya’s customers

gain greater footholds on Mexican soil.

215

| VIEW FROM THE TOP

HIGH QUALITY STANDARDS FOR TECHNOLOGY RAÚL SUÁREZ Vice President and General Manager of MANN+HUMMEL Mexico

Which

products

from

MANN+HUMMEL’s

broad

areas. However, car manufacturers design their vehicles

portfolio are the most popular in Mexico?

to be resistant to any conditions so we must comply with

A: The most popular products in the country are filters and

their specifications. We have certain products that are

intake filtration systems. We offer these products to OEMs,

targeted toward particular conditions, but we just add

and to the aftermarket industry. There are some products

other components to our base product to achieve that.

that we have not distributed before, but we have grown and have new technological capabilities. The Mexican market is

Q: Aside from demand for low prices and high quality,

price-oriented and the benefits of good filtration systems

what other trends have you noticed in the Mexican

have not always been common knowledge. Car owners are

market?

not always aware that unfiltered particles can reduce the

A: Normally, car owners see it as an investment and do not

lifespan of an engine, so the challenge is communicating

want cheap parts that might damage their car. Another

with them. We offer high-quality products that meet OEM

important factor is the internet; there is a lot of information

requirements, which means they have better operation

available and customers can compare every product and

and last longer. The company allocates some resources

its quality. On our website, we explain to our customers

to develop good relationships with shops and distributors

the advantages of our products, and the different solutions

to show them benefits of good filtration systems, as well

that we can offer. We also have an online catalog of

as utilizing specialized people to explain customers the

products where we display all the applications for that

advantages of our products. Even though they might be

item. This is currently an important trend in the market,

more expensive, we will still focus on products with a higher

evidenced by our clients pointing out the importance of

quality. There is a segment of the market that wants good

having online access to information. There is always going

quality, and we are going to continue to work with them.

to be demand for cheap products, but that also extends to quality products. Car owners do not want to spend every

Q: MANN+HUMMEL mainly focuses on service and

other day in the workshop, and, for that reason, they are

production in Mexico. Are there any plans to develop R&D

willing to make an investment in high-quality items. We

operations?

always try to show our customers why they need good

A: Given that there are some products that are specifically

filtration and how our technology works to help customers

targeting the NAFTA region, as well as the opportunity in

make an informed decision.

the aftermarket, we already have some research capabilities for filtration in Mexico. However, as more manufacturers

Q: What new products, services, or strategies are you

establish plants in the country, they are starting to develop

planning to reveal in the near future?

their own R&D centers, so we will need to adapt to these

A: We are planning to launch new intake manifolds and

new situations. Early in 2015, we presented our first intake

we are seeing an increasing demand for turbochargers,

manifold system manufactured in Mexico. It is a very

which means that we will offer more specialized ducts for

complex product that helps in fuel economy and emissions.

these applications. We already know what kind of engines

Previously, this part was manufactured in casted aluminum,

will come with the new manufacturers, so we are ready

but now we are developing it with plastic, reducing the

to provide solutions for fixed and variable flow manifolds.

weight and the cost of the vehicle.

In the area of turbocharger ducts, there is no one else in the region who can offer the same quality as we do, which

216

Q: What are the major challenges in Mexico regarding

means that all we need is the proper investment to be

differences in climate around the country?

prepared. At MANN+HUMMEL, we want to continue with

A: We have an R&D department that tests our products

our current quality. We want to continue offering original

against dust and different weather conditions. It is not

equipment with high-quality standards, and we want to

the same to design products for desert or snow covered

convince customers of the benefits of this technology.

| VIEW FROM THE TOP

CREATING SYNERGY BETWEEN MEXICAN AND BRAZILIAN PLANTS JUAN ROBERTO AGUIRRE SOSA Director General of TUPY Mexico Q: Why did TUPY decide to enter the Mexican market, and

product development is the reason we are considered a

what results has the company seen within the country?

Tier 1 supplier. Moreover, in 2001 we mastered the mass

A: As TUPY was originally based in Brazil, our location had

production of vermicular graphite iron, internationally

distanced us from global value chains. This resulted in a need

known as CGI (Compacted Graphite Iron). This alloy allows

for competitiveness and efficiency, which our Mexico plants

us to manufacture smaller, finer blocks and heads without

are now providing, alongside their considerable geographical

losing their mechanical properties, guaranteeing lighter

advantage. In April 2012, the company acquired two factory

products and leading to lower fuel consumption. Now, we

units in Mexico, one located in Ramos Arizpe and one in

are the number one supplier of CGI, the demand of which

Saltillo. We now have plans to open another plant this year

increases every year. Another recent innovation, adapted to

with an estimated investment of US$10 million. This new plant

industry changes, is TUPY Alloy. This high-resistance union

will have the capacity to produce 200,000 engine blocks by

was developed by our engineering team in collaboration

April 2017. Our presence in Mexico helps our diversification

with investigation institutes, suppliers, and a Brazilian

strategy and makes manufacturing much more flexible,

university. It facilitates the construction of a more powerful

creating the further possibility of entering different markets,

engine with cast iron, at a lower cost than that of CGI. For

especially in North America, which represents more than

blocks, this also increases resistance, reduces size and

50% of the company’s revenue. In 2013, 83% of assembly

weight, and maintains the thermic connectivity of the heads.

production was sold outside the country, principally to the US. The majority of TUPY’s revenue comes from exports, and

Q: What differentiates TUPY’s blocks and heads from the

the plants in Mexico contribute to approximately one third of

competition?

the sales volume of TUPY’s engine cylinder blocks and heads.

A: The principal distinction is our knowledge, which allows us to manufacture the most complex products in the smelting

Q: How would you define the principal challenges that the

and metallurgic industry, creating blocks and heads with

company faced when entering the Mexican market?

fine walls and alternative alloys that are vital for meeting

A: Achieving the optimum process integration and best

legal performance requirements. These parts need to meet

practices was difficult, even though we already had this in

high standards of fuel consumption and emissions, which

Brazil. We have now reached a point where we can export

was only possible thanks to a considerable investment in

new best practices to Brazil from Mexico, and achieving

R&D that TUPY has always maintained. Furthermore, we

maximum synergy is a crucial challenge that we face.

are the only independent foundry in the industry with a

Secondly, we believe we have now successfully assimilated

full planning and pre-assembly structure. This is already in

all of our personnel into one team, in which both Mexicans

place in Brazil and in the development stage in Mexico. Our

and Brazilians share the same mission, vision, and values.

production line in both countries is capable of catering to a

The final challenge has been standardizing our operations,

range of projects in terms of volume, size, and geometrical

but we still see plenty of room for improvement.

specifications.

Q: Have the industry’s global manufacturing changes and

Q: What characterizes TUPY’s R&D strategy?

the investment boom affected TUPY’s supply strategy?

A: We reinvest around 1% of our liquid revenue into R&D and

A: The automotive industry demands that suppliers

product development. In 2014, we created a vice president

use cutting-edge technology to produce top-quality

role to focus on projects that differentiate TUPY as a high-

products. Therefore, TUPY has adjusted its strategy to

tech producer to be able to offer alloys of the highest

allocate resources to new product development. With two

quality designs. Our new vice president for Technology

manufacturing plants in Mexico, TUPY has the capacity to

and R&D has been contacting various Mexican universities

meet different needs of various automotive manufacturers.

and technological institutes to identify existing skills in the

The company’s knowledge of forged iron and complex

population that could be applied to our projects.

217

| PLANT SPOTLIGHT: MAHLE RAMOS ARIZPE & CELAYA During June 2015, Mahle Componentes de Motor de México

peripherals, thermal management systems, and engine

expanded its Mexican production space by over 52,000m2,

systems and components. Specific profit centers for the

with the opening of a 34,000m2 plant in Ramos Arizpe

company include small engine components, motorsports

on June 9th, and an 18,000m facility in Celaya on June

and special engines, engineering services, mechatronics,

10th. This development extended Mahle’s global presence

thermostats and valves, and control units and front-end

of approximately 150 production locations and 2014 sales

modules. With light vehicle production in Mexico set to

of over US$11.5 billion. With these two additions to its

increase from 2.8 million in 2013 to 4 million in 2018, Mahle

portfolio, Mahle’s Mexican footprint will increase from ten

is taking advantage of the opportunity to proactively

to twelve production facilities, with an expected increase

increase its market share before it becomes saturated.

of almost 10% to its 66,000-strong global workforce by 2019. Mahle is one of the top three global suppliers within

The new US$19 million Celaya plant will be integrated into

three business units manufacturing filtration and engine

the filtration and engine peripherals unit, producing air

cleaner systems, air ducts, air intake manifolds and carbon

commercial vehicles. Among the company’s customers are

canisters. With this new addition, Mahle has capitalized on

Audi, BMW, Chrysler, Daimler Trucks North America, GM,

a unique chance to serve Audi, BMW, Ford, Mazda, and

and Navistar. Employment here is expected to increase from

Toyota, which are all developing thier presence in nearby

140 positions to approximately 500 by 2018. The plant is the

locations. With Celaya’s initial workforce of 300, demand is

company’s third base in Ramos Arizpe, adding to a 42,000m2

expected to create a further 150 jobs by 2019.

facility built in 1995, as well as the complementary 22,600m2 liner plant constructed in 2007. From this location, Mahle

The Ramos Arizpe facility, located near Saltillo in northeast

already services Bombardier, Ford, GM, Nemak, Volvo, and the

Mexico, will constitute part of Mahle’s thermal management

aftermarket segment, providing almost 2,000 jobs in the area.

unit, which was incorporated by the company’s 2013

Ramos Arizpe has been awarded with prestigious recognitions

acquisition of Behr Group. The plant will supply HVAC

of quality by various OEMs, and is now undergoing a plant

modules and heat exchangers for both passenger cars and

expansion that is set to be completed by 2016.

As a result of German, Japanese, US, and Korean manufacturers are opening and expanding manufacturing plants in Mexico, direct suppliers are flocking to the country or expand their local capacity with large investments. Further down the supply chain, international Tier 2, 3, and 4 companies are eagerly awaiting the opportunity to expand their participation in the industry growth, while local SMEs are jumping on the opportunity to become indirect suppliers. For these players, the main objective is to enhance their quality standards, as well as technological and operational capabilities, in order to win contracts with large Tier 1 suppliers.

This chapter look into the opportunities at the different levels of the automotive supply chain, public and private sector strategies to strengthen the participation of Mexican suppliers, and the hurdles to be overcome to ensure that suppliers can meet the large production volume requirements and high-quality standards. Moreover, this chapter focuses on technology trends such as the development of more resistant parts, the use of lightweight materials, and cost effective manufacturing processes.

INDIRECT SUPPLIERS

Compact Globally customized solutions

The MANN+HUMMEL intake manifold offers not only small installation space but also low weight, lower CO2 emissions and high component cleanliness. Cutting-edge engineering and manufacturing processes are used to ensure that innovative products go successfully into production – professionally, reliably and globally according to uniform standards.

MANN+HUMMEL MÉXICO www.mann-hummel.com Av. Vialidad el Pueblito 104 Parque Industrial Querétaro Querétaro, Qro. México. Tel. + 52 (442) 103 11 87

CHAPTER 8: INDIRECT SUPPLIERS 224

VIEW FROM THE TOP: Fabio Negrao, Atlas Copco Industrial Technique Division

225

VIEW FROM THE TOP: Andre von Frantzius, Grupo Desmex

227

VIEW FROM THE TOP: Ramón Pages, Proquipa and Ecoplating

228

VIEW FROM THE TOP: Alexandre Herpin, Bend-All México

229

VIEW FROM THE TOP: Joaquín Tortola, Atotech de México

230

PLANT SPOTLIGHT: Ternium Nuevo Leon

232

INSIGHT: Christian Suhling, Kern-Liebers

233

VIEW FROM THE TOP: Andrew Tomczyk, Whitehall Industries

234

INSIGHT: Alfonso Guarneros, Roxtec Mexico

235

VIEW FROM THE TOP: Chester John Delvalle, Kem-Design de México

236

INSIGHT: Luis Rubalcava, Tekfor Mexico

237

VIEW FROM THE TOP: Gastón Calero, Mubea

238

INSIGHT: Jordi Coll, Relats Mexico

239

VIEW FROM THE TOP: Salvador Ramírez, IMS Buhrke-Olson de Monterrey

223

| VIEW FROM THE TOP

MAPPING OUT THE TOOLING AND ASSEMBLY NEEDS OF THE MARKET FABIO NEGRAO Director General of Atlas Copco Industrial Technique Division Q: Atlas Copco has different industry solution segments.

calibrate tools inside our clients’ operations, focusing on

Which of these interact with the Mexican automotive

reducing their mean time between failures (MTBF).

sector? A: Atlas Copco’s four business areas are compressors,

Q: How do your automotive solutions compare with

power tools, mining, and construction. Both Compressor

solutions applied to other industries?

Technique and Industrial Technique, which respectively

A: The usual requirements in the automotive sector are

deal with compressors, power tools, and assembly

quality, productivity, flexibility, ergonomics, and decreased

systems, each have a high level of interaction with the

environmental impact. Additionally, there is a need for better

Mexican automotive industry. Additionally, within Industrial

service, know-how, and training. Power tools with electric

Technique, our three divisions are Motor Vehicle Industry

motors are partly replacing pneumatic tools, and the demand

(MVI), General Industry (GI), and Service (SCE). Globally,

for lower fuel consumption is leading to alternative assembly

MVI represents half of our business and it has become a

methods like adhesives and self-pierce riveting. Inside the

key factor to our success. Industrial Technique is present in

MVI division, we have sub-segments to better understand our

every automotive company in Mexico supplying industrial

customers, separating the industry into the four main areas

power

assurance

of Western final assembly, Asian final assembly, heavy truck

products, software, and service. Furthermore, Atlas Copco

and buses, and powertrain solutions. Western companies are

is intimately linked to the automotive industry’s production

much more automated, while Asian OEMs tend to work with

development process.

a manual approach. Of course, this does not mean the quality

tools,

assembly

solutions,

quality

output is any different. In order to be the number one supplier Q: Given Atlas Copco’s extensive presence in the industry,

in its segment, Atlas Copco’s approach is to provide the most

what are your most important products for manufacturing

complete solution in terms of products and services, as well

plants?

as being the only company that works through constructive

A: Our customers are demanding advanced industrial tools

segmented sales. We are constantly looking to transform our

and assembly systems to be equipped on new and existing

clients’ technology based on their specific strategies.

assembly lines. Similarly, the motor vehicle industry has

224

been demanding more accurate tools to minimize errors

Q: What are Atlas Copco’s strategies in terms of

in production, enabling recording and traceability in every

innovation, compared to those of its competitors?

operation. For that reason, we have developed advanced

A: Regarding Atlas Copco’s vision and strategy, we

electric industrial tools and assembly systems that

want to be the first option for our clients when it comes

assist our customers, minimizing errors and production

to industrial power tools, assembly systems, quality

interruptions. This also includes a large portfolio of quality

assurance products, software, and services in the motor

assurance and quality improvement solutions. With the

vehicle industry. Our current strategy in Mexico is to

increasing requirements of lower fuel consumption and

have local sales and a service center, while our entire

the use of lighter materials, the automotive industry is

R&D operations are based in Stockholm. Nevertheless,

looking for alternative assembly solutions. To address

we have presence in 170 countries, each of which brings

this, Industrial Technique offers adhesive and sealant

a valuable input to our product development process.

dispensing equipment, as well as self-pierce riveting

Part of our global strategy is accomplished through key

machines. In terms of service, we have the capability to

account managers that take care of each OEM’s global

train our customers on how to use and repair our products,

requirements. We have local presence in multiple plant

in order to obtain leaner operations. However, there is a

sites around the globe, allowing us to always be one step

trend among our clients to transfer their tools management

ahead of our competitors. We know every new project

operations to us. In response to this, we have developed

these companies will launch, and we have staff closely

our Tool Management Center (TMC) service to repair and

related to the needs and culture of our clients.

| VIEW FROM THE TOP

EFFECTIVE ENERGY CONSUMPTION: A DEVELOPING MARKET FOR OEMS ANDRE VON FRANTZIUS Commercial Director of Grupo Desmex Q: Which Tier 1 companies are your key customers and

of their specifications. However, every segment of the

what strategic alliances have you formed in Mexico?

industry is experiencing stable growth, so we are expecting

A: Although automotive is our core business, we operate in

more international entrants. Even so, Desmex’s focus is

many sectors in Mexico, providing equipment, automation

entirely on Mexico.

through robotics, recycling reactor facilities, and products that include release agents and pigments. We sell nationwide

Q: What is Grupo Desmex doing in the clean technology

and we have several customers in the automotive industry

domain?

including Autoliv, TRW, Gonher, Dow, and Takata. In 2006

A: Our three product lines in the area of renewable

we developed another business branch oriented toward

energy are solar PV, solar-thermal, and wind power. Most

renewable energy and energy efficient products, leading

importantly, we are building our own solar park in Puerto

to Grupo Desmex winning a contract with BMW. One of

Interior in Guanajuato to cater to Pirelli and Volkswagen,,

the advantages of our products is that our release agents

which will be the first in the country to sell energy to private

are free of solvents, so their application is more efficient

customers. This development will allow us to offer these

and ecological. Customers are beginning to lean toward

companies fixed-priced energy for the next 20 years. Many

automation, which is the best way to achieve the lowest

companies are looking for energy efficiency solutions and

possible costs. Therefore we offer a complete solution

most manufacturers are requesting LEED certifications for

with the product, the system automation, and training for

their facilities. Grupo Desmex offers consulting services to

operators. Currently, we have 82 customers who specifically

these companies to design the processes, enabling them to

require microcellular polyurethane parts, and we expect

integrate energy efficiency solutions into the architecture.

a further 10-20% growth this year. This has resulted in a

Many new entrants into the Mexican automotive industry are

challenge for our logistics department, but we are working

interested in investing in such projects. However, it is more

with the commercial alliances we have with Chromaflo and

difficult to approach existing plants because they want a

Acmos to store our products in fiscal warehousing. We

faster return on their investment. Nevertheless, companies

designed the logistics program to supply material a month

that have been operating in Mexico for between 15 and 20

in advance to avoid late deliveries, and we have agreements

years often have poor energy efficiency, so are exploring a

with certain customers to make special deliveries when

renewed approach with small investments to improve their

requested.

operations. Desmex is able to work with these companies by offering our modular solutions.

Q: How do the specifics for global parts like air filters, steering wheels, and spoilers vary from one OEM to another?

Q: Considering the rapid growth of the industry, what are

A: We always have to make sure the polyurethane’s

your development priorities?

formulation complies with the manufacturer’s requirements.

A: We are working closely with Germany and with the

Our testing facilities make sure that the pigments and

Mexican-German Chamber of Commerce. We know that

release agents are in line with the polyurethane’s formulation

there will be 182 new German suppliers in the market

through several trials before the chemical arrives on the

over the next two years, 110 of them with polyurethane

production line. For companies that are already familiar

products. We are currently trying to increase our workforce

with our products, this is simply a matter of adapting their

in light of this situation, both in terms of technical and sales

existing solutions to local operations. Every OEM has its own

operations. Our alliances with universities like Monterrey

specifications, but we normally have a window of one to six

Institute of Technology and Higher Education (ITESM)

months between presenting the solution and obtaining the

and the University of Guanajuato (UGTO), as well as an

final results. Demand for high pressure machinery remains

interesting project managed by the Queretaro Cluster to

high among OEMs, and is particularly used for large parts of

build an automotive university, will help us prepare, but

the vehicle that require high density and pressure because

employee retention is our priority.

225

| VIEW FROM THE TOP

EXPANSION PLANS FOR HISTORY-RICH PLATING AND FINISHING COMPANIES RAMĂ&#x201C;N PAGES JR. Director General of Proquipa and Ecoplating Q: What is the history surrounding the formation of

Q: What coating finishes is Proquipa capable of offering

Proquipa and Ecoplating, and how does Grupo Pages

to automotive clients?

serve the automotive industry in Mexico?

A: We have the technical capacity and the infrastructure

A: Proquipa and Ecoplating are two electroplating

to develop and install production lines that are designed

companies established in 1983 and 1996, respectively,

for any type of custom jobs required by the client. Once

in order to offer metal finishing services in the region of

the line is ready to go, we can offer the service within 24

Toluca. The two companies belong to Grupo Pages, which

hours. We have well-established lines such as tin, copper,

was formed more than 70 years ago by my father, Ramon

silver plating, and epoxy coatings, which are mostly for

Pages Duhalt, the pioneer of metal finishing in Mexico.

the electrical industry. We also offer zinc, zinc nickel and

Grupo Pages consists of eight companies, with 70% of

zinc iron, which have proven extremely popular among

the service they provide aimed toward the automotive

automotive companies, as well as a newly developed

industry. These companies have a combined total of 1,500

coating that provides similar protection for a lower price.

employees and are located in various locations around

Our other significant lines are phosphate, nickel, electroless

the country, each offering metal finishing and parts

nickel, hard chrome, anodizing, and plating over plastic.

manufacturing. Comparatively, Proquipa and Ecoplating provide 60% of their service to the electrical market

Usually our clients specify exact requirements, and it is

and 40% to the automotive industry, but are both set to

difficult to suggest a different treatment or process that

expand due to the high demand in the growing automotive

may be more appropriate. OEMs have specifications and

industry. As of today we have a highly diversified client

norms indicating that, in order for a part to be admissible,

base, but when Proquipa started to develop as a business,

it must undergo a minimum amount of specified hours of

our first clients were from the automotive industry. These

corrosion-free performance. We use a salt chamber test

included Chrysler, Robert Bosch, Aeroquip, Volkswagen,

to verify that our pieces pass their minimum timeframe

GM, Parker, Valeo, and Hella. Thanks to them, we were

before showing signs of red corrosion. The standards or

able to begin progressing in an automotive-oriented

norms required for every piece are usually the same for all

structure.

cars, but in special cases they may differ.

Q: What changes have you seen in your clientsâ&#x20AC;&#x2122; demands

Q: With competition intensifying, what will Proquipa do

as aluminum has become more popular?

to maintain its place and presence in the market?

A: Since aluminum is lightweight and an effective

A: We understand that any manufacturing company can

conductor, it is an appropriate material to use in many

have problems and delays in its delivery times, so we are

industries, particularly automotive. Currently, we work with

prepared to provide our service to any client at any time.

2,000kg of aluminum per day and offer various treatments

A few years ago, one of our clients asked us to place a

for the metal, such as chrome for decorative purposes and

cleaning and plating plant closer to them in order to provide

protection against oxidation, and anodizing for extending

services in less than three hours. We established Ecoplating

the life of the product. We also offer copper, silver, and tin

Puebla to provide that service, and are now benefiting

for enhanced conductivity and protection. Electroplating

from this expansion in our market reach. Customers send

offers protection to enhance durability and wear-resistance,

us products from all over Mexico, since it is difficult to find

avoid corrosion, and increase strength, as well as affecting

other companies that will match us on quality, pricing, and

the appearance of the part. In addition to aluminum, the

on-time delivery. Due to high demand, we are planning an

most common processes for automotive metal finishing

investment of US$20 million in the next two years. Our plans

that we provide are zinc, zinc nickel, zinc iron, decorative

are to expand Ecoplating Puebla and initialize operations

chrome, hard chrome, nickel, electroless nickel, copper, tin,

in Queretaro, Guanajuato, and Monterrey, and to establish

and silver, as well as anodizing, plastic plating, and paint.

another line for the automotive industry.

227

| VIEW FROM THE TOP

HARMONIOUS BLEND OF BENDING AND FORMING PRACTICES ALEXANDRE HERPIN President of Bend-All México Q: What led to Bend-All’s decision to establish a Mexican

that setting up this plant would have been more difficult for

plant in collaboration with Valeo?

us should we have collaborated with an OEM rather than a

A: Bend-All is a Canadian company that belongs to an Italian

Tier 1 company like Valeo. Tier 1 companies provide more

group called Dynamic Technologies (DT), with plants in China,

opportunities to grow and develop new sites like this one,

Hungary, Poland, Italy, and the UK. DT bought Bend-All in

and, as such, are more willing to take greater risks. However,

2008, at which time the company started to look for ways to

after starting operations, OEMs are a more likely source of

position itself in the Americas. The company was interested

collaboration on projects like this, so we must deliver on

in acquiring plants in North America, which eventually led

quality, regulations, logistics, networks, people, and even

it toward Mexico. Bend-All, as DT’s main subsidiary, was

the size of the location in order to secure their business.

seeking partnerships that could help establish the company in the Mexican market, and considering its footprint in North

Q: What have been the main challenges in adapting your

America, finding these partnerships was a relatively easy

business to meet the needs of the Mexican market?

process. In 2010, DT and Valeo decided to move forward with

A: Since OEMs started awarding cross-continental contracts

our Mexican plant, which subsequently began operations in

to Tier 1 suppliers, it has become vital for these companies

2012. Bend-All Automotive is DT’s North American division,

to prepare

incorporating Bend-All Canada, which is mainly focused on

specifications across regions. Based on transnational

complicated steel parts, including transmissions that are

negotiations, an international presence is necessary to

developed for GM and Tier 1 companies. In comparison,

supply globally and in order to be able to do that, companies

Bend-All México develops simpler aluminum parts, with

need to have a major supplier that can provide on a global

the main difference lying in manufacturing processes and

scale. We have to adapt production processes between both

business division among sectors.

markets. Steel and aluminum do not behave in the same

strategies for implementation of different

way, but, other than that, our machinery is relatively similar. Q: What are the main challenges in the Tier 1 and Tier 2

Both Bend-All and DT work with a different approach, use

segments of the Mexican automotive industry?

different machines, and produce their tools differently to

A: Tier 1 companies are understandably demanding

the competition. Bend-All’s specialty is bending, while DT

customers, as they face pressure from suppliers like us as

focuses on forming, but the integration seen in our Mexican

well as the pressure from their end customers. I truly believe

plant provides a harmonious blend of both practices.

General Metal Finishing

Surface Technology for Automotive Applications We know Automotive from A to Z From Aluminum Wheels to Zinc Coating

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228

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Paint Pretreatment, Paint Overspray Treatment and Paint Stripping Solutions.

| VIEW FROM THE TOP

CHROME PLATING INNOVATION A PRIORITY FOR ATOTECH JOAQUĂ?N TORTOLA Managing Director of Atotech de MĂŠxico Q: What are the priority areas for Atotechâ&#x20AC;&#x2122;s operations in

organic additives, atomic absorption, X-ray equipment for

Mexico?

measuring thickness, and substance identification.

A: For light and heavy vehicles, the Atotech product range covers technologies for the entire spectrum of decorative

Q: Other than chrome (VI) substitution, what new trends

and functional electroplating, and semiconductor and

have you detected in the automotive market?

printed circuit board manufacturing. The Atotech surface

A: We are developing new alloys that offer more effective

technologies for automotive applications cover various

mechanical properties at lower costs. We are constantly

materials including steel, aluminum and plating on plastics

adapting new technologies and processes to update our

and all possible applications from engine and power

products and ensure more effective processes and an

train to electrical devices. In Mexico, our operations

adherence to legislation. Aside from trivalent chrome plating,

include distribution, technical assistance, testing, and

we have introduced smoked-chrome finishes and satin

manufacturing of two types of plating. One is purely

nickel processes. There are various finishing techniques that

anticorrosive, with or without nickel or cobalt, in order

differ in terms of the level of light reflection in the material,

to comply with the mechanical and chemical standards

and each manufacturer has its preferred image. In terms

required by manufacturers. The other kind of plating we

of decorative elements for the automotive industry, plastic

provide is decorative, but it still needs to be corrosion

parts are more important since they are lighter, cheaper, and

resistant. Certain plastic parts of the vehicle also go

far easier to manufacture, and we have developed important

through this procedure to offer more effective mechanical

relationships with plastic injection companies, which have

properties and a longer lifecycle. Similarly, copper parts

helped us avoid certain issues that arise when we want to

need to be treated with nickel and chrome to avoid

plate the component. New materials like aluminum and

corrosion, as well as any other effect that oxidant elements

magnesium are now being used in the automotive industry,

might have on the component.

but they are more complicated to treat, which gives plastic a greater advantage over these elements.

Q: What are the biggest challenges involved in the plating process and how does Atotech overcome them?

Q: How are you approaching new companies entering the

A: Our biggest challenge lies in obtaining the most efficient

Mexican market, and what processes are you offering them?

processes with the least impact on the environment. Even

A: Given that there may be several companies offering the

though chrome is one of the most anticorrosive materials,

same process, we find that it has become vital to optimize

there are certain harmful elements like chrome-6, so we are

our service, with efficient sales strategies and an attractive

conducting investigations to find a more suitable replacement.

product portfolio. Aside from our normal services we also

In decorative plating, chrome (VI) can be practically

offer immersion products, treated with a zinc-aluminum

eliminated, considering that there are certain processes that

alloy to leave a coating called zinc flake. This process is

leave a white or smoked-gray finish that use chrome (III),

specially designed for parts that cannot be in contact

a much more stable element that does not have the same

with hydrogen, either because of their size or because

health implications. Furthermore, the differences between

of the fragility this might contribute to the component.

a chrome (VI) and a chrome (III) finish are so minimal that

In terms of OEMs with a large international presence,

they can only be detected by an expert, and several of our

we first need to identify their suppliers, and then we can

clients are already using them in their decorative processes.

determine whether or not we can comply with their norms

Additionally, we offer instruction on how to use our products

and specifications. As leaders in the plating segment, we

in a plant and in a laboratory setting. Any company that

also provide certifications to other suppliers, recognizing

works with metal coatings must invest in laboratory facilities,

them as automotive approved applicators and, although

human resources and equipment. On our premises we can

we have not yet granted this certification to any Mexican

conduct corrosion tests, chromatography for analyzing

company, there are several strong candidates.

229

| PLANT SPOTLIGHT: TERNIUM NUEVO LEON Practically a year before KIA Motors announced its

of US$770 million, while Nippon Steel contributed with

establishment

the other US$330 million to the total investment.

Pesqueria,

Nuevo

Leon,

Ternium

inaugurated its new plant in the same municipality on September 18th, 2013, unlocking what is estimated to

The

become one of the strongest automotive regions in the

specialized steel primarily for automotive applications.

Ternium

Industrial

Center

focuses

highly

whole country. The Ternium Industrial Center is now the

It has six production lines built on 153 hectares and two

most advanced steel facility in Latin America, requiring the

main processes, namely Ternium’s continuous cold tandem

largest investment in Nuevo Leon over the last ten years,

pickling and cold rolling, and Tenigal’s continuous electro

which was even larger than KIA’s. This project is a joint

galvanizing. After receiving thick steel slabs from a strand

venture between The Techint Group, owner of Ternium,

casting process, the material can go through either one of

and Nippon Steel & Sumitomo Metal Corporation, leader

these processes. With tandem pickling, the metal is treated

in the steel industry and owner of the electro galvanizing

superficially with strong acids, to remove any impurity that

company Tenigal. The Techint Group is the main

the casting process might have left on the steel. After that,

shareholder of the plant with 51% and a total investment

the metal is sent to a cold-rolling process to obtain the

appropriate thickness for its final application, which also

and the rest for highly skilled technicians given the

enhances its mechanical properties making it harder and

advanced technology in the plant. Furthermore, during the

more resistant. This line also includes electrolytic cleaning,

construction period of the plant, the project represents

annealing, quenching, and tempering processes. On the

3,000 jobs for Pesqueria.

other hand, if the steel also needs additional protection against rust and corrosion, then it is electro galvanized.

The Ternium Industrial Center is also one of the first steel

This is a superficial process where the metal is heat treated

industrial complexes to be built with an environmental

and covered with a layer of zinc.

approach. The company has an ambitious plan to preserve the regionâ&#x20AC;&#x2122;s natural resources, which has resulted in

Terniumâ&#x20AC;&#x2122;s new plant is expected to produce 1.5 million

more than 17,500 different animal species rescued and

tonnes of cold-rolled steel and 400,000 tonnes of

more than 19,500 native specimens planted. Additionally,

electrogalvanized steel annually when fully ramped up.

the new plant was built with the strictest environmental

Additionally, the project will generate 600 direct jobs

lineaments, with a goal of obtaining a LEED certification

and 460 indirect jobs, 100 for engineering positions

for its operations.

PROCESS IMPROVEMENTS UNLOCKING NEW OPPORTUNITIES German suppliers in Mexico are continuously increasing

As well as manufacturing clips and slipper pads to fix caliper

in numbers, with many arriving to support their home

and braking systems, one of the company’s largest projects

nation’s OEMs. However, this trend does not stop with Tier

is with electric engine housings. Previously, it was necessary

1 companies, as German Tier 2 suppliers are following in the

to use high quantities of materials for this, but the company

wake of the country’s surge in popularity, presenting good

has since unlocked huge market potential by updating its

news for the Mexican supply chain. Kern-Liebers is one of

processes. Kern-Liebers is also seeing opportunities with

these suppliers, showing continued support for its existing

support and connection systems for engines, due to many

clients in Mexico. Globally, Kern-Liebers has more than 60

manufacturers attempting to replace these parts with

companies, most of them with approximately 100 members

plastic. According to Suhling, given the high temperatures

of staff. Additionally, the company’s headquarters employs

reached by the engine, metal components remain the best

around 2,800 people, giving it the capabilities to establish

choice in these instances, as they can be used to connect

facilities near its customers. The company supplies highly

the engine with external plastic parts.

precise metal parts for complex electric engine, braking, and safety systems. Extremely specialized in different

While Mexico is offering many promising opportunities for

materials, Kern-Liebers possesses a high level of experience

the company, Suhling has noticed certain issues that the

in stamping and bending processes that cannot normally be

country has yet to solve. “Looking at the total cost of labor,

carried out in Mexico.

Mexico is not really that cheap,” he says. “The workforce could be more efficient, and local steel mills do not comply

The combination of the macroeconomic situation in the US

with the necessary automotive requirements, meaning that

and Mexico’s market growth has made the country very

we still need to import most of our material from Germany,

attractive for Kern-Liebers. This has led to the decision to

the US, or China.” Equipment has also been a major issue

invest in a plant extension, as well as another plant for its

for the company, which found it challenging to upgrade

wire spring business in Queretaro. Its existing plant has

to more modern machinery during the 2008 financial

now been expanded from 4,400m2 to 12,900m2 and the

crisis. As a result, the company had to implement strong

new plant will span 10,400m . “In Mexico, we have the

cost reduction strategies and prove the value of the local

convenience of performing our design and manufacturing

operations to its corporate offices. Even so, Kern-Liebers

processes in-house, with heat treatments and surface

now seems to be recovering, as it expects a 40% revenue

finishing being the only ones that need to be outsourced,”

increase in Mexico during 2015. Suhling sees that Mexico

states Christian Suhling, Managing Director of Kern-Liebers

is starting to form a technology oriented supplier base, so

Mexico. “The company has a wealth of experience with

he is investing the company’s resources in modernization

producing small and complex stamped and bent parts in

and new equipment, with a goal to replace India and China

Mexico, but we are now exploring fine blanking technology

as the main focus for the company’s global managing

that requires even more precision. This will lead to bigger

operations. “We still need to compete with the sizeable US

presses to serve the precision requirements in bigger parts

market, but Mexico is definitely a focal point of of Kern-

that many customers require from us.”

Liebers’ strategy,” he concludes.

Whitehall Industries manufactures precision aluminum extruded components for the automotive and many other markets. With four plant locations strategically located for local customer support, and our state-of-the-art SMS extrusion presses, we are able to meet the demanding automotive design and tolerance requirements. We are proud of our well-trained workforce and TS-16949 quality certification. See more about us at www.whitehallindustries.com 232

Whitehall Industries de Mexico S. de R.L. de C.V., Carr. San Miguel a Dr. Mora Km. 1.5 Col. Landeta CP 37748 San Miguel de Allende, Guanajuato Mexico • 001-52-415-3400

| VIEW FROM THE TOP

GROWING OPPORTUNITIES FOR EXTRUDED ALUMINUM COMPONENTS ANDREW TOMCZYK Sales Vice President of Whitehall Industries Q: What have been the highlights since the entry of

Q: What is Whitehall doing to develop a strong supply

Whitehall Industries into the Mexican market?

base in Mexico?

A: Whitehall Industries entered the Mexican market and

A: In alignment with our growth strategy, we will bring

established its plant in San Miguel de Allende in 2011. At

technology and raw materials from the US if necessary.

the time we were exporting a significant percentage of

In fact, 100% of our raw materials are currently imported

our production in the US to customers that had moved

from our plant in Kentucky. If Whitehall was to enter into

their assembly operations to Mexico. Our customers

a partnership, we would seek a company with expertise in

were interested in creating a local supply chain, so we

the areas of extrusion and ultimate finishing of products.

established operations in Mexico in order to meet a

For instance, most of our products are given an anodized

growing demand given that Mexico represents about

finish, and it is difficult to find companies that can provide

10% of our overall sales. We are aware of the significant

a process that meets automotive standards. Aluminum

growth that OEMs such as Honda, Daimler, and GM are

extruders in Mexico use a high percentage of secondary filler,

experiencing, and these players continue to demand

which is essentially made by remelting scrap aluminum. For

local suppliers. Our client base in Mexico has a long-

automotive requirements it is necessary to use pure primary

standing relationship with Whitehall in the US. These

aluminum, and these requirements represent a shift in the

clients have moved their operation to Mexico as Tier 1

extrusion industry. The OEMs are not willing to accept the

suppliers over a number of years, and it was natural for

risk of employing secondary material or accept the liability

us to follow. Our primary clients in Mexico are automotive

that could result from that. A useful application for recycled

sunroof manufacturers like Inalfa, Webasto, and Inteva

material is making aluminum frames for a window or a door.

Roof Systems, and in the convertible market we also

If those components split or break, the risk for the user is

have major clients, such as Webasto-Edscha Cabrio. We

minimal. However, failure in a critical component of a vehicle

are currently a Tier 1 supplier for GM and Tesla, but we

can have more serious implications. For the extrusion

largely conduct Tier 2 business in Mexico. Our future

industry in Mexico and the parts that it produces, secondary

growth strategy is to make ourselves available to OEMs

use of materials is suitable, but for crucial components,

directly.

higher quality aluminum is required.

Q: How is the company attracting additional Tier 1 clients?

Q: Whitehall is famous for its aluminum roof tracks. What

A: Our business consists of aluminum and extruded

percentage of this product is made and sold in Mexico?

products. Currently, the US Corporate Average Fuel

A: Whitehall Industries currently supplies over 70% of the

Economy Federal Standard (CAFE) is being revised, and

rails for the sunroof market across the NAFTA region. All

new requirements will be established. By 2015 the CAFE

production in San Miguel is devoted to the automotive

standard for automotive companies will be 54.5 miles per

market, and our products are sold to customers in Mexico.

gallon, which will require OEMs to redesign their cars and

Currently, our production of sunroof rails is roughly 20,000

use lightweight materials. Aluminum is a key material that

units per day. Our company relies heavily on engineering

will be used to implement this strategy, and our company

resources and technical support for our customers. In the

is in a strong position to provide lightweight components

sunroof market, clients want glass panels at the top of the

with this material. We are currently testing high-strength

vehicle to be larger. We are a market leader in panoramic

aluminum alloys and adapting our practices to exceed

roofs, in which the entire vehicle roof consists of glass,

the average industry performance. The high-strength

as opposed to a small window. To accommodate these

aluminum alloy that Whitehall is producing is 10% stronger

designs, it is necessary to bend the extrusion profiles so

than standard industry guidelines, resulting in a benefit

they can match the curvature of the roof. We are using

for OEM clients. The challenge lies in making aluminum as

extremely precise technologies, allowing us to bend parts

strong as previously used steel components.

and hold tolerances that many of our competitors cannot.

233

CABLE SEALING SOLUTIONS PREVENTING DOWNTIME Manufacturing downtime is one of the industry’s main

Roxtec has been in Mexico for almost six years, and

concerns, capable of bringing a company to its knees as

its Mexican facility was discovered by OEMs such as

profit is hemorrhaged. One of the lesser known ways to

Chrysler, Nissan, and Ford thanks to the company

prevent this is to pay close attention to pipe and cable

being an Encompass Partner of Rockwell Automation.

sealing products. Alfonso Guarneros, Managing Director

This awareness led to a contract with Volkswagen and

of Roxtec Mexico explains that there is a considerable

negotiations with Nissan Aguascalientes, adding to

lack of education about these solutions. “Few companies

the company’s existing contract with Audi. To date,

use sealers, instead favoring materials like mastic or foam,

the aftermarket has represented the majority of total

which do not offer the same reliability in terms of plant

sales for the multi cable transits manufacturer, and, the

operation,” he explains. “Sealing is capable of preventing

company has become a leader in cable and pipe sealing

any sort of damage that could cause a major shutdown,

with an 80% market share in modular sealing. Mexico

so Roxtec actively visits manufacturing plants to explain

will hopefully become an important market for Roxtec

how they could manage these resources by sealing their

worldwide, given its recent growth of 126% and its

installations.” The two main application areas for cable seals

presence in all major industries, aside from aeronautics.

are civil construction and equipment. The construction

“We will target both the automotive sector and the

area focuses on properly sealing cables and pipes that

energy companies, concentrating on the three major

run through the walls of manufacturing plants and need

areas of marine and offshore, OEM and telecom, and

to be protected against water, fire, dust, and even insects.

land base,” explains Guarneros. The latter two areas are

The equipment area, on the other hand, concentrates

expected to grow considerably in the short term, as a

on isolating cables in machinery, sensors, and actuators.

result of the Energy and Telecommunications Reforms.

The three major components that cable sealing is based

In light of the company recently more than doubling its

on are rubber, steel frames, and compressing agents. Of

growth, the five year prognostic for Roxtec Mexico is

these three, Roxtec manages a variety of 3,000 to 4,000

extremely promising. One of the company’s goals is to

products, depending on the application, and is also the

target more OEMs within the automotive sector, in order

creator of multi-diameter sealing that can adapt to any

to increase the 5% of sales that the automotive industry

cable size, offering excellent flexibility.

represents.

Kem Design de México S. de R.L. de C.V. offers Specialized Mold Release Agents for All Molding manufacturing Processes in the industry; Specialties in Lubricating, Gliding and Antiblocking Agents; Color Concentrates in Fluid and Paste form; In Mold Coatings (IMC), Post Paint Coatings; Lacquers for Special Effects and Finishing in plastic and metallic parts; Specialized Cleaning Agents for Diverse Applications; Spray Equipment and Spare Parts for Specific uses; and Diverse tailor made chemical solutions on direct request.

Blvd. Aeropuerto #2001 Fracc. San Carlos C.P. 37670, León, Gto. México. T.: +52 (477) 740 3500 www.kemdesign.mx Contact: info@kemdesign.com.mx ventas@kemdesign.com.mx

234

| VIEW FROM THE TOP

NATIONAL SUCCESS IN MEXICO PAINTING GLOBAL REPUTATION CHESTER JOHN DELVALLE Executive Managing Director of Kem-Design de Mexico Q: Which OEMs and Tier 1 companies are your main

a bit more expensive. In the end, these types of products

customers, and how is Kem-Design keeping up with the

are the most cost effective for manufacturers. Through our

increasing demand from the OEMs?

R&D achievements, we use the best technology available

A: One of our main worries was production capacity, but

for formulation and performance, carefully selecting our

currently we have 50% availability. In that sense, we have

materials and our suppliers. Therefore, we are becoming

no problems regarding our growth, however if we need

more productive, doing lean manufacturing, and looking

more space we are willing to build a new, larger facility.

for ways to reduce costs and waste.

At the moment, we have contracts with Autoliv Steering Wheels in Matamoros, Takata in Monterrey, and TRW

Q: What are the challenges when developing coatings

in Chihuahua. Kem-Design started in 2001 in the shoe

and other products for the automotive sector?

industry, which was an interesting market at that time,

A: The qualified chemical engineer in charge of the technical

until we started to fall behind the Asian companies. We

and R&D processes in the company has helped us to develop

were gradually entering the automotive industry, but we

new technology with higher quality standards, and with an

had to accelerate the process. After securing Autoliv, we

almost nonexistent level of toxicity. There is real satisfaction

gradually moved onto TRW and Takata, and now we also

in that because we are replacing highly toxic products in

work with Lear and other key seating suppliers for Volvo,

many industries, including automotive. Customers seek

MAN, and Scania. We have been in the industry for 14

low costs, but we have showed them that we can combine

years and we have worked with some of these companies

competitive costs with high performance. We always strive

for approximately 13 years.

for better product performance, while making products less operator dependent, and more adaptable to different kinds

Q: Which of your products are the most popular in the

of processes.

Mexican market? A: Our number one product is focused on steering wheels. We

Q: What products is Kem-Design planning to release over

consider ourselves the leaders in steering wheel technology

the next few years?

for release agents, coatings, color pastes, and cleaning

A: Despite the limited succes of waterborne products,

agents for molds and tools used in the manufacturing

we are looking to develop more coatings based on this

process. Right now, the focus of the company is to get a

technology. Customers prefer solvent based, but water

good market share in all minor flexible foam applications,

based products can be more toxic than solvent based ones

since the larger ones, like seating, are controlled by another

so we will endeavour to find the proper materials to make

company. This company is focused on large volumes at

them environmentally friendly. The current trend is to

minimal prices, but we are targeting specialized markets,

eliminate toxic materials and replace them with non-toxic

since our products can adapt to any manufacturing process

or ultralow toxicity ones, so we are looking to release more

and to each customer requirement. OEMs can achieve

of these products in 2015.

higher competitiveness through our products since they pass all European standards for BMW, Mercedes, and

Q: What are your expectations for Kem-Designâ&#x20AC;&#x2122;s growth

Volkswagen. The latter has some of the tightest regulations

in the automotive industry?

in the industry, so once we get approved by them it is easier

A: The automotive sector is providing employment and

to get the approval from other companies.

investment to the country and we are part of this chain. The company is becoming a global supplier exporting to

Q: With such a demand for high quality products, how do

Brazil, the US and with plans for expansion into Colombia,

you ensure that Kem-Design can surpass the competition?

so international companies are expecting us to deliver high

A: We strive to have highly competitive prices, but we

standards of quality and pricing. The key is to satisfy the

always seek high value-added products, even if they are

clientsâ&#x20AC;&#x2122; needs on time, and surpass their expectations.

235

LOCALIZING FORMING SOLUTIONS FOR PREMIUM CAR BRANDS Automotive

for

that their forging process is globalized, and that many of

and

their products are manufactured on Hatebur machines with

environmental protection

the advantage of producing millions of pieces per machine.

are elevating the necessity

Innovative processes, exemplified by the Hatebur machines,

for innovation, with the

are crucial to the company, as well as a strong technical

need

near-

support network spread across facilities in India, Brazil, and

perfect products growing

Germany. This enables the company to send specialists in or

exponentially. In response

out of Mexico when required.

comfort,

Luis Rubalcava, Operations Manager of Tekfor Mexico

demand safety,

create

to this trend, automotive suppliers

must

develop

The company is currently positioning itself in the market

proficiency in state-of-the-

for new opportunities with premium companies, cultivating

art manufacturing processes and project management, in

relationships both domestically and globally with luxury

order to establish themselves as competent partners. Part

car brands. Rubalcava explains that the company has

of The Neumayer Tekfor Group, Tekfor Mexico (Tekfor)

received many visits from potential customers who are

specializes in forming, machining, heat and surface

now looking to do business in Mexico or in the US, and

treatment, as well as the manufacture of individual, ready-

well-placed relationships will allow Tekfor Mexico to drive

to-install components for the construction of complete

forging localization in Mexico. However, this will depend

assemblies. The company manufactures weight-reduced,

greatly on Mexico’s Energy Reform, and ultimately OEMs

high-performance components in order to meet the needs

will require more local parts production. Even so, this will

of this demanding sector.

provide enough forging demand for Tekfor to supply, assuming the availability of special bar quality steel (SBQ)

The Neumayer Tekfor Group has recently expanded its global

does not hamper production. This limitation is a result of

business, opening new non-European market locations that

the concentration of the steel mills that produce this quality

focus primarily on Japan and Mexico. Refinancing carried

of raw material in the US. Rubalcava’s concern arises from

out in 2009 generated new capital for the company and

the threat of delays in the event of import complications,

significantly increased its equity ratio, while the volume of

explaining that the projects to create these kinds of

orders at the beginning of the year was also considerably

steel mills in Mexico will take five years or more to build

higher than forecasted. Tekfor Mexico was formed as

and qualify. Presently, all of Tekfor’s products come from

a subsidiary in 2010, when Neumayer Tekfor began

a forging plant in the US, but Tekfor Mexico is more than

manufacturing components for a European rolling-element

ready to expand. The Irapuato plant is producing at around

bearing manufacturer at its plant in Irapuato, Guanajuato.

25% capacity, receiving approximately one million forgings

The plant initially started with prototype manufacturing

from the US facility. The next step for the company would

and then commenced series production in the second half

be to localize forging once a project is awarded in order to

of 2010, helping to achieve its 2015 goal of employing 300

justify the expense.

new people. Tekfor was acquired last year by Amtek Auto, creating the Amtek Tekfor Group, which describes itself as a

Unsurprisingly, the level of competition in the industry is

market leader in the definition, development and production

increasing. “We have seen many companies, both OEMs

of pioneering solutions for transmissions, engines, drivelines,

and suppliers, arriving to Aguascalientes, San Luis Potosi,

special applications and safety fasteners.

Celaya, Irapuato, Silao, and Queretaro,” says Rubalcava. “Many suppliers are looking to the automotive industry, but

236

Luis Rubalcava, Operations Manager of Tekfor Mexico,

they must be aware that crossing over from other industries

explains that the takeover by Amtek Auto has strengthened

is difficult, as the requirements are much more demanding.”

the company’s financial situation, particularly as a result of a

Additionally, the government has already helped local

management style that is more focused on financial results.

suppliers by providing funds for training, advancing

“The new management team reviews performance closely,

knowledge to the required level and boosting the overall

regularly reporting on operations results in order to form

industry specialists’ competence. Even so, our priority is

a strategy for growth in Mexico,” he explains. “This helps

to localize our diverse products in Mexico as soon as an

the company to expand operations, offer added value, and

opportunity to do so presents itself, as well as to continue

diversify its product portfolio.” To maintain its promise to

building awareness of the company in the market, preparing

offer added value, Amtek holds several patents and shares

Tekfor to pounce on new opportunities as soon as they are

global best practices between plants. Rubalcava is proud

presented by premium car brands,” he concludes.

| VIEW FROM THE TOP

EMPLOYEE KNOW-HOW ESSENTIAL FOR PRESTIGIOUS SPRING MANUFACTURER GASTÓN CALERO Mexico Operations Manager of Mubea Q: Why did Mubea decide to enter the Mexican market?

A: The main challenge is in understanding and implementing

A: The primary reason was that many OEMs are located

the technology and technical skills that these products

in North America, as well as obtaining growing presence

require to be manufactured. Mubea develops much of its

in Mexico. The country’s transportation options are very

own technology in its products and equipment. To do so,

well-suited to the shipping of our products in a safe and

we first define the business and technical requirements

timely manner, and there is plenty of well-qualified labor

and compare them with an internal assessment of our

on offer. NAFTA has also created an atmosphere that is

workforce to develop a training plan. We perform this at

conducive to business, incentivizing companies like ours

every level of the organization, from machine operator to

to establish a manufacturing location. Mubea has definite

management. Another strategy is the advanced training

plans to expand its capacity and introduce new products

we provide for new products, ensuring that when the

into our Mexico manufacturing portfolio in the coming

production initiates we already have well-trained staff with

years. We are well aware of the potential in the industrial

the appropriate knowledge.

and aftermarket sectors, and this year we are creating the necessary marketing structure for the industrial and

Q: What aspects of Mubea’s service did Ford recognize

aftermarket products we currently produce around the

when it gave you the Q1 supplier recognition award?

world. We are already supplying Mazda, Honda, and

A: This was definitely a great success for us, as it is one of the

Volkswagen in their new locations, and we are currently

most prestigious awards in the industry. Fulfilling the initial

building relations with Toyota, Hyundai, KIA, and Audi,

requirements has been relatively easy and it will become

with whom we already conduct business in other parts of

increasingly difficult to maintain our high standards. Ford

the world, including the US.

is currently our biggest customer in our valve springs business, purchasing close to 35% of our production, and

Q: Of the vast range of products that Mubea manufactures

we respect and value them greatly. In order to continue

and supplies, which have the most potential in Mexico?

evolving and improving, we need to continually work on

A: In Mexico, the chassis division manufactures suspension

further strengthening our quality system. The discipline

coils, springs and stabilizer bars while the powertrain

and standardization of our processes and procedures are

division provides engine valve springs, hose clamps and

the keys to ensure the quality of our products. For example,

belt tensioners. We are satisfied with our successful rate

in our valve spring manufacturing facility we produce more

of growth in Mexico to date as we provide a significant

than 12 million springs every month and we have developed

volume of products to all the OEMs producing in North

the procedures and equipment necessary to monitor and

America. The long-term vision of our global CEO, Thomas

correct any deviation that may occur. The design of our

Muhr, and our North American CEO, Doug Cain, has given

equipment with integrated poka-yoke has helped us to

us the capabilities to build deep product knowledge and a

guarantee and exceed our customer quality expectations.

sufficient customer base, enabling us to become a reliable and successful supplier that provides the best technology

Q: What are your main goals for the rest of 2015?

available in the market. Our R&D facility in Auburn Mills,

A: We need to focus on the strategies proposed by our

US, is where most of our valve springs, coil springs, and

global and North American CEOs, which are threefold. The

hose clamps are designed. Locally, we have a designer

plan is to attract, retain, and develop talent, to establish

for our flagship belt tensioner business, but as Mexico

further investment in quality, and to focus heavily on

continues to grow there will be a greater requirement for

growth. The strategy is in place to meet these objectives, so

these local collaborations.

every business unit must focus and make a concerted effort to ensure these goals are met. I am extremely confident that

Q: What are the main challenges in producing Mubea’s

by the end of the year Mubea Mexico will be well-positioned

vast range of products?

to become the location of choice for new investments.

237

SPANISH COMPANY TESTS MEXICAN NETWORK Imagine the frustration if every time a car hit a bump, the

absolutely sure that we can cover all requisites that our

radio stopped working. Now imagine that you could not start

clients demand when they assign us a project.”

the car on hot days, because it was not parked in the shade. Both situations seem unlikely, but they use the same principle

Relats is still a young company in Mexico, which means

as leaving a cell phone in the sun all day or punching the

there are still some areas of opportunity. Regarding its

screen every five minutes. Automotive electronics are just as

production operations, Relats’ plant is currently working at

delicate and precise as any other system, but they are required

50% of its full capacity, mainly because all the machinery

to function under the most extreme conditions. Whether it

has been recently imported, and the workers are still

is mechanic vibration, electromagnetic interference or high

developing the appropriate skills to enable the plant to

temperatures, these components must withstand a variety

reach its full potential. Similarly, the company continues to

of problems, which is precisely the area where Relats applies

import approximately 60% of its raw materials and semi-

more than 50 years of experience.

finished products from Spain.

“We must be absolutely sure that we can cover all requisites that our clients demand when they assign us a project”

Jordi Coll, Director General of Relats Mexico

Relats is a family-owned company whose general business

Relats works with a global strategy, and even though

is to offer sleeves for protection against temperature,

Mexico holds 20% of its entire business, the rest is in

mechanical abrasion, noise, and other general impacts. This

North America and Europe. This means that their plants

is a segment that has normally been dominated by major

in Mexico, North Africa, and China are part of a project to

companies, which is why they are working on establishing

create the necessary synergies with OEMs to obtain global

direct relationships with OEMs. Additionally, the company is

projects. At the moment, one of the company’s goals is to

currently exploring the possibility of moving into hybrid and

open a new plant in Vietnam, since it will open the doors to

electric engine components. Relats started to invest in these

enter the Japanese market. “Manufacturing in South Asia

products more than ten years ago, and now the company is

is a requisite for supplying many Japanese companies.

focusing on producing sleeves for these engines. The main

This was the same predicament we encountered ten years

advantage of this company is that it can offer high quality

ago, when we could not collaborate on key projects in the

products at lower prices than what could be found in Europe.

American market since we did not have a manufacturing plant in Mexico.”

Upon arrival in Mexico in 2010, the company sought

238

adequate distribution channels, as well as a partner with

At the moment, Relats is trying to establish a new

local knowledge of the market. Mainly, the company was

relationship with Lear Corporation. This project has

worried about local wages, and other potential legal and

been negotiated with Lear Spain, and it consists of

political obstacles the country may present. For that

manufacturing textile sleeves for its automotive plant in

reason, Relats established a 65%-35% joint venture with

Honduras. However, before establishing any commitment,

Textiles León in order to secure a strategic partner for its

Lear representatives will visit the plant to make sure

raw material acquisitions, and two years later it purchased

Relats’ processes meet the necessary quality standards

the whole company. Currently, Relats expects a turnover

at the lowest possible price. “We work closely with OEMs

of US$5.5 million, and given its development the estimate

to inform them of any new development we might include

is relatively conservative. According to Jordi Coll, Director

in our operations, assuring them that our processes are

General of Relats Mexico, most of this growth is due to the

fully controlled. Furthermore, we normally visit these

global contracts the company has with OEMs in Germany,

OEMs to make sure that the services we offer our Tier 1

Spain, and the US. “Even if we have manufacturing

clients cover the OEMs’ demands,” claims Coll. “We never

operations in Mexico, our clients and contracts are global.

invest in a new machine or process if we cannot predict

Therefore, policies determined at our headquarters in

the final result, or if we know the OEM will not approve

Spain affect all Relats plants, which is why we must be

these results.”

| VIEW FROM THE TOP

AUTOMOTIVE INDUSTRY REMAINS TOP PRIORITY FOR IMS BUHRKE-OLSON SALVADOR RAMÍREZ General Manager of IMS Buhrke-Olson de Monterrey Q: What is IMS Buhrke-Olson’s area of expertise and

this becomes very attractive to our engineering and

which OEMs do you currently supply form your Mexican

maintenance departments who can enhance their skills. I

facilities?

feel that automation will continue to play a larger role in

A: Our facility in Matamoros, Tamaulipas has been operating

our company over the coming years.

for more than 25 years. In 2007 we saw a beneficial trend in Monterrey, so we decided to make an investment and that

Q: How does IMS Buhrke-Olson plan ahead when

plant is the newest of three that belong to the IMS Buhrke-

considering the next new automotive innovations?

Olson division. Our main customers are GM, Ford, Chrysler,

A: The company has an engineering group that shares

Toyota, and Honda. Airbag systems and different modules

best practices in our facilities to produce a safe working

that will accommodate knee, curtain, and passenger

environment, incorporating procedures that focus on the

airbags are part of our area of expertise. The company also

safety of humans, machines, and tools. We try to incorporate

possesses significant knowledge of automotive cooling

in-die measurement systems so we can monitor part-to-

systems, which is where most of our aluminum products

part and stroke-to-stroke critical dimensions to make sure

are used. We have noticed that interacting with design

that the product fulfils our customer’s requirements. Since

engineers is imperative to understanding our customer’s

we have a lot of assemblies that are used for the airbag

requirements, so we work with them from the design

modules, we are looking for the industry’s best welding,

process onward.

sensor, and monitoring equipment. Welding is one of the most important methods for assembling our components

Q: When sourcing human capital, where does IMS Buhrke-

in the automotive industry. All of our facilities are ISO TS-

Olson find its best engineers?

6949 certified, so our focus on procedures to support the

A: In Mexico we hire engineers that are willing to grow

manufacturing process is developed to meet the industry’s

with the company. We have training programs for teaching

high standards, ensuring good quality and punctual

engineers the techniques of the metal stamping and

delivery to our customers.

assembly process, alongside our quality philosophies. Over that period of time, we send them to the US where we have

Q: How is metal stamping technology evolving, and what

special equipment for such purposes. Metal stamping is a

is IMS Buhrke-Olson doing to prepare for the future?

risky business, so our main focus is to put safety on top

A: Our IMS Buhrke-Olson R&D team in Illinois is looking

of everything. The philosophy of IMS Buhrke-Olson is to

for the best technologies to develop the finest stamping

ensure that our employees feel safe in our manufacturing

and assembly processes. We are supported by specialized

environment. Since we provide precision metal stampings

facilities that use software to test how the part will react,

and assemblies, we try to meet the mid- to high-level

even before a die is fully designed. Within the stamping

salaries for our workers, as well as working more as a family

industry, the presses are generally the same as they

than as a hierarchy.

were 30 or 40 years ago. That mechanical press has not changed, but the protection inside the die is always

Q: How are IMS Buhrke-Olson’s automation processes

improving, and that is how we attract our customers. We

evolving, and what effect are they having on the

do a lot of in-die sensing which, when combined with other

company’s human capital in Mexico?

in-die process applications, helps us ensure that each key

A: At IMS Buhrke-Olson we procure semi-automated, or

characteristic for our customer is monitored during the

fully-automated robots and equipment to supply defect-

production process. The latest technologies for in-die

free products. We introduced automation alongside our

and press protection, laser sensors, vision systems, and all

Monterrey facility in 2007 and we have strong support

the types of technologies that will prevent the tool from

from our Arlington Heights division to keep adding this

breaking and the press from being damaged have been

equipment. It has definitely affected manpower, but

incorporated.

239

Progress demands progress, and the automotive industry is not exempt from this rule. As more players are entering the fold, providers of advanced technology and top-quality products are meeting them head on. Innovative suppliers are offering manufacturers reduced costs by enabling them to test new designs in virtual environments before production begins. These savings can be further enhanced by advanced sealing and adhesives technologies that are limiting weight and changing how car makers approach their construction processes.

Nanotechnology is also gaining ground, helping to achieve increased freedom of design, energy savings, and reduced investment costs. Furthermore, automation and robotics, diverse software platforms, and new metrology devices are providing a unique insight into the possibilities of improving product quality and production effectiveness. From a sales perspective, consumerfocused technology is leaning toward an enhanced user experience, encompassing the integration of next generation infotainment modules, next generation climate control systems, and futuristic heads-up displays. Finally, electric vehicles and driverless cars are no longer science fiction, but represent a glimpse into our mobility future.

Within this chapter, we explore the game-changing technological advances that automotive companies are applying to their production and their products, presenting interviews with leading software developers, automation solutions providers, research centers, and metrology companies, and providing their insight into the high-tech destiny of the sector.

RESEARCH & INNOVATION

El momento en que la calidad te hace parte de la industria automotriz. Nosotros trabajamos para este momento.

// CALIDAD

HECHA POR ZEISS

ZEISS se ha consolidado en el mercado mexicano desde 1912, siendo hoy la empresa líder en máquinas de medición por coordenadas, posicionándose como un socio reconocido en la industria automotriz y sus proveedores. met La metrología industrial de ZEISS es un sistema perfectamente equilibrado: desde los componentes hasta los sensores, software, y los mejores especialistas. Todos los equipos están diseñados para ofrecer los resultados más confiables en el menor tiempo posible.

Customer Interaction Center 01800 24 93477

www.zeiss.com.mx

CHAPTER 9: RESEARCH & INNOVATION 244

VIEW FROM THE TOP: Héctor Gutiérrez, Delphi Mexico

Alberto Zumeta, AVL 245 INSIGHT: Raúl Gutiérrez, AVL 246

VIEW FROM THE TOP: Cuauhtémoc Tapia, Visteon Technical Center Mexico

247

VIEW FROM THE TOP: Michael Voll, Preh de México

248

VIEW FROM THE TOP: Frank Hezel, BASF

248

TECHNOLOGY SPOTLIGHT: BASF, Adhesives and Sound Damping Technology

250

VIEW FROM THE TOP: Marcos Villarreal, Henkel

252

VIEW FROM THE TOP: Raf Putseys, Carl Zeiss de México

252

TECHNOLOGY SPOTLIGHT: Carl Zeiss, X-ray Technology

254

VIEW FROM THE TOP: Alejandro Silva, Renishaw

255

VIEW FROM THE TOP: Mario Rodríguez, KUKA de México

256

INSIGHT: Arturo Gil San Román, Tierra Tech

257

VIEW FROM THE TOP: Antonio Mendoza, Balluff

258

VIEW FROM THE TOP: Gunther Barajas, Epicor Software Corporation

259

VIEW FROM THE TOP: Ramón Álvarez, Oracle Mexico

260

ANALYSIS: The Google Self-Driving Car Project

262

VIEW FROM THE TOP: Jorge Hagg, Schneider Electric

262 ANALYSIS: Google Maps and Waze 264

VEHICLE SPOTLIGHT: BMW i3

Rafael Sánchez, SAP México 266 VIEW FROM THE TOP: José Carlos Rivero Celorio, SAP Northern Latin America 267

VIEW FROM THE TOP: Alejandro Rojo Valerio, CIMA

268

MAP: Test Tracks & R&D Centers

270

INSIGHT: Dr. Jesús González Hernández, CIDESI

271

VIEW FROM THE TOP: Guillermo Fernández de la Garza, FUMEC

272

PLANT SPOTLIGHT: Ford Chihuahua and Guanajuato

273

VIEW FROM THE TOP: Marcos Pérez, Ford de México

243

| VIEW FROM THE TOP

DRIVING FORCE OF INNOVATION ACROSS R&D AND MANUFACTURING HÉCTOR GUTIÉRREZ Director General of Delphi Mexico Q: How is Delphi currently serving the Mexican automotive

development for the Delphi Electronics and Safety division,

industry, and what opportunities has the company

and has consequently formed a successful alliance with

recently seized?

Condumex, which is part of the Carso Group.

A: Delphi Mexico currently operates 41 manufacturing plants, three technical centers and employs 59,000 people

Q: How is Mexico collaborating in the development of

in Mexico across 12 states, and our clients are some of the

autonomous technologies, and how would you change

largest commercial vehicle assembly companies in the world.

this technology to make it more approachable in the

In Mexico, Delphi produces more than 13 million pieces every

domestic market?

day, and ships more than 20 million components to over

A: The autonomous vehicle (AV) developed by Delphi was

8,000 client installations all over the world. All shipments are

designed with diverse technology, which, to a lesser or

achieved with 99.5% punctuality and fewer than two parts

greater extent, is already being used in modern vehicles. This

per million are rejected by our clients. This has been possible

is truly a reflection of the three aforementioned tendencies

thanks to the implementation of the Delphi Manufacturing

in which Delphi is currently involved. The Delphi AV was able

System, which has been credited with several awards from

to cross the US from San Francisco to New York completely

both the private industry and the authorities.

automated 99% of the time. For this to be a marketable reality, laws would have to be adjusted regarding vehicle transit and

Our products can be categorized in three central trends,

infrastructure in cities and on highways, which would need to

namely driving safety, green components for managing

be adapted to the radars and cameras that this car requires

fuel efficiency, and products for internal and external

to make decisions. The most important focus of AVs should

communications. Most of our customers are based outside

be on accident avoidance, the technologies of which would

of Mexico, especially Tier 2 providers supplied by Delphi.

arrive almost immediately in Mexico because of its position

However, we have a group of development specialists that

in North America.

encourage providers to establish facilities in Mexico, which still has plenty of room to grow in terms of manufacturing

Q: What new developments has Delphi made in safety,

and logistics. This would ultimately benefit Delphi as much

and how will R&D efforts be directed toward this area?

as our clients and the locality.

A: Unfortunately, Mexico still does not require the inclusion of all safety systems in every vehicle in the market. However,

244

Q: What is the main focus of Delphi’s three technical

the measures we have identified as emerging megatrends

centers in Ciudad Juarez, Saltillo, and Queretaro, and

at Delphi include active security systems, driver monitoring,

what have been their flagship achievements?

battery disconnection, human-machine interfaces, and

A: The technical center in Ciudad Juarez is the largest

occupant classification systems. With hybrid and electric

Delphi center in the world. With approximately 1,000

systems come new opportunities to take advantage of

engineers, it has registered 300 patents and has more than

the whole combustion process in terms of regeneration

1,000 registered inventions. The proximity to several of our

and the use of thermoelectric materials. As a pioneer in

assembly plants, as well as the proximity to the US, has

propulsion systems for this type of vehicle, Delphi is trying

facilitated client visits on the occasions that they need to

to reduce the cost of electrifying the motor and the systems

assess the development of their products in our laboratories.

architecture in order to increase safety. Part of this is the

To address this, the center in Saltillo is specialized in

development of cables and connectors to operate safely

creating diverse connectors for communication systems in

with high voltages, and software for regenerating energy

vehicles. The evolution of electric and electronic systems

via braking in hybrid cars. Delphi aims to develop the safest

in vehicles today has meant that connectivity between all

motor with the lowest fuel consumption. Moreover, the

the elements in a vehicle is vital to functionality. Finally,

company is investing in innovative technologies to increase

the center based in Queretaro is specialized in software

its recycling-to-waste ratio.

OPTIMIZED TESTING SERVICES FOR ENGINE IMPROVEMENT capable of reproducing the performance of different components in a vehicle. Packages like AVL FIRE and AVL BOOST show the combustion process in the engine, AVL EXCITE helps with its design process, and AVL DRIVE demonstrates the performance of the engine and the entire vehicle, without having to physically build it. These systems can be used in any kind of combustion engine, as well as in electric and hybrid cars. Furthermore, they Alberto Zumeta, Managing Director of AVL

Raul Gutiérrez, Commercial Director of AVL

are already used by the light and heavy vehicle segment, as well as in the development of Formula 1 and NASCAR

As competition within the Mexican automotive market

vehicles. “AVL does not see considerable promise in

intensifies, the increased focus on R&D has created

terms of the evolution of the electrical vehicle market in

an opening in the industry for companies to improve

Mexico,” states Alberto Zumeta, Managing Director of

processes.

engineering,

AVL. “However, in terms of electrification, there is a need

simulation, instrumentation, and testing services to the

to strive for less consumption and fewer emissions, with a

automotive industry. Due to Mexico’s reputation as a

major opportunity for the thermal engine. Even so, Mexico

manufacturing country, AVL’s client interaction is mainly

has been slower to implement this technology compared

focused on supporting production operations. However,

to other early adopter countries. AVL is trying to create

with AVL’s global background for engine development

awareness of this, but new regulations that push for a

and calibration, the company is looking to branch

stronger domestic market are essential.” Even so, Zumeta

out into this area within the country. AVL’s innovative

stresses that this will also have implications in other areas,

technology includes a single cylinder engine system

such as fuel quality and car prices, where the country still

that enables lubricant and fuel testing to be performed

needs to grow.

AVL

provides

powertrain

without generating waste. With this system, performance regarding knocking, power, emissions, as well as flame

Zumeta predicts four main drivers for the industry,

and temperature dispertion can be effectively tested,

including CO2 emission reduction and fuel economy,

which would normally incur large costs with a regular

regulations to equal those of Europe, ownership costs, and

engine. However, the AVL method enables companies to

an increased emphasis on the driving experience. In engine

obtain realistic and economical replicability. This system

design and emission control, AVL is ideally placed to help

is also useful for analyzing raw emissions coming from

OEMs with the required design and instrumentation, but

the engine, and to better understand the results of the

may see increased competition due to a recent change in

combustion process. Some clients seek a specific part of

regulations. Costs cannot be controlled by the company,

the simulation data and, in some cases, partnerships are

but AVL believes that the efficiency of its simulation

created to develop more effective software. Most OEMs

systems provide a way to analyze both objective and

are not specialized in testing their components, so the

subjective data, outweighing any price concerns.

specific tools required are provided by AVL. With around 7,500 employees and 40 technical engineering Operating as a consultant for the Mexican industry in

centers worldwide, the company considers itself to be both

terms of global environmental trends, AVL is helping to

global and local. “As a global company providing local

define what can realistically be achieved in sustainability.

solutions, the company is well aware that the needs in one

The company’s annual Engine & Environment conference

country are not the same as others,” explains Raul Gutiérrez,

covers a variety of topics, such as CO2 emissions, electric

Commercial Director of AVL. “Engine testing must be

cars, and diesel or gasoline engines, among other topics.

tailored to local requirements, creating stronger links on a

AVL has developed several engine proposals, including

local basis. AVL has significant potential in Mexico with the

a new range extender engine for electric applications,

recent introduction of Toyota and KIA, but the concern will

which has also been included in other technologies like

now be to adapt to a new customer base while maintaining

electric turbochargers for Formula 1 vehicles. An open

the same level of service for existing customers.” As the only

development platform has also been created to allow

company in Mexico that can provide local support services

free exchange of information between every stage of

with local engineers, AVL has obtained a distinct advantage

the design process. Additionally, the company offers its

in its attempts to improve services in the country, and to be

advanced simulation technologies division, with software

seen as a reliable supplier and a reliable partner for OEMs.

245

| VIEW FROM THE TOP

GROUNDBREAKING TECHNOLOGY PERFECTING DRIVER EXPERIENCE CUAUHTĂ&#x2030;MOC TAPIA Site Engineering Manager of Visteon Technical Center Mexico Q: What are the most important activities of the Visteon

Q: What new trends have you detected in the market?

Technical Center?

A: We have noticed that even low-end vehicles are now was

including the latest connectivity and electronic technology,

inaugurated in 2002, when it assumed all the design-

so Visteon is working to make every device compatible with

related responsibilities that were previously managed in

infotainment systems. Nowadays, drivers can use movement

our manufacturing plants. Currently, we have more than

recognition technology, and even eye tracking systems which

220 employees within a 72,000ft working space. In 2003

are revolutionizing the industry. Visteon was also recently

we achieved the ISO 16949 quality certification and in 2010

awarded a project to deliver another groundbreaking

the ISO/IEC 17025 for Testing Operations. By 2014, we were

system, namely a curved display with organic light-emitting

able to recertify in adherence to ISO 16949 and ISO 17025.

diode (OLED) technology. We participate in the Customer

By the end of 2014, VTCM had grown by approximately

Electronics Show in Las Vegas every year where we

30%, and we expect this expansion to continue until

present our latest concepts. As a result, we have identified

the end of 2015. We manage design operations for

several opportunities in emerging technologies, such as

connectivity,

Visteon

Technical

Center

Mexico

(VTCM)

and

heads-up displays. To stay up to date with new trends, our

displays, as well as audio and climate systems. Additionally,

infotainment,

instrument

clusters,

marketing team identifies the most popular devices, and

we offer engineering services in electronics, mechanics,

our engineering team develops systems that can be easily

plastics and metal modeling, quality, and vehicle acoustics.

updated to maintain compatibility.

We have launched new programs in collaboration with North American automotive manufacturers, we supply

VTCM is collaborating in the development of these new

products to Asia-Pacific OEMs, and we are pursuing new

technologies on a six-month program that sends engineers

opportunities with European automakers.

to the US to work on projects for emerging technology, allowing our teams to broaden their horizons and potentially

Q: How much freedom does Visteon have in its design

bring new ideas to Mexico. The program increases loyalty

process, and how much development comes from the OEMs?

among our engineers and is a perfect way to recognize high

A: OEMs provide us with guidelines for what they need,

performers, providing the opportunity to test their abilities

along with a rendering of how they visualize the product.

with other engineers in an educational environment.

Companies normally have a framework of required

246

specifications such as dimensions, volume, weight, materials,

Q: What does Visteon look for in new recruits and where

and even the amount of local content required. Within that

are you focusing your recruitment efforts?

framework, we have the flexibility to develop a product

A: The most useful specialties for Visteon have been

using sketches and schematics, showing every component

software, electronics, mechanics, and mechatronics, and we

required to build the final assembly. Additionally, we must

have always considered speaking two languages a priority in

comply with every mechanical and electrical specification

our recruitment process. Besides qualifications, the skills we

from component suppliers. Our system requirement and

value are proactivity, commitment, and the capacity for self-

sales teams work together to ensure this, following the

directed learning, because knowledge can be acquired, but

latest market trends. The entire process after the financial

attitude and core values are difficult to change. We target

estimation is managed directly with customers, and once

graduates through relationships with universities, mostly for

we have all the program requirements, we can provide a

professional internships. Our intern program has proved an

prototype and begin working on the final specifications.

effective way to recruit new talent and has allowed us to

Our stage-gate product development process ensures

create an intense training program for the most promising

that we receive and respond to customer feedback,

college graduates. This consists of a structured rotational

always presenting new technologies and ideas that we can

plan through different areas of the company over two and a

recommend to our customers.

half years, providing a comprehensive knowledge of VTCM.

| VIEW FROM THE TOP

MODERN MATERIALS AND INTERFACES FOR INDULGENT VEHICLES MICHAEL VOLL Director General of Preh de México Q: What has been Preh’s strategy to reach sales over

tool shop that enables us to maintain our tools, optimize

US$140 million in less than ten years?

them, and adapt them whenever necessary. Surface

A: We have brought a great deal of technology to Mexico

technology and plastic injection are related to the most

and our customers trust us, so we are expanding in

critical components that we produce. Approximately 40%

collaboration with North American OEMs. The biggest

of our plastic parts are produced in-house, while the other

customers of our Mexico plant are Ford, GM, and BMW.

60% are bought in Mexico or the US, and sometimes from

Originally we only supplied Ford’s US plants, but we now

Europe for newer products. In Kalos, we handle the final

also ship to the OEM’s facility in Hermosillo, as well as to its

assembly of our products, perform any final testing, and

other locations in Europe and China. With BMW, we started

then dispatch the products to our clients. Three years ago,

by supplying products for the X5 and the X6, and we also

we initiated SMT production in order to gain the advantage

develop switches that are shipped to Germany and South

of wider vertical integration for all the steps of our process.

Africa. This combination has allowed us to generate a large

Our populated PC Boards are one of the most valuable

sales volume over the years. Furthermore, the fact that

aspects of our products, so should not be imported. This

customers want to purchase our products in US dollars as

also simplifies the customs process due to the origin of the

opposed to Euros helps our business in Monterrey.

products. We have expanded our SMT processes in Kalos, starting with only one line in 2013, and moving up to three

While Preh is mainly a manufacturing company, we also

by 2015. In 2016, we will likely implement another SMT and

deal with injection, painting, and surface-mount technology

final assembly expansion.

(SMT) processes. We manage the same lines that would be found in our European locations, which are a mixture of

Q: What are the differences between the Preh plants and

semi-automatic and manual processes, and a combination

your German facilities in terms of what can be developed?

of assembly and testing processes. In Mexico, Preh started

A: One difference is found in the control units produced

with its Monterrey plant in 2005, and since then we have

in Europe for the Audi A3. One version is built in Portugal

expanded twice. After our acquisition by China’s Joysen

and the other version in Romania. We would need to pass

Electronics in 2011, our Kalos plant was built, and in 2014

a logistic assessment and get approval from Audi before

we expanded by a further 5,000m2, displaying Joysen’s

we could produce parts for them in Mexico. Even so, we are

support of our expansion in the NAFTA region.

already one of two approved painting suppliers for Audi in Mexico, but unfortunately we have no projects running for

Q: What aspects made Monterrey the right place for both

them at the moment because the plant has not yet begun

of Preh’s Mexico plants?

operations.

A: We made the decision to start here in order to serve the North American market, close to the border. This makes it

Q: How will Preh’s plans to make more sophisticated

easy to use warehouses and other logistics platforms to

technology around the world affect operations in Mexico?

transfer goods to the US and Canadian destinations. The

A: One of the interesting things that we are looking into

second plant was built because we wanted to continue

is the development of haptic feedback technology on

using the same workforce, and Monterrey was the only

our control units, which generates feedback when using

option to achieve this. Since opening the second plant, we

touch-based controls. We also conducted a test with touch

have split activities between the two. Injection and painting

technology, studying features such as controlling climate

processes stayed in the Avante plant, meaning it deals with

requirements with a touch screen. This touch and haptic

plastic components that possess a high level of technology

feedback technology can be applied to steering wheel

like painted and lasered surfaces. Avante also produces

switches too. Preh made some prototype samples to show

in-house light guide systems, which require a high level

customers the technologies we are capable of developing

of tool maintenance knowledge. Finally, Avante owns a

on a broader scale, which have been well received.

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| VIEW FROM THE TOP

LIGHTWEIGHT SOLUTIONS ENHANCE EFFICIENCY FRANK HEZEL Vice President of BASF’s Coatings Division in Mexico, Central America and the Caribbean Q: How is BASF preparing for the new trends that have

efficiency of auxiliary systems and improving comfort for the

appeared in the automotive sector?

driver. E-mobility is also altering the outlook, triggering the

A: Firstly, the weight saving trend in the automotive industry

development of alternative powertrain vehicles. In response,

is not only relatively unchartered territory, but is becoming

BASF is developing materials and technology for lithium-ion

increasingly important, as CO2 emissions and fuel economy

batteries, as well as future powertrain concepts. Lastly, the

must comply with more stringent requirements. BASF offers

notable trend toward improved safety and comfort has led to

a broad portfolio of lightweight solutions ranging from

the development of components for braking, airbag housings,

engineering plastics to foams and composite systems, which

and bumper stiffeners. Moreover, our noise, vibration, and

reduce weight without compromising the strength of the

harshness solutions improve the overall consumer experience

structure. The price of increased mobility is higher emissions,

while increasing driving comfort and safety.

so we work to minimize the ecological impact with fuel additives that reduce these, while increasing efficiency. As

Q: What nanotechnology opportunities is BASF exploring

the global leader in catalysis, we help our customers meet the

in the automotive sector?

toughest emission regulations with cost-effective solutions.

A: By using nanotechnology, we can achieve increased

Improved fuel economy is one of the most important

design freedom, lower reject rate, minimal investment

trends in the automotive industry, but energy consumed by

costs for production tools, and energy savings of up

heat, ventilation, and air conditioning systems in vehicles

to 20%. BASF is becoming more efficient thanks to

contributes to a significant increase in fuel usage. To combat

nanotechnology, with the key to this innovation lying

this, BASF’s materials for solar heat management and thermal

in the addition of finely dispersed nanoparticles. The

insulation optimize heat flow through vehicles, increasing the

particle size reached 100 nanometers, modifying the

| TECHNOLOGY SPOTLIGHT: BASF ADHESIVES

AND

SOUND

DAMPING

MEET

adhesives that have been specifically developed for technical

Car makers increasingly try to stand out by offering high-

lamination. The company’s dispersions, in combination with

quality and functional car interiors, with treated surface materials playing a decisive role in their creation. There are different procedures that suppliers use in order to upgrade surfaces, the most flexible and most sophisticated of which is currently thermo-laminating. This process involves the use of carrier materials made of linked natural fibers or plastics, such as acrylonitrile butadiene styrene. The interiors are refined with thermo-plastic films, such as thermoplastic polyolefin or polyvinyl chloride, as well as leather or textile materials that are applied with the help of laminating adhesives. This lamination process calls for reliable and resilient adhesives that must meet the highest standards to fulfill the reliability and resilience demands of the automotive industry.

248

BASF offers a broad range of raw materials for water-based

AUTOMOTIVE RESILIENCE STANDARDS

application behaviors and the rheology of some products,

conversion (FWC) catalyst can remove particulate matter,

subsequently revolutionizing the automotive industry

as well as CO, HC and NOx from gasoline-engine exhausts.

for BASF partners. In Mexico, the company is selling

Upcoming Euro 6 and US Tier 3 regulations will enforce

nanotechnology via Ultradur High Speed and Ultramid

a more stringent control of particulate matter emissions

High Speed products. BASF is completing the evaluation

from gasoline-powered vehicles. Therefore, BASF has

process to work on a focus development program with

developed innovative FWC catalyst technologies in global

a number of educational institutes in order to create a

R&D centers, which can be applied in a system along with

partnership with OEMs, academia, government, and R&D

a standard TWC, as a close-coupled, under-floor, or even

centers.

as a FWC-only device for a fully integrated system. Due to increasing OEM and Tier 1, 2 and 3 investments, Mexico is

Q: What made the development of the four-way catalytic

considered an important target for these products.

converter possible and how does it differ from the traditional three-way converter?

Q. As sustainability becomes increasingly important in the

A: BASF’s EMPRO three-way conversion (TWC) catalyst

automotive sector, how are BASF’s R&D efforts directed

technology features a patented precious metal alloy

at making processes cleaner?

of platinum, palladium, and rhodium that significantly

A: BASF has a long tradition in sustainability. In the 1980s

outperforms conventional three-way conversion catalysts

and 1990s, nitrogen emissions were reduced by nearly 90%,

in the oxidation of hydrocarbons (HC) and carbon

and 17 million MWh were saved per year through Production

monoxide (CO). This employs BASF’s patented washcoat

Verbund. Since 2014, BASF has steered its portfolio

technology, which places the precious metals within the

toward sustainability to systematically review and evaluate

washcoat, resulting in the optimal use of precious metals,

relevant aspects of the approximately 50,000 product

lower cost and higher effectiveness, and higher CO, HC and

applications in the company’s portfolio. The benefit of this

nitrogen oxides (NOx) conversions. BASF’s TWC catalysts

externally validated process is the possibility of measuring

have a lower light-off temperature, offer high temperature

the products’ contribution to sustainability within various

stability, minimize hydrogen sulfide emissions without

markets. Environmental and social responsibility goes

using nickel, possess outstanding resistance to lead, and

hand in hand with running a profitable business, so BASF

have a stable oxygen storage function to help OEMs

has embedded sustainability in the corporate mission, with

meet On-Board Diagnostics II requirements. On the other

a mission statement boasting that “We create chemistry

hand, the innovative single-component EMPRO four-way

for a sustainable future”.

additives, can be formulated to become two-component

with extreme climatic changes. BASF’s products include

adhesives or latent-reactive systems, and can be used to

Luphen® polyurethane and Acronal® acrylic dispersions,

develop odor-free, block-resistant adhesives that can cope

which are perfectly suited to 3D furniture lamination and foam bonding. Aqueous, liquid-applied sound damping (LASD) is increasingly used to optimize the interior acoustics of cars and railway carriages, with systems being designed to suppress bodywork vibrations. Due to the efficiency and precision of automated spray robots, water-based LASD masses are becoming the modern alternative to traditional bitumen mats. One significant advantage is that aqueous technology leads to significant weight savings. As a pioneer in this field, BASF provides at least 70% of the components used in the formula for LASD application, from high-quality acrylic and styrene-butadiene polymer dispersions, which have been specifically developed for this application, to additives that allow for masses to be rheologically modified, ensuring an ideal spraying application.

249

| VIEW FROM THE TOP

SEALING THE FUTURE BY STICKING WITH THE BEST MARCOS VILLARREAL Automotive, Metal, and Aerospace Business Director, Adhesives and Metal Pretreatment, Henkel – Latin America North Q:

What

advancements

has

Henkel

made

toward

an OEM includes a larger proportion of lighter materials, we

improving the company’s adhesives portfolio?

can pretreat these materials so that higher quantities can

A: The improved, lighter, and cost-effective materials

be used. We have another two-step technology where we

currently popular in the automotive industry present new

first pretreat the galvanized steel and then the aluminum.

bonding challenges, such as new lightweight plastics that

This technology reduces waste and sludge, offers better

are difficult to bond. Therefore, our adhesive solutions for

corrosion protection, and eases weight reduction efforts.

the interiors segment, the Loctite® and Teroson® brands,

Additionally, we ensure that our adhesives help OEMs

have adapted to keep improving their performance.

maintain safety, comfort, and performance levels when

Traditionally, for gasketing and sealing applications in the

making structural changes to reduce weight. We developed

powertrain segment, silicones and anaerobic technologies

structural adhesives for the doors, roof, and hood to ensure

have always been the solution. Nowadays, Henkel is able

the cars keep the same strength with less weight.

to offer higher flexibility in anaerobics, better adhesion to aluminum, and improved chemical and thermal resistance,

We have a technology called Liquid Applied Sound

boosting the performance of the powertrain. However,

Deadener (LASD), which is applied to the floor of the

considering the current requirements such as the use of

vehicle. This product is directly applied by a robot that

aggressive oils and coolants, there is demand for high-

dispenses it in the shape of the vehicle. This equipment

resistance and performing sealants. For this reason, Henkel

allows LASD to be applied uniformly, eliminating the need

has developed the polyacrylate technology that offers

to have tailor made parts that must be applied to each

benefits as best-in-class chemical and oil resistance, as

individual model. This process results in less material

well as good adhesion to plastic and metals.

applied overall by being dosed precisely at the most strategic places.

Q: Weight reduction has been a priority for Henkel, but

250

how do Henkel’s solutions help OEMs achieve this goal?

Additionally, we have applications for doors that have

A: Our products account for average reductions of up to

several metals welded together. Companies do not want

98kg per vehicle due to several technologies. However, it

these metals clashing against each other, so we apply anti-

is not about weight reduction as such. For example, when

flutter material that can expand and fill the gap according

to the shape of the door. This technology allows companies

pistons, increasing corrosion resistance and reducing

to reduce the amount of metal used while maintaining

friction. If we can reduce the latter by 3-5% on the pistons,

comfort and noise reduction.

the result is almost like adding a supercharger to the car. This technology also prevents damage to the engine and

Q: What kind of challenges has Henkel faced when

improves savings on fuel consumption. We are in the final

creating new bonding and adhesives solutions?

trials for this process in collaboration with Honda and

A: Henkel is working with Audi to develop a fully bonded

other piston manufacturers, to ensure that these materials

car, free of welding. This innovation would be the ultimate

are reliable in the long run. While electroceramic coatings

solution, which could be deployed for any combination of

are more expensive, this investment translates into big

aluminum and galvanized steel. Bonding is interesting as

savings when it comes to engine performance.

the same force is applied evenly to the surface, as opposed to welding which has contact points where the force is

Q: How does your R&D strategy differ for cleaning

concentrated. In the future, we might see fully bonded

products as opposed to the rest of your materials?

metal vehicles, or even some made out of magnesium,

A: Our latest developments are neutral cleaners that stand

plastics, or carbon fiber resins, as seen in Formula 1 cars.

between acids and alkaline. They offer a big advantage as they do not damage parts. The mix of metals and materials

When dealing with powertrain, transmission, or engine

that will be used in the cars of the future makes it more

components we know that every part is different.

important to have neutral cleaners that will not damage

Therefore, we can preprogram robots or PLC’s with the

any part or the properties of any material apart from giving

exact dimensions of each part in a car so that the adhesive

rust protection. Henkel Mexico adapts products to the local

can be applied rapidly, uniformly and without worrying

market in partnership with local suppliers to make them

about the size and shape of different parts.

as competitive as possible. For example, we are improving our line of cleaners and lubricants in Mexico, as well as the

Q: One of Henkel’s newer products is electro ceramic

phosphate materials that we provide for use before painting.

coatings. How does this product help improve engine

Therefore, while we have limited innovative R&D domestically,

performance and reduce CO2 emissions?

we count on Mexico to manufacture products and improve

A: We are applying these electro ceramic coatings to

others in order to be more cost effective for our customers.

Henkel’s adhesives and functional coatings give designers the flexibility to introduce lighter materials, while meeting competing demands for increased durability and performance and reduced noise and emissions. Henkel technologies could reduce up to 100 kg in vehicular weight (the equivalent to plant 19 trees).

Website: www.henkel.com.mx/automotriz Email contact: contacto.automotrizaeroespacial@henkel.com All marks used are trademarks and/or registered trademarks of Henkel and its affiliates in the U.S. and elsewhere. ® = registered in the U.S. Patent and Trademark Office. © 2015 Henkel Corporation. All rights reserved. 14778 (9/15)

| VIEW FROM THE TOP

METROLOGY LEADER ADAPTS TO AN EVER-CHANGING MARKET RAF PUTSEYS Director of Industrial Metrology at Carl Zeiss de México Q: What is Zeiss’ history, both globally and within Mexico,

how the measuring plan should look. Later on, when they

and how is the company pioneering in the world of

require measuring machines, we can configure them with

industrial metrology?

the right sensors, software, and the necessary accessories,

A: Zeiss has a history of almost 170 years, with more

making the whole process as easy as possible. Once the

than 100 of those years in Mexico, and the company is

machine starts acquiring the data, we include statistics and

continuously growing and renewing itself. Zeiss has 24,000

process control solutions so our equipment will immediately

global employees, with 10% of these located in our lens

warn the customer when there is a quality risk of his product.

manufacturing plant in Tijuana. Zeiss has many divisions, the newest being the Semiconductor Group where our

Q: Metrology innovations represent a large investment

lithography optics enable semiconductor manufacturers to

for automotive companies, so how does Zeiss reassure

produce ultra-high-performance microchips. Zeiss develops

its clients of the benefits of this technology, while also

technology that will be used in many sectors, such as health,

adapting to their needs?

optics, electronics, and industrial metrology, which is a very

A: We have three certified laboratories available; one is ours

important segment for us. In terms of industrial metrology,

and the other two are run by our business partners. This

today there are around 800 operational machines within the

enables us to provide metrology services to clients that do

country for which we have a strong service team working with

not have the proper equipment. We have an agreement with

our customers on a daily basis. However, our goal is to reach

CIATEQ to offer state-of-the-art technology to the market,

1,000 machines in 2015. Therefore, we have changed our

including our new X-ray measuring technology, METROTOM.

philosophy in order to become a complete solution provider.

This system looks into the inside of the components and

From the beginning of the process, we advise companies on

does the metrology process inside the part.

| TECHNOLOGY SPOTLIGHT: CARL ZEISS X-RAY TECHNOLOGY FOR THE REDUCTION OF

is complete, all the collated data is combined to paint

SCRAP MATERIALS

a complete picture of the vehicle. As well as speeding

Metrology is one particular technique that has helped to

up vehicle manufacturing processes and developing a

guarantee excellence in any given component, but these

complete statistical analysis of production, VoluMax can

testing processes can sometimes be time-consuming as

help to verify the quality of a certain component, resulting

they require the products to be dismantled or destroyed.

in less scrap material and a much lower defect rate.

The well-known German optical systems manufacturer,

252

Carl Zeiss, determined to change this trend, has developed

X-ray scanning technology is garnering a lot of interest

VoluMax, a new inline computer tomograph that is set to

within the industry at the moment. “X-ray provides high

change the world of metrology. Computed tomography

accuracy measurements without opening the components;

evaluations are used for cast aluminum parts and other

we have already included it in our METROTOM systems,

non-ferrous materials, as well as for plastic components

and we will soon be selling these machines in Mexico,” says

within automobiles. VoluMax can inspect the entirety of

Raf Putseys, Director of Industrial Metrology at Carl Zeiss

any of these components for manufacturing defects. With

de México. Through its collaboration with CIATEQ, Carl

this technology, several robots acquire measurements

Zeiss has now implemented this new technology in some

of specific sections of the vehicle during brief periods

of Mexico’s metrology laboratories, offering its customers

of inactivity on the production line. Once production

an opportunity to test the equipment.

Historically, measuring machines used to be well-protected

Q: What have been the most important challenges that

in a measuring room. However, ten years ago, Zeiss began

you have had to overcome in the Mexican automotive

to move the equipment close to the production line,

industry?

which enabled us to provide a line of equipment that

A: Mexico is a very extreme country. If you go to the north,

could withstand difficult situations without affecting the

summers are extremely hot but a harsh winter ensues.

efficiency of the machine. Customers want faster and more

Therefore, we need machines capable of adapting to this

accurate results in the line, so we adapt our strategy and

environment; we test them and guarantee their quality to

we develop machines to satisfy these needs.

our customers. In Mexico, we offer the MAX line products, which can be placed on the production line. One of them,

Q: How is Zeiss able to leverage its global relationships

the DURAMAX, is our starting machine, which is really

in order to serve the new OEMs and Tier 1 companies

popular with small companies because of its size, price,

entering the Mexican market?

and features. It even includes the same software as the

A: We adapt to the needs of the automotive industry and

most expensive machines in the line. Another popular

our global network is an important part of this process. We

product is our CenterMAX equipment, which has micron

have already sold six machines to KIAâ&#x20AC;&#x2122;s new plant and our

level accuracy and is very popular with OEMs for engine

branch in Korea is preparing the software. Carl Zeiss de

and gearbox manufacturing. Our equipment works at high

MĂŠxico will receive this project, complete the installation,

speeds, significantly increasing the testing rate of products.

and provide the technical support required moving forward. When we learn about any new project, we prepare before

Q: How important will Mexico continue to be for Zeiss in

the OEM even starts building. We work closely with our

2015 and in the near future?

branches in any country where the OEM is coming from,

A: Mexico is truly important to Zeiss International. Since

and we have everything ready two or three months before

the country is considered an rapidly developing economy,

their arrival. Another advantage of our global community

we know it is where we need to fight for the market. The

is that an international team stays with us for as long

country will continue to have important investments in

as we need. For instance, we are currently working on

the automotive sector, and I am confident we still have

the foundations needed for our equipment in the new

two or three abundant years in the industry. There might

Audi plant in Puebla. During this stage we work with the

be fluctuations during this period as Mexico is always

architects and engineers to instruct them on any structural

dependent on the US economy, but we are prepared to

and disposition requirements for the equipment.

change our strategy according to the situation.

There are a number of issues within the production process

the production process. In the past, it was only possible

that can be avoided with the use of X-ray technologies. In

to detect component defects such as porosities, but with

plastic injection for example, there are many variables that

VoluMax, their size and location within the component can

have to be controlled in order to accurately create a part from

be evaluated, enabling the definition of product-specific

a mold. If the right pressure, temperature, and material are

regions within the component in which different cavity

not used, the finished part will possess incorrect dimensions.

sizes can be used as a criterion for component evaluation.

To test the process, the component usually has to be

The 3D results delivered by VoluMax are used for porosity

submitted to microscopic analysis and sometimes destroyed,

analysis, assembly checks, and metrological verification of

further increasing production time. During a casting

simple dimensions.

process, the part has to be cut to meet its final geometric requirements. This is when problems that are hard to notice

VoluMax incorporates Carl Zeissâ&#x20AC;&#x2122; know-how in the field of

can arise, such as pockets of air within the part. In these

inline metrology and ensures the optimal integration of

cases, the component has to be melted down and the whole

the computed tomography (CT) into the manufacturing

process needs to be restarted, wasting valuable time. Even

line by means of automated robotic loading. The software

in the most effective companies, this process can result

integration of the CT into the manufacturing phase

in around 15-20% of scrap material. The introduction of

ensures that test results can be traceably documented and

VoluMax technology would offer many advantages during

archived for safety-relevant components.

253

| VIEW FROM THE TOP

DELIVERING THE TRUE ADVANTAGES OF INDUSTRIAL METROLOGY ALEJANDRO SILVA Director General of Renishaw Q: Which companies represent Renishaw’s main clients

is disseminated across the entire production chain, and

and how do you generate new business with OEMs in

our metrology equipment represents a standard in terms

Mexico?

of quality control. We are able to measure a whole car

A: We are working together with a lot of Japanese

and a whole chassis, helping companies to comply with

subsidiaries with common customers, enabling us to offer

dimensional accuracies stipulated in their designs.

worldwide solutions to their clients. Also, we have business with some German OEMs, specifically Volkswagen and

Q: What are the main differences in terms of quality

Audi. We operate as a worldwide metrology company,

control between German, Japanese, and Mexican clients?

which means that we get information from potential clients

A: Renishaw has been in the US and Germany much longer

before they start their projects in Mexico. That way, we can

than in Mexico. Renishaw Germany has over 20 years of

inform our subsidiaries so they can pursue the business

experience, while Japan and the US have more than 30.

in each company’s home offices. When KIA announced a

Even though Renishaw has been in Mexico for the last 20

huge investment in Nuevo Leon, I sent all the information

years, it has not been as a direct subsidiary since everything

to our Korean subsidiary, so we could discuss the project

was always handled by other distributors. These players

directly. As a result, of the 100-150 lines they are bringing

can offer the products, but they do not fully understand the

to Mexico, 80% will come with a Renishaw probe. Of course

technology or how to present it. Nevertheless, we are now

there was competition, but our early communications with

working with our end users, which means that education

KIA and Hyundai made securing the deal much simpler.

has become part of our core strategy. The Mexican market knows about our products superficially, and a lot of people

Q: What areas have seen the most growth in the company

who know the brand only understand what we can offer at

and what are the clients’ biggest interests at the moment?

a basic level. Therefore, we are making sure that our clients

A: Renishaw manages three different business units

know exactly what our equipment is capable of.

including industrial metrology, healthcare, and scientific research. Industrial metrology is our strongest division,

Q: What are the main objectives of Renishaw’s ongoing

bringing in most of our global revenue. Additionally,

innovation processes, and what new projects are you

industrial metrology is further divided in Current Measuring

planning to release in the market?

Machine

touch

A: We have a few products in the pipeline, but our current

probes for CMMs, probes for CNC machines, calibration

technology is already able to test equipment accuracy and

equipment, and our new Equator. Equator is a flexible,

offer solutions to most quality problems. We also have

completely programmable gauge, used to measure parts

products that calibrate machines to return them to their

between CNC machines, the manufacturing tool, and the

original presets.

(CMM)

products,

probe

heads

and

CMM. This provides traceability to the process, resulting in successful measurements, as well as faster, leaner, and

Once you know the machine is perfectly aligned, you

more cost-effective manufacturing.

can insert the material and start the machining process. However, before and after you start, the tools need to

254

Q: How has Renishaw grown in the Mexican market, and

be calibrated again. Our probes help operators and end

what does the company offer to its clients?

users test and locate parts inside their equipment. That

A: When we entered the automotive sector in Mexico,

way when the process ends, they can make sure all the

we had more basic operations used only for newly

specifications have been met. Quality control is important

manufactured parts. 50 years later, the industry has

for companies, whether they check one out of ten parts

become more specialized, quality standards have become

or ten out of ten. For that reason, making sure that every

stricter, and there is an increasing demand for luxury

component is correctly processed is priceless knowledge,

technology, so we now have a bigger role. Our technology

and probes are the worldwide standard to achieve that.

| VIEW FROM THE TOP

OPTIMIZING THE VEHICLE LIFE CYCLE WITH ROBOTICS MARIO RODRÍGUEZ Managing Director of KUKA de México

Q: What new trends have you detected in the automotive

A: KUKA offers a tool for offline programming called

industry that could potentially impact on robotics, and

KUKA.sim, a simplified user interface with prefabricated

how is KUKA preparing for these new challenges?

technology packages for processes and sophisticated

A: We believe there are four significant trends in the

diagnosis functions. Even in terms of programming, KUKA

automotive industry. Firstly, due to globalization, locations

goes one step further with the LBR iiwa. The lightweight

of plants will be dictated by OEM locations. In addition,

robot is an intelligent helper for industrial tasks, and it

Industry 4.0 is calling for versatility among factories, and

opens up new fields of application in terms of service and

demographic changes are having a significant impact on

medical robotics. This new robot can be moved quickly and

the production concepts of automobile manufacturers.

intuitively to any position through manual teaching, in which

Finally, with global warming in mind, overall resource

the human operator programs paths by demonstration,

efficiency is becoming increasingly important. Therefore,

reducing

our challenge is to optimize the entire vehicle life cycle,

programming effort involved with the LBR iiwa would be of

lowering CO2 emissions all the way through production of

particular interest for orders of small batch sizes and large

raw materials, use, and ultimately the car’s recycling.

product variety. The LBR iiwa has also opened up a new

time

immensely.

Furthermore,

the

minimal

chapter in human-robot collaboration, since the system acts KUKA is a global organization that manufactures its robots

as the third hand of the operator and can work directly with

in Germany and China, and we manage our distribution

humans, without a safety fence. Regarding the automotive

through subsidiaries worldwide. Consequently, we are able

industry, this robot could replace human labor in tedious

to understand local requirements easily, adapt our robotic

and difficult tasks, such as inserting plugs in a vehicle body.

systems accordingly, and ensure our proximity to customers. At KUKA, we are shaping and driving the change, so Industry

Q: What has been the response to the introduction of

4.0 is not simply a buzzword. Turning concepts of a ‘smart

mobile robots in the Mexican market?

factory’ into reality is only possible with high-performance

A: This technology has recently been released so it is in

production systems that are equally efficient and flexible.

the early stages of introduction to the market. However,

KUKA is already offering these developments, oriented

we are expecting this technology to be a significant part

particularly toward the field of human-robot collaboration,

of our product portfolio, contributing to new segments

as well as mobile robotic systems with autonomous

where the robotics business has been less active in the

navigation software. KUKA invests a considerable number

past. With the KUKA Mobile Robotics (KMR) iiwa, the

of resources in internationally recognized open standards,

company is combining the strengths of the sensitive

in order to guarantee customers the highest response in

LBR iiwa with a mobile and autonomous platform, thus

terms of interoperability. The system’s flexibility under

offering the perfect solution for all conceivable scenarios.

Industry 4.0 comes primarily from the combination of

This innovation allows the robot to become completely

advanced IT technologies, such as Cloud and Big Data,

location-independent, and a highly flexible production

with classic automation technology. KUKA is focusing

assistant with an unrestricted workspace creates an ideal

on providing solutions based on high-performance and

basis for meeting Industry 4.0’s requirements. Additionally,

a standardized infrastructure. We are collaborating with

thanks to its specially developed Mecanum wheels, the

Swisslog, KUKA Industries, and KUKA Systems on the new

platform can be moved in any direction from a standstill.

sensitive Lightweight Robot (LBR) iiwa, designed for direct

The robot and the vehicle are operated with the KUKA

interaction between humans and robots, especially during

Sunrise controller, capable of handling multiple kinematic

strenuous and challenging tasks.

systems, considerably simplifying operator control and use in practical applications. The platform includes several

Q: How has KUKA developed a user friendly interface for

environmental scanners and ultrasound sensors to detect

customers that are not familiar with this technology?

and avoid any obstacles the vehicle might encounter.

255

INTRODUCING ULTRASONIC CLEANING EQUIPMENT Founded 2004, found

Arturo Gil San Román, Director General of Tierra Tech

Spain

sludge, and water within the unit. One model, the MOT-

Tech

8000 has a tank built of AISI 304 stainless steel with a

niche

market

capacity of 8,000l and an ultrasonic power of 34,000W produced by ten generators. Its working frequency is

cleaning equipment for

40KHz and the unit has 20 submersible transducer

automotive

boxes, all of which operate at 1,700W. With a 1-inch thick

companies. into

ball valve for water inlet, a 2-inch ball valve for liquid

Mexico three years later,

expanding

draining, an integrated wasteflow system and inclined

the company’s Director

bottom, the MOT-8000 is a highly efficient, hygienic, and

General, Arturo Gil San

time-saving cleaning system. The ultrasonic equipment

Román, recognized the

contains a high frequency generator connected to

absence of anything similar in the country, and therefore

a titanium steel transducer, which is placed inside a

decided to market through a variety of sectors, such as

stainless steel tub filled with water. Ultrasonic waves

automotive, aerospace, and agriculture. The company

travel through the water, generating a physical effect

is ISO 9001:2008 certified and produces a variety

called cavitation, which puts pressure on the water

of equipment for precision cleaning that has been

molecules and causes them to implode at twice the

designed to eliminate grease, oil, and carbon deposits

speed of sound, subsequently causing a suction that

from engines.

allows a delicate washing process.

Servicing

256

in affordable ultrasonic

Upon

Tierra

customers

such

Volkswagen,

Nissan,

Tierra Tech provided this equipment to Nissan to clean

Voith, Caterpillar, Cummins, and GM, the company

the liquid aluminum injection molds at its plant in

provides standard models as well as integrated cleaning

Aguascalientes. In those molds, the aluminum is injected

and rinsing units, with optional drying facilities. By

and cooled, before the molds are opened to extract

employing multifrequency ultrasonic waves of between

the components. However, waste residue inside the

40-90KHz, the cleaning of delicate materials like

mold means that it must be cleaned before the next

aluminum, magnesium, and brass is optimized and

piece is manufactured. Before the use of the ultrasonic

damage is prevented. Other advantages of the system

equipment, this process took two or three days, and

include reduced energy costs, a reduction in labor time,

manual cleaning as well as the harsh chemicals meant

and immersion washing features that save water and

that the molds suffered from corrosion, meaning they

detergent. For instance, the water used is not wasted,

had to be replaced on a scale of over 70 every two years.

since longer use creates better outcomes as a result of

Each mold costs US$250,000, but now only require

the reduced surface tension, making water molecules

replacement every 20 to 30 molds within the same

less sticky or heavy so the waves can travel faster.

two year timeframe, resulting in Nissan experiencing

Additionally, the system provides a cleaner and more

a significant saving in time and money by using Tierra

environmentally friendly service due to separation of oil,

Tech’s units.

| VIEW FROM THE TOP

COST REDUCTION THROUGH BETTER AUTOMATION SOLUTIONS ANTONIO MENDOZA Managing Director of Balluff Q: What range of products do you offer to the Mexican

really successful with Nissan and it has become one of

automotive industry and which represent the bulk of your

our strongest customers. In this particular success story,

revenue?

Nissan was facing a logistics setback. The OEM was

A: While Balluff has a wide range of products in its portfolio,

accustomed to importing everything from Japan, usually

the company’s main focus is on automation solutions.

waiting a couple of months for orders to arrive. That

Besides the product, we offer consulting services to our

meant that if the company missed an order, it would have

clients in terms of productivity, quality, and performance

to wait additional time for the products, further delaying

of production lines. An important success factor is that

the processes. Our solution to this not only included

we adapt our solutions to the specific requirements of our

products, but also a logistics strategy that ensured order

users. Specifically, in the Mexican market we have acquired

delivery in less than 24 hours. Thanks to this service we

expertise in welding solutions by substantially reducing

gained Nissan’s trust for the management of a project in

damage in the sensors’ sites, stop lights, and quality

its press shop. With our solutions, we managed to save

problems.

approximately MX$5 million (US$333,000) per year, reducing the damage to the sensors in the shop while

Within our portfolio, Radio Frequency Identification

increasing overall productivity.

systems are just beginning to take off in Mexico. This product offers data tracking and error proofing solutions,

Q: Which links of the supply chain would benefit the most

which means the client can trace its production processes,

from your solutions?

assembly line, machine tools, warehousing, logistics, and

A: We impact the whole supply chain, all the way from

distribution. As the OEM transforms a piece of metal into

OEMs to Tier 1 and 2 suppliers. Furthermore, international

a precise component, it is important to avoid scraps and

integrators like Comau, KUKA, and FFT also benefit from

mistakes in the machining process. If there is damage in

our solutions. Most automotive players need automation

an OEM’s machining center this can amount to a cost of

and engineering solutions. However, companies that only

almost US$2 million. When we convert certain parts of an

want to see a reduction in their costs are not our target

assembly line, we reduce errors and avoid human failure.

client base. Our traditional customers are companies that

Regarding welding, we have steelface inductive sensors

can identify the long-term cost benefits.

that have been very successful. Sensors are not made to be replaced regularly and when they fail it is due to a

Q: What specific objectives do you have in place to take

connection error, a faulty installation, or a wrong sensor

advantage of the boom the industry is experiencing?

model. To avoid this, Balluff invests heavily in technical

A: Balluff Mexico has become responsible for the whole

training, so that technicians can make the right selection

of Latin America with the exception of Brazil, so it has an

of products for the client’s unique situation.

ambitious growth strategy in place. We recently opened a subsidiary in Argentina, where we have been really

Q: What success stories has Balluff gathered within

successful despite its precarious economic situation. I am

the Mexican automotive industry, and what impact

very optimistic about this subsidiary, and I know that the

has the company’s technology had on manufacturing

players that prevail will get a bigger slice of the cake. We

processes?

are carrying out market studies in Central America and

A: As a German company, it was essential to approach

we are evaluating our resources to make this expansion

Japanese players. Our initial belief was that this would

happen. Additionally, we are opening distribution centers

be difficult, since they are characterized by being

in Colombia, Venezuela, Ecuador, and Chile. In terms of our

exclusive and only opting for Asian suppliers. We were

Mexican operations, we see many areas of opportunity,

able to jump this hurdle by listening to our customers’

especially following the arrival of Audi and BMW in San

needs in order to open doors. In fact, we have become

Luis Potosi.

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| VIEW FROM THE TOP

IMPROVING MANUFACTURING QUALITY WITH BETTER SOFTWARE GUNTHER BARAJAS Latin America Regional Director of Epicor Software Corporation Q: What have been Epicorâ&#x20AC;&#x2122;s most significant achievements

A: Our software can be accessed according to user needs,

and products since last year?

whether they are at their workstation or out on the road.

A: Epicor Mexico achieved 28% growth during 2014. Within

Similarly, the system can be deployed on-premises, in the

the manufacturing industry, automotive was a key sector

cloud or hosted. For smaller customers, we can deliver the

for us. All the investments that have recently been made

same application on a monthly hosting service platform. This

in the country have had a really positive impact on the

offers the same functionality as with bigger companies by

company. Many OEMs are requesting information from

employing their own mainframes and servers. Epicorâ&#x20AC;&#x2122;s open

their suppliers about their efficiency and consumption

technology also allows large, global companies to collaborate

levels, as well as the level of non-compliant parts produced

and communicate. Manufacturing can be programmed and

per million. All of the finer details of this information

centralized, so every plant has the operational specifics they

can be tracked by our system and then analyzed by the

need in one robust platform. We have some new customers

companies. As an example, our new Epicor Mattec MES

in the Bajio region that use different platforms on a global

production control software connects production line

scale. While they have larger operations on their home

machinery to our enterprise resource planning system,

turf, their Mexican representations are much smaller. These

giving our customers the ability to report on the efficiency

customers were looking for software that could offer the

of their operations in real-time.

same functionality without the large infrastructure and human capital investments. As a solution, we are able to

Q: How closely did Epicor work with OEMs and suppliers

outsource servers, software, and application maintenance.

in order to develop the Epicor Mattec MES system? A: Epicor develops software based on the needs of its

Q: During the implementation process, how closely do

customers, which means that Epicor Mattec was designed

you work with clients in terms of training?

with the same approach. We have over 700 employees in

A: We have a standardized signature implementation

Mexico, 90% of them focusing on customer service through

methodology that starts and ends with training. This gives

either support or software development. The difference is

us a chance to show customers how to use the software,

that we have no third-party companies between us and the

as well as its capabilities, features, and functions based

customer. This allows customers to contact us firsthand, even

on the best practices in the market. A standard solution

when suggesting new features or additions to the software.

may not fit 100%, so we have to use web services to adapt the application. At the end of that process, we provide

Q: These kinds of contracts and changes can be appealing

more training for the customer based on the final solution

to larger corporations, but what kinds of affordable

that has been configured for them. Once they have been

packages and services is Epicor offering SMEs?

trained, our support services continue as a safety net for

A: Epicor is based on a web architecture that allows us to

day-to-day operations.

change the logic of the information that the application processes. Furthermore, our use of the Microsoft .NET

Q: What are your main objectives and ambitions for

platform gives us the flexibility to make changes quickly

Epicor in the short-term?

and at low cost. This is one of the reasons why we have

A: For 2015, we want to achieve a higher level of customer

been growing in Mexico in the mid to small market, where

satisfaction, with a platform that helps them grow. In Latin

budgets are limited, resources are few, and time is tight.

America, Epicor wants to grow another 30%, which is an

So far, our indicators show that we are 95% on budget and

ambitious objective, but we feel that our success will carry

90% on time.

us toward that goal. Mexico has gained a high level of importance for Epicor over the last few years. Seven years

258

Q: How are your Cloud and hosting services integrated

ago, we were just another branch, but now we are the fourth

into the packages you offer?

largest revenue-generating country for the company.

| VIEW FROM THE TOP

MOVING EVERYTHING TO THE CLOUD RAMÓN ÁLVAREZ Director General of Oracle Mexico

Q: How important is the automotive industry for Oracle?

A: Companies that were already providers for these

A: On a global level, the top 20 OEMs use Oracle technology.

OEMs in other regions of the world most likely have an

It is true that the degree of involvement depends on the

Oracle solution. This means that once they arrive they can

company, but they all use our database and development

begin operations with the proper tools. Even so, there are

tools and a large percentage use our Enterprise Resource

some that are looking to expand those solutions. These

Planning (ERP) applications. We have wide participation

companies ask Oracle to train their new local workforce,

among Tier 1 and Tier 2 companies, especially in

and also seek consulting services to adapt their practices

manufacturing systems, product integration services, and

to the Mexican market.

just-in-time (JIT) delivery operations. Oracle has spent over US$60 billion in supply chain management acquisitions such

Oracle has internal specialization processes and our

as Oracle Demantra and Oracle Transportation Management

commercial workforce is divided into industries, including

over the last five years, which shows our emphasis on

the automotive sector. Within that commercial group,

developing more complete solutions. Most OEMs have a

our specialized agents liaise with any new suppliers, with

clear view of their desired ERP solutions, manufacturing

the help of automotive-oriented partners, in order to

systems, or human resources systems, and moving toward

implement the fullest and most complete solutions.

Tier 1 and Tier 2 companies, solutions are adapted based on clients. For most companies, the closer they are to an OEM,

Q: What innovations is Oracle developing for the

the more integration there is with Oracle’s solutions.

automotive industry? A: Companies can either set up their technology in

Q: How has Oracle adapted to Mexican companies, in

Mexico or adapt their processes with the technologies

terms of working environment, lean manufacturing, and

they own. One additional trend we see is a migration

logistic processes?

to the Cloud instead of locally implementing a solution.

A: Oracle has two major segments when it comes to logistics

For example, an OEM provider that has both Oracle

solutions. The first one is our supply chain management

and Cloud solutions in its main network systems may

system which, thanks to Demantra’s acquisition, is

purchase a Cloud license to use its software. Oracle

positioned as our best solution. The second one is our

believes that Cloud is the future. The installation

product lifecycle management (PLM) solution, used for

timeframe difference between products is abysmal,

the development of new products, particularly in the

although this is an extremely important process in any

automotive industry. While most OEMs do not utilize this

industry. Cloud services radically change the way in

technology, they have assembly companies that can reach

which the industry works, providing adaptability to any

out to their Tier 2 or Tier 3 suppliers to create new specific

required technology. The Cloud’s elasticity fits all specific

products. Such innovations are created with PLM systems

necessities depending on highs and lows, and many

through a collaborative development with a number of

companies see this as the best solution for managing

different tools. Regarding supply chain management, we

overhead costs and profitability. By the end of 2015, our

have a package called Oracle Lean Manufacturing, primarily

goal is to become the most significant Cloud provider

developed for the automotive industry. The software

worldwide. Oracle’s new approach is to provide any

contributes through the specialization of our solutions

solution through our Cloud network and the automotive

regarding JIT, manufacturing, and inventories processes

industry had one of the highest Rapid Planning demands

that require advanced demand planning systems.

in the market due to the sector’s complexity. Every player is looking toward customization and tropicalization of its

Q: Now that many OEMs are coming to Mexico and

solutions, and with the help of Oracle’s existing solutions

bringing their own supplier base, how will Oracle expand

coupled with its Cloud network, we expect to facilitate

its presence in the industry?

this achievement for many companies.

259

THE GOOGLE SELF-DRIVING CAR BECOMES A REALITY Imagine if you could jump in a car, press a button, and then

each time the car traverses it. This may sound like a simple

relax while it takes you to your destination. Imagine if you

process, but the amount of processing the computer needs

could sit in the front seat playing video games or watching

to do is massive, and it must be quick enough to determine

TV without worrying about the traffic. Imagine if you could

the car’s position as it moves on the road.

spend the time it takes you to get back from work talking and engaging with your loved ones, just as you would at

The second question to answer is what objects are

home. Now imagine a world where the roads are filled with

surrounding the car, which is partially addressed by the

other vehicles just like yours, all communicating with each

LIDAR as it continuously detects everything around

other to ensure safe journeys for everyone. This may have

it. Accompanied with a complete array of sensors and

once sounded like the setup for a science fiction novel, but

cameras, the computer is able to detect sizes, shapes, and

the reality of automated vehicles is now within our reach.

movement patterns in order to determine the nature of nearby obstacles. After acknowledging its surroundings,

The Google Self-Driving Car Project began life in 2009

the vehicle needs to predict what these objects are going

when the company first started testing the technology

to do next. The combination of external sensors and some

with the Toyota Prius, moving on later to the Lexus

basic electronics can help with this to some extent, but

RX450h. After lobbying for the creation of robotic car

the real work is done by the central computer. First of all,

laws in Nevada, Florida, and California, Google went on

Google engineers need to teach the car what to expect

to complete over 480,000km of self-driving freeway tests

from each object in basic situations. If there is a person

by the end of 2012. At that time, the company still used

by the side of the road, the car needs to know they might

existing cars by adapting them to include all the necessary

want to cross. Comparatively, if there was a traffic jam and

technology to function without a driver.

the path suddenly clears, the vehicle has to understand that it is possible to accelerate. This sort of reasoning

Thanks to the large amount of electronic systems in

comes naturally to humans, but it is a much more complex

today’s vehicles, getting the cars to move on their own was

process for a computer. Nevertheless, there are ways to

not difficult. Nevertheless, in order to drive at the same

teach this behavior to a machine, leading to the idea of

level of awareness as a human being or better, a car needs

artificial intelligence.

enough sensors to see everything happening around it.

260

With that technology, it can process this information and

The car’s computer is designed to make decisions based

store it for future similar situations. This alone would be

on the complexity of the road conditions. If the vehicle

ideal if road situations were always predictable, but, as

is driving at a constant speed on a highway, then the

any experienced driver knows, there are innumerable

computer only needs to process basic control algorithms

variables that can change in a fraction of a second, turning

to stay in its lane. For example, if it detects that the car

a pleasant drive into a stressful experience. With that in

is too close to the right hand lane, it steers slightly to

mind, Google came up with four main questions that the

the left. The computer needs to control many of these

car should be able to resolve. Firstly, the vehicle needs to

simple tasks at the same time, while also regulating speed,

know exactly where it is, which, thanks to GPS, Google

acceleration, and direction. However, there are much harder

Maps, and Waze, is not a problem in terms of global

challenges once the car starts to face other drivers or

positioning. While these technologies are incredibly useful,

objects that interfere with its path. In the case of another

they only give an approximate location of the car, which is

vehicle signaling that it wants to turn, the computer will

not sufficient for autonomous vehicles, as they need the

act accordingly, but sometimes people forget to put on

exact position within a margin of centimeters. Naturally,

the indicators, so the autonomous car needs to be aware

this poses a greater challenge, but, with the right LIDAR

of these possibilities. For these types of situations, the car

sensor and a proper 3D mapping solution, it is entirely

uses advanced learning techniques such as neural networks

possible. A LIDAR sensor, or Laser Imaging Detection and

and fuzzy logic. These tools allow programmers to teach

Ranging technology, is a system capable of determining

basic rules of behavior to the computer, training it on what

the distance between the vehicle and any object around

to do in specific situations. After a process of trial and

it. By placing a rotary LIDAR on the car’s roof, Google’s

error, the computer can logically determine what to expect

self-driving car was able to build a fragmented image of

according to certain stimuli. As a result, the vehicle is able

its surroundings. After driving several times on the same

to predict what other drivers will do, when pedestrians are

road, the system is able to construct an accurate model

going to cross the road, and even detect cyclists’ signals by

of the street, picking up on any alterations or anomalies

measuring the distance from a person’s hand to their head.

Finally, after this intricate reasoning process, the car has to

and, given that the routes are currently fixed, the system is

determine the best way to act depending on the situation.

activated with just one button. However, Google did make

The vehicle needs to slow down to let pedestrians or

some changes to add more safety to the vehicle, including

other drivers pass by, as well as understand when to move

redundancy in the braking and steering systems, a fixed

away from cyclists and motorists that want to advance

speed limit of 40km/h, and an emergency stop button, as

between cars. These commands are easily passed on to

well as a foam bumper and a flexible windscreen modeled

the vehicle, thanks to the computer’s control over the car’s

to absorb as much energy as possible in case of an impact

electronics. Additionally, the central directives controlling

with a pedestrian.

the vehicle dictate the safest possible actions in case of any uncertainty. This means that when someone wants to cross the street, the vehicle is able to determine exactly when to stop, and exactly when it is safe to continue. All these features were previously included in the Toyota and Lexus models, but given that they were already completed vehicles, it was a complicated and inefficient process. In light of this, Google decided to build its own car with specific requirements. Obviously, this required another kind of expertise, considering that it was something completely outside of Google’s core business, which is why the company decided to consult with as many automotive partners as possible. Alongside Google’s own research, companies like Bosch, Continental, and LG Electronics brought all their expertise to the project,

The project is still in its prototype phase, and the vehicle

helping to build a prototype with all the personality you

still has some limitations in terms of speed, especially

could expect from the technology giant.

considering all the possible risks that could arise if the system fails. Furthermore, the car still needs to learn how

Google’s car is powered by an electric motor, which

to behave in certain situations where previous knowledge

provides an approximate range of 160km. The car’s

is unavailable, and where visibility and sensor capacity is

computer system can detect objects, people, road signs,

impaired. Nevertheless, Google has continuously pushed

traffic lights, and other vehicles, with enough power

for new regulations in terms of self-driving cars, and it

to see up to 180m in any direction from its 360 rotary

has already accumulated more than 1.6 million kilometers

sensor. Additionally, the computer in charge of managing

of autonomous driving experience, combining highway

the autonomous system was especially developed for

and city road tests in California. Even though this project

automotive applications. The car’s design was planned to

is currently based in the US, it has huge implications for

enhance the sensors’ capacity as much as possible, and

what mobility could mean for the entire planet. While there

to make the user experience as stress free as it could be.

is still some road to cover, the future of mobility is right

While it still remains fairly similar to a regular vehicle in

at our feet, and Google is making historic steps toward

terms of seating, there is no steering wheel, no pedals,

leading the world into a new era of transportation.

261

| VIEW FROM THE TOP

THE RIGHT PLUG FOR EACH VEHICLE JORGE HAGG Business Development Manager Ecobuilding of Schneider Electric

Q: With 70 years of experience in the Mexican energy

A: We do not get involved with the vehicles per se, but

market, what have been Schneider Electric’s main

we do our own R&D for the chargers. We have an R&D

operations in the country?

center close to Monterrey, and we have around 200

A: If we divide the market into three main blocks, the first

engineers designing EV chargers. These products will be

one would be power generation and the last one would

manufactured in Canada or the US, but all the design will

refer to products oriented to energy consumption, neither

come from Monterrey. For the time being, this will be our

of which has any relation with Schneider’s operations.

only R&D center in the country and it will transform into a

Our company is in the middle segment, where we help

net zero facility in the near future. The plan for this center is

our customers manage the energy that someone else

to expand as needed, and we have enough space to grow.

produces and distributes. Part of this process is to make energy safe, productive, and environmentally friendly for

We have at least 11 manufacturing sites in the country,

the customer. Additionally, we are aware of several new

ten of them focused on IMMEX operations for the NAFTA

players on the consumer side, some of which are focused

market, while others are oriented toward electronic

on electric vehicles (EV). Therefore, it is our job to ensure

assemblies. That allows us to build part of the electronics

safe energy distribution for these products through the

in the chargers, while the final assembly is done in the US.

proper infrastructure. Q: Most companies bring their manufacturing operations to Q: How does Schneider Electric collaborate with OEMs in

Mexico, instead of their R&D process. What led Schneider

their design process for electric vehicles?

Electric to establish an R&D center in the country?

HOW GOOGLE MAPS AND WAZE FORGE NEW ROADS It is 8:30 am. You have 30 minutes to get to work and you

By 2007, Google Maps had added 54 new locations to its

are exactly 30 minutes away from your office. It looks as if

network and had integrated its Google Traffic extension

this is going to be a perfect day, but then you see endless

to report real-time traffic flow conditions in 30 US cities.

rows of red brake lights and not a single sign of movement.

Street View was also introduced for some major cities in the

You start to get desperate and you begin to pray for a way

US, allowing users to view a ground-level 360° view of the

out of this torment, but you know you will be stuck in traffic

photographed streets. Nowadays, there are more than two

for the next hour. Finally, you make it to your office, where

billion active users of Google Maps around the world, 40%

everyone is talking about the blocked road that forced

of whom access the platform through mobile devices. These

them to look for other routes to work. At first you wonder

users make Google Maps the most powerful service it can be

why nobody warned you, but that is when you hear them

by accessing the application through their mobile device and

mention how wonderful life is with Google Maps and Waze.

sharing their location, in combination with the historic data from the users, Google Maps can create precise and real-time

262

Google Maps officially appeared in 2005 after Google

information that is constantly updated as new users enter the

acquired the software from Where 2 Technologies in 2004,

application. Once all these factors are merged into a single

and it has remained in constant actualization from that

database comprised of different users in the area, Google

moment on. After its acquisition, Google transported the

Maps can calculate average speed and traffic jam zones,

entire platform to a mobile application, eventually modifying

showing traffic flow on any route through a color coded

it to include navigation, voice commands, and traffic reports.

system. Green roads show traffic free areas, while yellow and

A: It was mainly because of the confidence our corporate

connector is a standard SAE J1772 connector. This system

offices had in our team. We have five global design centers

is used by all OEMs and we can charge any vehicle with it.

located in Monterrey, France, India, China, and the US,

For the fast charger on the other hand, currently there are

but the electric charger project was assigned to Mexicoâ&#x20AC;&#x2122;s

two main standards: CHAdeMO and COMBO; BMW uses

center. It is part of our globalization process, and it also

the COMBO system, while Nissan has CHAdeMO plugs. At

relates to the language and the expertise of the Mexican

the moment, we only have CHAdeMO systems, but we will

workforce in electric technology.

have a fast charger with both plugs in 2015.

In the electric world there are two main standards, one from

Q: Since Mexico is still a young country in terms of R&D,

the National Electrical Manufacturers Association (NEMA)

how are you finding the proper talent to source your

in the US and the other from the National Electrotechnical

design center?

Commission (IEC) in Europe. In Latin America, you can find

A: Part of the growth Schneider Electric has had in the

countries like Mexico with either approach, and we have the

last few years has been through knowledge acquisition,

design center to address requirements with both standards.

and one of the companies we absorbed in Mexico was Summit Energy. This company is based in Celaya, and it is

Q: What kind of technology is Schneider Electric using in

100% manned by Mexican engineers. These people have

its chargers?

all the expertise we need in terms of energy performance,

A: Currently, there are three types of chargers on the

savings, and quality. Additionally, one member of our

market. There is the traditional charger you can plug

marketing and communications team focuses solely on

into any outlet, which will take 10-12 hours to charge a

our relationship with universities. We frequently receive

vehicle. However, we are not participating in this segment,

students from different fields in our showroom, we

given that these are provided by car manufacturers. We

show them what Schneider is, and we explain what we

focus on a second type, which takes from three to four

are capable of. We also have a project where we receive

hours, depending on the current charge level in the

around ten new graduates for a six to eight month

car. Additionally, we have one type of fast charger that

period, with a specific assignment in a certain area of

takes only 30 to 40 minutes to charge. We market these

the company. After this trial period, the students with

products for residential and commercial applications, both

the best performance are offered a formal position in the

indoors and outdoors. For the middle type of charger, the

company.

red roads indicate different degrees of traffic congestion. The

in countries all over the world. Mexico City has always been

darker the color, the heavier the traffic you might encounter.

known for its traffic jams and general faulty road conditions,

It is clear that as more users enter the application, the more

but millions of users have found solutions to the everyday

precise the data will be.

traffic challenges thanks to Google Maps and Waze. Bit by bit, most Google Maps features have arrived to the country. Just

In 2006, Waze was founded in Israel to create a free map of

this year it was announced that Mexican users will finally be

the country, but this ambition quickly escalated to the point

able to access Google Transit. With this extension, commuters

of posing a real competition to Google Maps. In 2013, Google

can now find the best way to get to their destination using

decided to acquire this company as well, making both

public transportation, getting full information regarding

applications twice as powerful as they were in the beginning.

tariffs, schedules, routes, and available stops.

The thing that made Waze attractive for most users was its collaborative approach. Apart from offering routes and

Google Maps and Waze have proven to be extremely

locations, Waze offers users the opportunity to input road

useful, and they are constantly improving their navigation

conditions and other relevant traffic information. Adding

capabilities. In the future, these platforms are destined

that to data regarding normal traffic conditions, this platform

to be used for more sophisticated technologies such as

was able to create far more precise information than Google

autonomous driving. Autonomous cars will require the

Maps. After the acquisition of Waze, all information that users

ability to navigate every road, and will have to comply

brought to this platform was immediately reflected in Google

with every traffic regulation, which means telematics

Maps, thus benefiting users of both programs, informing

and connectivity will have to combine with a complete

them about accidents, road blocks, or just regular changes

database in order to circulate without any problems. This

in traffic and estimated travelling times. Since then, both

might seem like a distant concept, but the future is gaining

platforms have expanded rapidly, changing the traffic culture

more and more ground every day.

263

| VEHICLE SPOTLIGHT: BMW i3 Moving silently through Mexico City’s hectic traffic, feeling

in obstructive locations. Furthermore, every control is

the car slow down as the inverter charges the battery

positioned to offer easy access to the driver, with the right

when you lift your foot off the throttle, and surprising

amount of controls to be stylish, elegant, and functional.

other drivers with its impressive acceleration are all part

An additional plus is the use of natural and sustainable raw

of the unique experience of driving a BMW i3. It is obvious

materials used in the interior. About 25% of the materials

that electric cars offer a new driving concept, and BMW is

come from recycled products or renewable sources, and

well on its way to unlocking the future of the city car.

the fibers used for the seats are 100% recycled.

Changing the powertrain of a car impacts its appearance,

Given that there is no neutral state with an electric motor,

and stepping into a BMW i3 is like entering a completely

you can experience the car’s full torque just by pushing

new world. The absence of a gearbox in the middle of

the accelerator. Similarly, the absence of gas injection and

the car creates a sensation of space and comfort that

emissions from the engine means that there is practically

no combustion vehicle can offer. Additionally, BMW

no noise inside or outside the cabin. To an experienced

planned the i3’s design carefully to avoid placing batteries

driver that might be slightly unsettling, but the car is

perfectly capable of delivering its 170hp at a maximum

an optional Wallbox to be installed at home, providing a full

speed of 150km/h. Braking is an experience with this car

charge in approximately three hours ,depending on the grid

too. Because of its electric motor, the vehicle begins to

conditions. In addition, each i3 comes with an emergency

brake automatically when the accelerator is released,

cable adaptable to any plug, which can charge the car in a 16-

recovering energy the vehicle has just consumed.

hour period. While this offers a complete charging coverage for most situations, BMW, in collaboration with Schneider

Obviously, with a full electric vehicle, the question that

Electric and other companies, has installed several charging

everyone is asking is how far you can go with it. However,

points throughout the city that is currently free of charge to

there is no need to worry about the range of the BMW i3.

BMW users. The navigation system of the new i3 has also

Without a range extender, the car is capable of driving up

been designed to offer the best routes in terms of distance

to 160km, making it perfect for urban trips. Furthermore,

and traffic, taking into consideration the driving style of the

the i3 comes with an ECO PRO and ECO PRO+ driving

user and the available energy in the vehicle. Furthermore, it

setup, which allow the car to reach 200km with full

has the capability of searching for the closest rapid-charging

energy economization. In terms of charging, BMW offers

point in case of a charging emergency.

| VIEW FROM THE TOP

SIMPLIFYING SUPPLY CHAIN INTERACTION LEFT: Rafael Sánchez, Director General of SAP México RIGHT: José Carlos Rivero Celorio, Industry Value Director of SAP Mexico

Q: Which of SAP’s solutions have been the most popular

designed for small companies in this sector, and has been

in the Mexican market?

developed to allow even a player with a single computer to

RS: Mexico has become an extremely relevant market for

benefit from our services.

SAP; the company started out here with ERP solutions and then moved on to core applications. One of our

RS: Most of the time, SAP is seen as a company for large

platforms is Ariba, which allows companies to manage

ERPs and global customers, but we have made significant

their procurement in real time through the connection of

investments to cover the entire industrial network, and

business-to-business processes. Another of our solutions

now our products for SMEs are completely aligned with

is SuccessFactors, which is focused on managing all

our solutions for large businesses. Furthermore, Mexico is

human resources processes, from recruitment to training.

the third biggest market for SAP in terms of Business ONE

Over the last two years, SAP has spent more than US$20

licenses.

billion acquiring new cloud companies and integrating

266

them into its portfolio. We are also investing a significant

Q: How is SAP helping its clients develop more flexible

part of our resources into R&D operations, and we recently

and lean manufacturing operations?

allocated more than US$7 billion to improve our solutions.

JCR: Our software is completely oriented toward lean

Our Mexican subsidiaries have close to 900 employees

manufacturing processes, Kanban systems, and Six Sigma

offering sales, pre-sales, and after-sales services to our

operations, which means that it can be implemented to

base of more than 5,000 clients. We launched our new

help our clients as soon as it is acquired. It is true that

generation of solutions in 2015, with Mexico becoming the

our software can help our clients immediately, but in this

first country to stock our S/4 product line on February 4th.

instance it would only work to 80-90% of its capabilities.

JCR: SAP also provides a platform that enables OEMs to

RS: During 2015, we have been focused on launching our

evaluate their entire pool of suppliers to decide which

S/4 products. We have moved several of our solutions

ones offer the best services at the most convenient

to the cloud and have started to work on internet-of-

prices. Similarly, it enables suppliers to analyze each new

things solutions. This last area is going to be huge in the

requirement from these companies. On the demand side, we

automotive segment, given that it allows information to

have our Supplier Network Collaboration software, which

be obtained from every component in the vehicle. There is

allows OEMs to send a constant stream of information to

going to be an enormous amount of information to manage,

suppliers, preparing them for possible adaptations of their

and clients will need a system capable of processing all

production and manufacturing capabilities.

that data and make it relevant to their operations.

Q: How have you adapted your solutions to the

Q: What benefits have SAP’s new S/4 products brought to

complexities of Mexican infrastructure, particularly for

your clients in the automotive industry?

logistics and aftermarket companies?

JCR: SAP has simplified its software for transactions,

JCR: SAP has invested substantial resources into its logistics

research, and consultation in every area of the business,

solutions,

and

including finance, logistics, and management. Furthermore,

transportation optimization. The company partnered with

the system runs in real time and it is completely integrated.

several major transport companies to improve the way we

The three main focal points of our strategy are complete

optimize routes and shipments, and one of our warehousing

systems integration, real time data management through the

solutions was designed alongside a prestigious heavy

HANA platform, and a tailored design that allows software

vehicle company. We offer solutions for all levels of the

to run on business networks. This strategy facilitates

automotive supply chain, including micro companies, SMEs,

optimization within companies, enabling them to provide a

and global companies. Business ONE has been specifically

faster and more effective service to their customers.

developing

geo-devices,

geolocation,

| VIEW FROM THE TOP

OVERCOMING BARRAGE OF DEVELOPMENT CHALLENGES ALEJANDRO ROJO VALERIO Director General of CIMA

Q: How is CIMA collaborating with the different research

based on the crankshafts manufactured by Macimex.

centers throughout the country?

Instead of treating the material through an induction

A: CIMA is collaborating with the Institute of Electric

process, the laser tempers the material superficially,

Investigation (IIE), the National Center of Investigation

obtaining martensite without submerging the component

and Technological Development (CENIDET), the San Luis

in a liquid. We designed a system capable of carrying out

Potosi Institute of Scientific Investigation and Technology

this process, and we even modified an SAE standard to

(IPICYT), and the University of San Luis Potosi on a Ministry

incorporate this technology in the industry.

of Energy project designed to produce a two-seater cargo vehicle powered with a 5kW hydrogen cell, capable of

Q: What are the specifics of your current project with

reaching 60 km/h and supporting a total cargo of 400kg.

the PACE network, and how is CIMA contributing to its

IIE only had the technology to manufacture 1kW cells,

development?

but with the Ministry of Energyâ&#x20AC;&#x2122;s support, the institute is

A: The first challenge was to break the traditional T-Model

now able to produce a 5kW version. The project leaders,

from Ford, and the second was a Portable Assisted Mobility

CENIDET and IPICYT, are focusing on the electronics of

Device designed for last-mile applications. This latter

the vehicle, supported by the University of San Luis Potosi,

project originated from the idea of reducing vehicle use

while CIMA is providing the structure, styling, and the

and consumption, promoting public transportation with a

powertrain for the vehicle.

practical solution for travelling short distances. Mexico and Latin America are still behind on this concept, but Europe

We are also participating with MODUTRAM on its LINT

and the US have already embraced new mobility solutions

project, focused on PRT autonomous vehicles. The

like car sharing. For the latest challenge, the idea was to

company is developing a monorail system and we are

create a Reconfigurable Shared Mobility System, but given

collaborating on the chassis, powertrain, the coupling

the large scope of this concept, we focused on the vehicleâ&#x20AC;&#x2122;s

between the vehicles and the rail, and their performance

adaptability regarding passenger or cargo capacity. This is

characterization

and

a two-year project for which we are currently in the initial

acceleration. Cuernavaca was the first city to acquire this

design phase. The fundamental concept for this product

system, and although it has only been implemented in its

was based on a seed and was capable of seating one person

convention center, the plan is to develop an entire network

when closed, but able to seat two people when it extended.

through the city. This system would be ideal for urban

The original design included an option to adapt the steering

transportation, but the costs are still too high. Currently,

wheel to the right or left of the vehicle, depending on

the units are powered by gasoline, but the final goal is to

how the user required it. Based on those specifications,

implement a hybrid engine.

the engineers proposed their best solution, combining

regarding

speed,

braking,

functionality and an attractive design. Q: How is CIMA contributing to the development of the local supply chain?

Q: What does the future for hydrogen cells in Mexico look

A: During the last 11 years, we have contributed to more

like?

than 100 projects for this sector, we have published more

A: Electric technology has not yet been perfected and

than 80 articles, filed 12 patents, and we manage a cash

petrol prices are not overly inflated in Mexico, so the real

flow of US$5 million. One of our main projects in this area is

change will come when we see significant cost reductions

with Macimex, the largest crankshaft manufacturer in Latin

in battery and hydrogen cell technology. We are working

America. This company approached us with the desire to

with the Ministry of Energy to evaluate the most efficient

become more competitive, given the growth of electric

way to implement this technology in a vehicle. However,

and hybrid vehicles in the sector. We are also working

for the next ten years, hydrogen cells will only work as a

with ETXE-TAR to develop a laser heat treatment process,

support system for lithium batteries.

267

| TEST TRACKS & R&D CENTERS CIDESI Tijuana

Nissan

Mexicali

Ciudad Juarez CIMAV

Delphi

CeDIAM Ford Hermosillo

Visteon

CIMAV

Chihuahua

ITESM

CIDEP

Aguascaliente

CEN Continental CESVI MÃ©xico Guadalajara Bosch

General Mo Cupuan del Rio

Private Sector Academic Sector Public Sector Mix Sector

268

ITESM Ford

CeDIAM Cuautitlan

CESVI MÃ©xico

IMP CDMIT

Bosch General Motors

Toluca

Ford Nissan

FUMEC FCA Group IINGEN

Cinvestav CIDESI

Schneider Electric KATCON

Metalsa CIDESI

CIMAV Monterrey ITESM

CIDEP

CIIDIT

Toyota ABB

San Luis Potosi es CIDESI CIATEQ

NAM

otors

Queretaro IMT

Toluca

Puebla

CeDIAM

Volkswagen

269

INCREASED FOCUS ON R&D FROM THE OUTSET The

pay 20% more, with the knowledge that the experience

Engineering and Industrial

and skills of CIDESI’s personnel are among the best in

Development (CIDESI) is

the country. The center has developed strong testing

a public R&D center that

capabilities, with autonomous instruments controlled by

was set up by CONACYT

high precision telematics that can detect virtually any

Headquartered

problem. Its calibration and testing laboratories have

in Queretaro, the institute

highly specialized personnel in each of the technical

has

Nuevo

areas, providing support through open courses and

Leon, the State of Mexico

specialized training. Likewise, students can acquire this

and

California,

knowledge and these skills through programs that CIDESI

postgraduate

implements in partnership with educational institutions.

programs that are accredited by the National Registry of

In addition to the specialized services, the calibration and

Postgraduate Programs (PNPC) with a focus on science

testing laboratories provide advisory services in each

and technology. Within this program, students can choose

area of expertise, as well as accreditation and laboratory

between a variety of fields, including mechatronics,

certification. Other services CIDESI offers include method

manufacturing, energy or advanced materials.

development and validation, laboratory facility design,

Dr. Jesús González Hernández, Director General of Center for Engineering and Industrial Design (CIDESI)

Center

1984.

centers Baja

offering

software development for quality control and certainty Collaborating with the science and technology industry in

measurement, as well as certification of personnel in non-

Mexico is the main focus of the center, as well as working

destructive testing methods.

with industrial sectors like automotive, aerospace, and energy. CIDESI is one of the most innovative and well-

One of CIDESI’s measures of success was the increased

equipped centers in the country in terms of system

workforce from 200 to almost 500 since 2012. Around

automation and mechatronics, and supports companies

60% of the employees are paid out of revenue generated

with projects that allow increased competition and global

from contracts, with 70% of the budget spent each

visibility. Due to CIDESI’s expertise on the subject, 40%

year coming from the private sector, and 30% from the

of the postgraduate students related to R&D processes

federal government. Government funding is awarded for

have a connection with manufacturing, making it the most

a number of reasons, including publishing papers and

popular subject in the center. In terms of complementary

degree certifications, as well as supporting micron and

disciplines, applicants for mechatronics constitute about

small companies. In terms of future initiatives, the center

60% of the students, with design and mechanical systems

recently made an agreement with Balzers, a leading German

development representing close to 30%, and the remaining

company in the area of coatings. CIDESI will develop and

10% focusing on other fields.

provide solutions, with Balzers, subsequently moving the finished products toward commercialization. Another area

CIDESI’s specialized services laboratories have more than

of development is in the fabrication of MEMs. Although

100 people working within 13 calibration magnitudes

CIDESI already designs micro electro-mechanical systems,

in Queretaro, Tijuana, and Nuevo Leon, as well as four

the center lacks the ability to produce them in-house.

inspection and testing laboratories in Queretaro. As the

However, the center has secured US$7 million in funding for

second most capable metrology center in the country, just

the development of this technology and expects to begin

after CENAM in Queretaro, CIDESI has the most precise

production in 2017.

equipment in Mexico, which is regularly capitalized by the

270

automotive industry. More than 10,000 annual metrology

Finally, with another investment of over US$7 million,

services are offered for almost 1,200 companies, a third

the center has recently broken ground on a new center

of which are in the automotive sector. Furthermore, the

in Campeche. This project is designed to support the

center provides an exclusive metrology team for GM’s

industry with the necessary equipment for the inspection,

facilities in Silao. “We have competitors in other metrology

exploration, and development of wells, and will provide

companies, but we are much better equipped than them,

employment for at least 40 development R&D staff.

albeit more expensive,” admits the center’s Director

Construction will be carried out in two stages, covering

General, Dr. Jesús González Hernández. Last year, CIDESI

7,000m2 and 1,200m2 respectively. The building is set to

offered its services to PEMEX for US$5 million, which was

have five levels that will house the administrative staff,

a price PEMEX was willing to pay in recognition of the level

investigators, and engineers, as well as sports complexes

of quality CIDESI provides. Some companies are willing to

and three applied R&D laboratories.

| VIEW FROM THE TOP

MEXICO-US COOPERATION ON RESEARCH AND INNOVATION GUILLERMO FERNÁNDEZ DE LA GARZA Executive Director of FUMEC

Q: FUMEC recently introduced the Innovation-Corps

FUMEC has been working with more than 100 of the most

(I-Corps) program to Mexico. What have been the

important companies in the Mexican automotive industry.

successes of the early stages of the program, and how

We have incredibly technologically advanced companies like

has it evolved since its launch in March?

Alps Electric in Reynosa. In contrast, there are many other

A: The launch of this program was strongly supported

big companies that have limited intelligent manufacturing

by the US National Science Foundation (NSF), as well as

processes, which still use 20-year-old technology. If these

CONACYT and the Ministry of Economy in Mexico. The

companies improved such systems, they would have much

country has outstanding research teams in its universities

less consumption in terms of energy, water, and economic

and the program’s structure fits our strengths. The problem

waste. There are many things that will be visible in the

is that we do not have enough tools to support those

short term regarding this program, especially in the next six

teams during the research stages in order to facilitate new

to eight months. However, the bulk of the most important

spinoffs, which is what the program is all about. There is a

implementations will come over the next three or four years.

new Mexico-US collaboration framework, established after

Training and building relationships will be the easiest steps

the agreements that President Peña Nieto and President

to take, since we already have a wonderful interaction with

Obama reached. These set up a high-level economic

the Digital Manufacturing and Design Innovation Institute

dialogue, the Mexico-US Entrepreneurship and Innovation

(DMDII), which supports the US manufacturing efforts

Council (MUSEIC), as well as the bilateral forum FOBESII

promoted by Obama. DMDII is one of the world leaders in

for innovation, higher education, and research.

intelligent manufacturing, and we are really happy to be close to them in terms of training, certifications, data gathering,

Mexico has held a lot of research efforts in mechatronics and

and connectivity with technology suppliers.

automation fields, as well as in new materials development and sophisticated modeling processes for vision analysis

Q: How have your TechPYME and TechBA programs

and automation improvements. We want to facilitate

evolved, and what success stories have you witnessed?

these processes through the I-Corps, boosting start-ups

A: Through TechBA Michigan, we have been organizing a

and helping companies form within the industry. These

consortium with automation companies that are linked to IMI.

companies can profit from the experiences of research

For small companies it is very difficult to tackle big projects,

groups, through spinoffs that have both the knowledge

and most of the time they have to partner up with others to

and the know-how in terms of automotive operations.

do so. This allows them to combine expertise and financial strength, and that is precisely what we have been doing.

Q: What are the key techniques that FUMEC is using

However, we need to find ways to simplify the government’s

in order to increase productivity and competitiveness

mechanisms to promote consortia, establishing clear and

through the Intelligent Manufacturing Initiative (IMI)?

effective rules.

The

program

covers

full

range

different

technologies. It can go from simple sensor and computer

Q: Looking forward to the future, how do you see the

communication, to sophisticated automation tools related

foundation growing with companies from the automotive

to data analysis, as well as new simulation systems that

sector in 2015?

require deep process understanding. It is critical to have

A: The automotive industry’s growth has brought many

digital support for both the design and manufacturing

opportunities for us. We are working with Mecaplast in Puebla

logistics that come afterwards, and IMI helps companies

on the development of advanced plastics for the automotive

gather digital information from products, processes, and

industry. Ford, on the other hand, is now interested not only

all the different elements that are interacting with them. In

in product, but also in process design. We must continue to

addition, it links the different parts of the innovation chain

nurture the network we have in the US and Canada, so we

through digital media.

can create high value for Mexican companies.

271

| PLANT SPOTLIGHT: FORD CHIHUAHUA AND GUANAJUATO April 2015 was characterized by investment announcements

versions, as well as the Power Stroke Diesel 6.7-liter V8

in the Mexican automotive industry. On April 17, only

and diesel 4.4-liter engine production in Chihuahua.

two days after revealing another project for the state of

This will require an investment of US$200 million and

Guanajuato, President Enrique Peña Nieto participated in

is expected to create a total of 500 new jobs. On the

the announcement of Ford’s plans for the country. “Today’s

other hand, Ford’s second project will also take place in

announcement is an important milestone in Ford’s 90-year

its Chihuahua site, where the company will build a new

history in Mexico,” stated Gabriel López, President and

engine plant to manufacture gasoline-powered engines.

CEO of Ford Mexico. Currently, the country represents

The investment for this facility will amount to US$1.1 billion

8% of Ford’s global production, which translates to

and will create 1,300 new positions. This investment will

an investment of more than US$10 billion in Mexican

enable Ford to export its products to the US, Canada,

components. With four manufacturing plants already in

South America, and the Asia-Pacific region to support its

Mexico, 11,300 employees, and a production of 500,000

vehicle production. Furthermore, both projects will make

engines and 500,000 vehicles for the national and the

Ford’s facility in Chihuahua the biggest engine plant in the

international market, Ford is investing US$2.5 billion in

country and one of the most important facilities for Ford,

three new projects in Chihuahua and Guanajuato. These

with a combined production capacity of one million units.

will strengthen the company’s commitment to deliver fuel-

In addition, the company plans to bring an all-new project

efficient engines and transmissions, creating 3,800 new

to Irapuato, Guanajuato. Within the premises of its partner

jobs according to Joseph Hinrichs, Ford’s President of the

and transmission supplier Getrag, Ford will build its first

Americas. “These new engines and transmissions will help

transmission plant in Mexico. This will bring a US$1.2

deliver even better driving experiences and fuel economy

billion investment to Guanajuato and it will generate

gains for customers around the world,” says Hinrichs.

approximately 2,000 new direct jobs. The plant is expected to manufacture two new automatic transmissions for

272

The first project the company is planning is the expansion

vehicles in North and South America, Europe, and the Asia

of its current Duratec I-4 engine line in its 2.0- and 2.5-liter

Pacific region, with an annual production of 800,000 units.

| VIEW FROM THE TOP

AWARD WINNING COMPONENTS BY MEXICAN ENGINEERS MARCOS PÉREZ Director of Product Development at Ford de México Q: Ford’s engineering site has been present in Mexico

available. Our experts have the latest software licenses for

for decades now, but what were the original reasons for

computer-aided design and computer-aided engineering,

establishing it in the country?

and every year we invest almost US$6 million on new testing

A: Our Mexican R&D operations started in 1964 with a

facilities. Our Cuautitlan facility is conditioned with a test

small team of about 180 engineers. Back then, most of

track and an emissions lab for exhaust and evaporative

the workload was focused on design and localization to

emissions, as well as environmental chambers for testing

address the unique needs of the domestic market. In 2006,

component durability under extreme temperatures. We

Ford decided to learn more about its global customers,

have close to 500 engineers in Cuautitlan, in addition to

taking advantage of local talent and lower operating

the 700 we have in Santa Fe. Our Santa Fe facility focuses

costs. From that moment on, we decided to expand our

on CAD design, as well as body interior and body exterior

capabilities to 1,250 engineers, which made our R&D center

engineering. Meanwhile, Cuautitlan houses our powertrain,

the largest in Mexico for any automotive OEM and one of

electrical and electronic systems engineering, chassis, vehicle

the largest in Latin America. We are currently developing

evaluation and verification, and vehicle engineering groups.

systems and components for the US, South America, Asia, and Europe, including technology for vehicles that will

Q: What have been the main product developments that

soon be released in those respective markets.

these centers have achieved? A: We have developed components for products that are

Q: Ford’s engineering facilities in Cuautitlan and Santa

already on the market, such as the Ford Expedition and the

Fe have grown considerably over the past few years, but

Ford Navigator. Both vehicles recently received accolades

which areas have seen the most development?

for Best-In Segment Vehicle from J.D. Power, and they both

A: Our growth has been exponential since 2001, with the

got five stars in terms of crashworthiness, which was thanks

addition of 150-200 engineers annually to our team. These

to a feature engineered in Mexico. Both our powertrain and

are talented professionals, who have been able to develop

vehicle assembly facilities come across as the best in North

new methods of engineering, and are very knowledgeable

America, and we are outperforming many other Ford R&D

regarding new technologies, such as computer-aided

centers around the world. Generally speaking, 95-98% of

design and simulation. These tools allow them to carry

Ford’s vehicles are identical, regardless of the region, which

out virtual assessments for crashworthiness, fuel economy,

enables economies of scale and the improved efficiency of

emissions, durability, noise, vibration, and harshness,

our operations. Nevertheless, we have to be extremely careful

among other tests. We are currently the third innovation

with the remaining parts. In Mexico, 65% of Ford vehicles sold

center in the world regarding disclosures and patents,

will be used at altitudes of 5,000-7,300ft. These surroundings

with only the US and Germany ahead of us. Even though

will make a naturally aspirated engine lose 20-30% of the

both countries have a much larger pool of engineers, we

engine’s torque, forcing us to redesign the product based on

are rapidly approaching the same level. The responsibility

the environmental conditions of the domestic market.

we now have for electric and electronic components is growing significantly. We are in charge of 20 electronic

Q: With Mexico expecting a potential bottleneck in

modules, as well as Electrical Architectures and Electronic

automotive human talent, how is Ford helping to educate

Distribution Systems (EDS) for vehicles that will be

better engineers for the country?

released in the near future.

A: We have created a program called Ford Motor Company Ambassadors, where our top level engineers

Q: What new technologies has Ford added to its facilities to

and professionals are assigned to certain universities.

further improve the design capabilities of your engineers?

They host conferences to help students understand basic

A: We have invested heavily in tools and infrastructure,

engineering and design topics, as well as challenges that

since we need to provide our engineers with the best tools

we are currently facing in the industry.

273

Human capital in Mexico is rapidly becoming the most precious commodity for the automotive industry. As the industry expands, thousands of new jobs are being created by the arrival of new players and the expansion of existing ones, but if this trend continues, Mexico could face a momentous bottleneck of labor shortage. Mexico currently ranks number 35 on Heidrick & Struggles’ Global Talent Index – generally considered as one of the most accurate indicators of talent competitiveness – moving up three places since 2011. However, the sheer pace of expansion means that the country’s manufacturing industry is potentially facing a considerable deficit in skilled professionals, despite approximately 100,000 engineers graduating annually.

This chapter provides an insight into the measures currently being implemented in order to address this potential human capital shortage. New university programs and increased incentives for enrolling in technician courses are examined, as well as the changing requirements for recruitment agencies hiring within the country. In addition, industry experts offer their take on what they are looking for in new recruits, while research centers and other institutions detail the main areas of opportunity that the next crop of graduates, technicians, and engineers should be looking to seize.

HUMAN CAPITAL & EDUCATION

CHAPTER 10: HUMAN CAPITAL & EDUCATION 278

INSIGHT: Ricardo Castro, Baker & McKenzie

279

VIEW FROM THE TOP: Carlos Lozano de la Torre, Governor of the State of Aguascalientes

280

VIEW FROM THE TOP: Rene Schlegel, Robert Bosch México

281

VIEW FROM THE TOP: Candita Gil, CONALEP

282

VIEW FROM THE TOP: Dieter Holtz Wedde, Laureate International Universities México

282

INSIGHT: José Raúl Guerrero, Korn Ferry

284

VIEW FROM THE TOP: Eduardo García García, UVM

285

VIEW FROM THE TOP: Jesús González Hernández, CIDESI

286

INSIGHT: Antonio Ríos, PITT at ITESM Chihuahua

286

INSIGHT: Sergio Mendoza, Chihuahua Automotive Cluster

288

INSIGHT: Gabriel Alvarado, Kronos Latinoamérica

288

TECHNOLOGY SPOTLIGHT: Kronos InTouch

290 VIEW FROM THE TOP: 290

Rafael Yturbe, Russell Reynolds Associates Jaime Padilla, Russell Reynolds Associates

INSIGHT: Antonio Herrera, Queretaro Automotive Cluster

292 VIEW FROM THE TOP:

Gerardo Kanahuati, Hays Mariana Villa, Hays

292

INSIGHT: Ternium, Young Professionals Training Program

294

INSIGHT: Germán Hernández, Spencer Stuart Mexico

294

INSIGHT: Elizabeth Falcón, Leaders Trust / Alto Partners

277

HUMAN CAPITAL HAS BECOME A CRITICAL SUCCESS FACTOR By

company’s resources allow it. Another relevant factor related

Globally, the automotive

to foreign investment is age difference, given that a single

industry has been on a

company can house up to four generations at the same time.

growth

which

Each of these has its own particular objectives and priorities,

has

Ricardo Castro, Labor Partner of Baker & McKenzie

Ricardo

led

Castro

rampage,

new

so foreign companies are now implementing strategies to

companies in the sector

reduce turnover and costs, while boosting productivity. This

hunting for the world’s

new market implies that all new companies must embrace

best investment locations.

these practices, adapting to the reality of the Mexican market

For that reason, countries

in order to remain strong and competitive in the country.

across

the

many

globe

are

working to become more

The real question is how these new investments can affect

competitive and attractive for investors, competing for a

normal salaries by bringing foreign talent. The National

rightful place in the ranking.

Minimum Wage Commission (CONASMI) determined that from January 1st, 2015, the new general minimum wage

There are international organizations such as the World

would be MX$70.10 (US$4.67) for every eight working

Economic Forum (WEF) that are constantly monitoring

hours, which equates to US$0.58 per hour. Nevertheless, it

the development of each of their members. These

is complicated to find a company that pays this minimum

institutions analyze countries in terms of infrastructure,

wage, since it is entirely common for these players to

macroeconomic environment, health situation, education,

offer twice or even three times the amount. Aside from

market access to goods and services, the labor and

the basics in terms of labor relationships, every company

financing market, technology, business sophistication,

has to have sufficient understanding of the market where it

and innovation. Particularly, WEF prepares studies to

will invest, as well as the type of companies surrounding it,

provide a clearer idea of how countries have advanced

the union situation, and the level of labor peace or conflict

throughout the years, comparing them with others to

perceived in the region. Furthermore, these players have

determine the best location to invest. According to the

to be aware that if they bring foreign personnel, they must

last WEF 2014-2015 report, Mexico is currently ranked

take into account working conditions and benefits from

61 among 144 countries in terms of the labor market, as

their home countries as well as Mexico.

well as how new investments impact the country’s human capital conditions. However, in the previous report Mexico

In recent years, the federal government has applied new

was ranked 55th. This was mainly because WEF placed

fiscal regulations for all industries, making social welfare

more importance on factors like innovation and skills as

no longer 100% deductible. Now, companies can only

key aspects for economic development. In the last decade,

deduct up to 47% of their benefits in one year, or 53% in

Mexico has shifted its reputation as a cheap labor country,

the next if they did not deduct anything during the first

and is now well-known for its highly qualified workforce,

year. However, this does not apply to IMMEX companies,

translating to increased job availability and competitive

which can still deduct 100% of their social welfare benefits.

salaries. Nevertheless, Mexico’s labor costs represent less

This was managed through long discussions with the

than US$1 per hour, per worker, including all the mandatory

government, as well as the rest of the players that have

benefits stated by Mexico’s Federal Labor Law. Therefore,

an impact on the automotive sector. Another common

compared to the top ten countries affiliated to WEF, its

phenomenon these investments bring is an increase in the

labor cost is significantly lower.

cost of living within the region. Given that companies often pay for rent and leasing services rather than individual

278

Recently, with the support of federal and local governments,

directors and executives, this translates into higher costs

Mexico received several foreign investments that have

prevailing in the market, further affecting the final salaries

generated thousands of well-paid jobs. Each state competes

in the region. Bringing economic development to a region

against each other to obtain the largest investments, and

not only helps it to grow, but also has a deeper impact

even though there is no legislation that prevents workers from

on how its attractiveness is perceived by other sectors.

quitting and finding better opportunities, labor satisfaction

The automotive industry has been a crucial player in the

has become one of the main priorities in already established

national economy’s development. The country is preparing

companies. For that reason, instead of looking for ways to

to receive an enormous amount of new investments, which

prevent other companies from establishing in the state, the

means that these companies will need experts to help

objective is to look after the workforce for as much as the

them determine the best locations in the country.

| VIEW FROM THE TOP

EDUCATION AND SOCIAL DEVELOPMENT THROUGH AN AUTOMOTIVE APPROACH CARLOS LOZANO DE LA TORRE Governor of the State of Aguascalientes Q: In terms of education, what advantages does

Q: How is the government collaborating with the

Aguascalientes offer to companies settling in this state?

private sector to create programs that meet the skills

requirements of companies such as Nissan?

Aguascalientes’

standards

competitiveness,

productivity, and knowledge exceed those that can be

A: Nissan’s initiative is a joint project between the company,

found in other countries, but its defining factors are the

the government, technical institutions, and universities. We

working environment, the safety of the region, and the

have offered scholarships to the students participating in

education level of the local workforce. Aguascalientes has

this program, and we have now expanded from the initial

the best public education in Mexico. We are ranked first

100 students that he company enrolled to approximately

in the PISA test applied by the OECD at an elementary

250 per year. Furthermore, the company only offered

level, while the Autonomous University of Aguascalientes

positions to around 30% of these graduates when we started

is considered one of the five best universities in the

the project, but now it employs almost everyone. Our triple

country. Furthermore, other technological universities

helix linkage model has redirected educational plans toward

based in Aguascalientes are considered examples within

manufacturing and every other profession that our current

their own networks. Moreover, we have restructured our

growth is demanding. We are working with six R&D centers

public education curricula to adapt them to the needs of

in the state, and we have created a truly integrated school-

the manufacturing industry.

company program through our commitment with CONALEP. Our priority is to create as many opportunities as possible

Q: How has the automotive industry influenced the job

for local people; we cannot prevent others from coming to

market in Aguascalientes?

the state, but we can offer the best education according

A: In 2014, we developed a growth model for our local

to the industry’s needs. Every company in Aguascalientes,

supply chain along with JICA, CIMAT, CIATEQ, and CIDE, in

whether American or Japanese, is managed by local

order to close the gap with large companies in areas such

people, most of them graduates of the public system. This

as quality certifications and human capital development.

was unthinkable 35 years ago. Nissan’s Vice President of

We are developing a database of qualified personnel in

Manufacturing, Armando Ávila, comes from Aguascalientes,

the state, and our next step is to develop an individual

and the company even employed someone from our state

strategy with each company through programs with

to manage its operations in Brazil. This is not exclusive to

INADEM, CONACYT, NAFIN, PRODIAT, and PROSOFT,

Nissan, as there are multiple companies taking managers

depending of their particular needs. In terms of labor,

from Aguascalientes to other facilities around the world.

Aguascalientes has an extremely low personnel turnover

We are exporting talent, and these people have become

rate, and our employment generation currently grows at

examples of the state’s quality.

an annual rate of 6.1%. As a result, the unemployment rate has dropped from 7% in 2010, to 4% in 2015. In four years,

Q: What would you like to achieve during your remaining

we have created more than 58,000 new jobs, and each of

time as Governor?

these jobs represents one less problem on the streets. In

A: We still have one and a half years to consolidate all

2014 alone, 6,600 jobs were created in the manufacturing

these projects. We just announced the opening of a new

area, 3,800 in the service sector, 1,350 in construction,

technological university to meet the demand for higher

1,170 in commerce, and 1,350 in communications and

education, and we also built a new completely bilingual

transport. With Daimler and Infiniti’s new investment, we

campus for 6,000 extra students. We are focusing on

are expecting the creation of 5,700 direct new jobs, and it

developing language laboratories to make our students

is a general rule that a project like this will generate seven

more competitive in this new global environment, and we

indirect positions for every direct job. Employment is the

want to keep strengthening our educational approach. We

only way we can eliminate crime, and creating wealth is

want to remain a safe state with the best governance in the

the only way we are going to alleviate poverty.

country, as well as keeping up with our economic growth.

279

| VIEW FROM THE TOP

LACK OF SKILLED LABOR A THREAT FOR THE AUTOMOTIVE INDUSTRY RENE SCHLEGEL President of Robert Bosch MĂŠxico Q: How is Bosch working with universities and other

of market acceleration. If education becomes broader for

educational bodies to develop home-grown talent and

skilled labor, growth in Mexico will be accelerated. It is not

retain it?

a case of productivity, which is a subject that resonates

A: Individuals who begin their career in the industry have

throughout many industries, but more a case of who is

access to an ever increasing bounty of options since there

productive. Productivity is not people working faster, but

is safe employment, lots of opportunities, great companies

working smarter.

to work for, and decent salaries. Bosch is happy to recruit fresh talent, but we also need senior specialists who are

Q: In what ways does Bosch guide its employees toward a

already developed. Many industries are growing and

more R&D focused career?

Mexico is becoming more attractive for people who have

A: We are very open as to whether trainees are focused

both deep and current knowledge. Previously, the country

on development, manufacturing, or purchasing. The

was attractive for people who were more geared toward

problem is that both Bosch and the automotive industry

the practical, even manual, so I think this expansion of

are growing faster than we can develop these people.

opportunities is extremely welcome.

The quantity and ambition of these candidates is good, as well as their ability and learning curve, but the industry

The problem for us is below the university level. I think

is outpacing skilled labor growth. Qualified, skilled labor

that the German dual-education system is probably the

on every level will be the biggest bottleneck for Mexico in

best option for Mexico to adopt. There are some major

the next 15 years.

efforts being made to implement this, and it has now raised heightened awareness among members of Mexicoâ&#x20AC;&#x2122;s

Q: What is your primary focus within Bosch this year?

government. We hope action will follow this awareness

A: The most important topic for me is human capital.

and that we will see some projects implemented in a

We try to look at the entire range of positions that are

few states. These would really broaden the options for

available within Bosch. We have a new external executive

companies who need to tap into a qualified labor pool, as

recruiting program in which we can bring people in at

well as enhancing the possibilities for young Mexicans to

the highest level. The company has implemented a new

have a decent income at a very young age. Bosch already

program called MEXcellence. In this program, we finance

has its own dual education programs in Toluca and San Luis

the education of academically outstanding students from

Potosi, with plans to extend them to the Ciudad Juarez site

low income households. While there are already many

in 2016. We put a lot of effort into developing talent in

stipends available, we can provide larger stipends to a much

Mexico because if not, it would hinder our growth here. I

smaller amount of people. The enrollment comes with no

think many companies think alike in this respect, which is

additional obligations; participants never have to work for

good news for Mexicans entering the labor market.

Bosch unless they want to. As long as their scores remain above 8.5, they can go from the first university year to a

Q: What are the specific features of the programs that

PhD without paying for anything. The program is still in the

Bosch offers, and what have been the success stories

experimental stages, so we expect to experience bumps

so far?

along the way, but they will only help us to improve it.

A: Bosch has its own apprenticeship programs for skilled

280

labor that combine practical work and education, as

In a multi-billion dollar business like Bosch, people are the

well as studies with educational institutions that we hold

most important success factor. If we get that right, then

contracts with. The result for the apprentice is an officially

everything else falls into place. I am highly passionate about

recognized diploma and a qualified position with either

this, and it drives my focus for the 13,000 employees who

Bosch or another company. We can only really do this based

are currently with us, as well as the many more who will

on our predictions of demand for talent, so it is a question

soon be part of the team here at Bosch in Mexico.

| VIEW FROM THE TOP

MEETING MEXICO’S NEED FOR SKILLED TECHNICIANS CANDITA GIL Director General of the National Institute for Professional Technicians (CONALEP)

Q: How is CONALEP supporting the development of

Q: What must be done to enable international OEMs to

skilled technicians?

focus on Mexican technicians rather than foreign ones?

A: CONALEP was started to respond to Mexico’s necessity

A: While many facilities are automated, the industry’s value

to develop skilled technicians and is today the most well-

chain still has an extremely high demand for technicians.

established provider of dual-education programs within

the country. Our 47 professional specialization courses

companies, because foreign entities are accustomed

are available across 308 schools in the country, which

to requesting technicians with similar skills to those

have been chosen to be accessible to the demographics

provided by CONALEP. We are further developing link-up

representing a lower socioeconomic group. We operate

processes and dual-education programs with the Ministry

in a unique manner since we have been known to award

of Public Education and COPARMEX, to continue on the

students with both a technical degree and a high school

road to achieving our goal. To illustrate the success we

diploma. In several regions such as Morelos, Yucatan,

have experienced with OEMs so far, Nissan is currently

Coahuila, and Guanajuato, we are the first choice for

supplying CONALEP with engines employing the latest

students aspiring to attain technical qualifications. There

technology so that our students can learn from the most

is a direct correlation between CONALEP and the states

advanced technology on the market.

must

promote

communication

with

Mexican

in which industry development has created increasing demand for technicians. However, the general attitude that

Q: How does CONALEP’s campus in Castro del Rio

becoming an engineer or having a college degree is better

illustrate the benefits of cooperation between education

than becoming a technician is a misconception that we

institutions, government, and the business community?

continue to combat through public media. We know that

A: In 2007, CONALEP Guanajuato received a proposal

one of Mexico’s strengths, cited by foreign companies as a

from the industry to open a second campus in Irapuato

principal factor in their decisions to invest in the country, is

to complement the region’s educational offering. The

the proficient technical workforce, and this serves as proof

collaboration with Castro del Rio was a catalyst for this

that the institution is succeeding.

project, given that this park provided the land for the new campus, the necessary infrastructure, and provisional

Q: JICA helps to train CONALEP’s professors, but does this

installations for student use while construction was

imply a direct association between Japanese companies

finalized. The development of projects in industrial parks

and your students?

is contingent on the support that the local government

A: In 2013, CONALEP reinstated its relationship with JICA,

provides, and these decisions are based on the needs

participating in programs that provide training for teachers

identified by local authorities. We have an additional

on topics such as mechatronics, robotics, industrial

committee in which we discuss the programs and

technology, and other projects that require collaboration

specializations that will be taught, as well as modifications

between

industry.

to align programs with market trends and the educational

Additionally, through JICA, the Japanese government

specifications requested by employers and recruiters.

awarded CONALEP the human resources development

The primary objective of CONALEP in the automotive

contract for Bajio’s automotive sector project, which

industry is to provide qualified human capital, with world

seeks to teach the skills and technical knowledge that the

class technical skills aligned with those demanded by the

automotive industry demands. This project started in the

sector. We want to create strong, consistent, and long

third quarter of 2015 and will develop over four years, with

term relationships with prosperous companies in order to

the support of Japanese industry specialists. Its final goal is

facilitate the development of the Mexican workforce. If this

to create a new college major, Automotive Manufacturing,

initiative is successful, foreign companies will no longer

which will require 50 teachers in Aguascalientes, Queretaro,

have to import personnel into Mexico, which boosts the

and Guanajuato to be trained accordingly.

national economy and eases the process for companies.

the

government,

academia

and

281

| VIEW FROM THE TOP

EMPLOYABILITY AND PRODUCTIVITY CATALYST FOR EXCEPTIONAL HUMAN TALENT DIETER HOLTZ WEDDE President and Director General of Laureate International Universities México Q: What are the key elements that make Laureate the

from families with no university degrees in their history. This

largest education provider in the world?

is a completely different academic approach to the known,

A: Laureate is growing very aggressively based on the

traditional, elite universities. Our commitment to Mexico

philosophy of employability, which is the most important

lies within its growing middle class, to which we deliver

component of our educational strategy. While Laureate

an international quality education at accessible prices. No

does not invest heavily in finding new patterns and

other Mexican educational institution can match our large

developing new and sophisticated formulas or machinery

network of universities. We can provide online content and

through complicated research, we offer a network of

platforms, visiting professors, seminars, and many other

teaching universities that focus on creating employability

benefits because of our global scale. Given that we have

for our students. This approach is what has made us so

200,000 students in this country, we are, by far, the largest

successful within the middle classes of the countries in

private education institution in Mexico. By taking on the

which we operate.

responsibility of educating the middle classes, which are the people who will boost the country’s productivity, we aim to

Worldwide, we have around 1 million students that are

push Mexico’s growth at a faster rate.

distributed across 80 universities in around 29 countries. Our current growth is geared toward countries in which we

Q: Which educational institutes is Laureate using to

do not yet have a presence, which is most of Asia. In Latin

deliver these solutions to students in Mexico?

America, we are already more consolidated, allowing us to

A: The two institutions that enable us to achieve this are

take advantage of a sophisticated network of universities

Universidad del Valle de México (UVM), and Universidad

and use economies of scale for the benefit of the students.

Tecnológica de México (UNITEC). UVM has around 125,000

This also gives us a competitive advantage in terms of

students, and UNITEC has around 75,000. UVM has a

content and the network of professors. In Mexico, we have

model that expanded geographically into 22 states, while

been particularly successful in delivering employability to

UNITEC is just beginning that process and is more focused

our graduates through a formula of very specific academic

on the metropolitan area of Mexico City. The UVM model is

content and educational models for the middle class. Our

focused on international content and opening up the doors

courses have been very popular with individuals that come

of our international network to our students, while UNITEC

CLOSING THE INTERNATIONAL GAP New

investments

are

companies in their talent search throughout the whole

obviously beneficial for the

human capital spectrum, offering advanced programs

country, but few people

focused on cultural integration and alignment to overcome

realize the cultural barriers

cultural differences.

that companies have to overcome to bring their

Since 2007, Korn Ferry has transformed its global

operations to Mexico. The

operations in more than 80 offices around the world,

country is full of contrasts,

expanding outside the executive part of the recruitment

so new players need to

business and focusing on middle management operations.

align their mindsets to an

“Everybody can find names, but what we offer is the

unfamiliar workforce with

knowledge and the tools to attract candidates that truly fit

its own ideas. With more than 15 years of experience in the

with our clients’ philosophies,” explains José Raúl Guerrero,

automotive industry, Korn Ferry is well positioned to assist

Director General of Korn Ferry. The company is not afraid

José Raúl Guerrero, Director General of Korn Ferry

282

is focused on people that need to study efficiently, quickly,

most candidates need to have technical capabilities, which

and flexibly. UVM provides a university experience with

is something that Mexico has neglected. There is not yet a

extra-curricular activities, such as sports, cultural activities,

system in place to change this, but we have made an effort

networking, and campus life, while UNITEC is more direct in

to work with the automotive sector in order to understand

its approach to studying because 75% of our people at this

its needs. Approximately 71% of the automotive companies

university are also working part-time. UVM’s ratio of work

operating in Mexico cannot find people with the education

and study students is more like 30-35%. Clearly, these are

they require. However, they still hire these people but then

two very different institutions, but together they cover a

have to focus on training them for 12 months. Additionally,

wider spectrum of the middle class in Mexico. The difference

59% of the employees in the automotive industry did not

in tuition fees between both institutions is around 40-50%.

get above the level of middle school.

Q: What are the most significant ways in which Laureate

Having worked with all the main companies in the

serves the automotive industry in Mexico in terms of

industry, and now working with auto parts companies,

human talent?

we are seeing the same trend across the board. There is

A: With thousands of engineers graduating from our

a requirement for graduates to have a specific technical

institutions every year, we are one of the most important

competency, but the system is not delivering. In response,

suppliers of human resources to the automotive industry.

we have enlisted the help of ten universities in our network

We have found that there is a critical area of opportunity

that are focused on technical higher education. Together,

due to the lack of technical talent in the Mexican

we have been providing the best content and teachers

automotive industry. There is an inefficiency in the way

to develop technical programs in the automotive sector.

that engineers are hired, which is something that we

By sitting down with some large OEMs in Mexico, such as

discovered during intense conversations with FCA, Nissan,

Ford and Nissan, we were able to show them the content

KIA, Audi, Volkswagen, and GM. These companies take

that we defined from our global benchmarking, in order

about eight to 12 months to train engineers, which results

to develop these technical programs. This has proved to

in a one year gap of productivity across the entire country.

be a substantial endeavor because Mexico has a negative

Only around 4% of people working in the industry have

opinion of technical education. We have found that a

graduated from some sort of higher education with a

well-prepared technician can earn the same salary as

technical degree. The average found by the Organization

somebody who graduates from university as an engineer

for Economic Co-operation and Development (OECD) is

or even more. Today, Laureate is working toward bringing

30%. This shows that the country has not been doing things

the entire industry into this program, and toward being

correctly. Another example is Chile, where every year 65%

able to offer the students a certificate of recognition,

of students within higher education are studying technical

because we are partners of the automotive industry. OEMs

careers, while the remaining 35% focus on university

are happy to share their best practices with us so that we

degrees. In Mexico, 95% go to university and 5% go into

may consolidate them into an academic model, in order to

technical education. When entering the automotive sector,

bring more, much needed talent to the sector.

to look for the right talent outside the automotive industry,

competencies, traits, drivers, and the intricacies of how a

since one of its ideologies is that the best people for certain

person matches with a company’s culture. “People normally

positions can come from any area. “When candidates have

get hired for what they know, but get fired for who they

the required abilities, they can learn about a new industry

are,” claims Helbig. “This provides Korn Ferry with plenty

in a matter of months. Talent does not have nationality,

of added value, since we are the only firm in the market

industry, or background; it is developed when you find

offering the kind of expertise that companies are coveting.

someone with all the proper characteristics, so you should

Even with this approach, we have found that several players

not focus primarily on their background,” says Guerrero.

in the industry greatly misunderstand the true capabilities of the Mexican workforce. This is a terrible statement because

Another important aspect of Korn Ferry’s operation is its

there is plenty of talent,” says Guerrero. “If companies do not

evaluation process. Patricia Helbig, Client Partner of Korn

seize the opportunity to develop their human talent in the

Ferry states that the company’s Four Dimensional Executive

early stages, they will lose it to their competitors.” However,

Assessment methodology goes far beyond finding people

companies are accepting more Mexican candidates every

with the right technical competencies. This technique

day, recognizing that it is vital to have local people on board

provides the company with the ability to check experience,

in order to help the cultural diversification of their workforce.

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SATISFYING INDUSTRY DEMAND FOR EXPERTISE EDUARDO GARCÍA GARCÍA Institutional Vice President of Engineering at UVM

Q: How did UVM become the second most important

Q: What strategies has UVM applied to attract engineering

private engineering school in the country?

talent from lower educational levels, and what preventive

A: The university’s broad experience and the substantial

measures have you taken to lower the drop-out level?

growth in our mechatronics and industrial engineering

A: The first hurdle that dissuades students from the

programs

areas

engineering field is the basic science courses that precede

representing 38% of our engineering enrollment. The main

them. Over the course of the last 11 years, we have been

focus of our graduates is specialized manufacturing, which

working on ways to make these courses less tedious for

is particularly beneficial for the automotive industry. I firmly

students at a high school level, by organizing national

believe that the Mexican aeronautic industry’s success hinges

robotics competitions during which 950 of our students

on the growth of the automotive industry, so the demand for

develop their own personal project. We decided to focus

engineers will continue to rise. With this in mind, we must

our competitions on the robotics field because these

create educational programs that follow industry tendencies,

machines are striking and attract attention, but there are

which is why our manufacturing technologies program caters

multiple categories within the competition for students

to industry needs, alongside the mechatronics and industrial

from high school age up to college students between

engineering

have

led

these

two

specialized

specialization

their first and third semester. These kinds of events allow

program has also been channeled toward the automotive

lower level students to get involved in the science and

industry. Of equal importance is the career path set out for

engineering field in an exciting way, and to put what they

industrial mechanics and mechatronics majors with a focus

have learnt so far into practice. Another competition that

on the automotive industry. Vehicle infotainment trends are

has also been taking place for 11 years is the automation

the reason behind our decision to align our study plans with

challenge, in which we work closely with automotive

embedded electronics, having been advised by multiple

companies, such as Festo Mexico. Over a period of three

OEMs on how to implement these programs. This allowed

days, students work toward solving an industry challenge

us to understand what is needed in order to be proficient in

that involves basic fields like electro-pneumatics and

the marketplace.

pneumatics, as well as more intricate mechatronic design

majors.

Our

postgraduate

and mobile robotics fields. To establish a geographical connection with the industry,

284

our engineering programs are offered at five main

Q: What facilities does UVM offer its students so that they

campuses in Toluca, Lomas Verdes, Saltillo, Hermosillo,

can partake in dual-education programs?

and Puebla. We also have condensed courses in Campus

A: Our students naturally start looking for work as soon

Queretaro,

Campus

as they reach their sixth semester. UVM also obligates

Aguascalientes. We are currently tackling regions where

students to participate in professional internships once

companies have already vocalized demand for expertise,

they reach their final semester of studies. Therefore, our

but as automotive regions continue to evolve, our study

students spend the last 400 hours of their semester within

programs are expected to expand to Monterrey and

a controlled work environment, while being tutored by

Guadalajara. Since only a few campuses are pillars for UVM’s

our professors, instead of in a classroom or laboratory.

engineering programs, we ensure that students are aware

Moreover, we are developing a technician program called

of the strength of engineering programs in other campuses

TechVoc, based on the dual-educational system. The goal

using link-up programs to attract them from a broader

of the TechVoc program is to either professionalize those

geographical base. For example, our Aguascalientes

already working in the industry, or attract young people

campus has a strong relationship with Nissan, generating

that wish to become technicians. The approach for that

multiple internship program requests. Our Toluca facility

study program is directed toward the maintenance of

has a similar program, which increases student confidence

industrial plants, as well as the assembly and manufacturing

in obtaining employment after graduating.

of products.

Campus

San

Luis

Potosi,

and

| VIEW FROM THE TOP

INTERNATIONAL RELATIONS IMPROVE TECHNICAL DEVELOPMENT DR. JESÚS GONZÁLEZ HERNÁNDEZ Director General of Center for Engineering and Industrial Development (CIDESI) Q: How is the Center of Engineering and Industrial

Q: How do students learn about CIDESI from a high

Development (CIDESI) represented in Mexico and how

school level, and what collaborations does CIDESI have

does the center’s work affect the automotive industry?

with other educational institutes?

A: CIDESI has 150 employees, 70% of which are focused on

A: CIDESI has a strong communication program, we announce

R&D. We have a strong presence across the country with

our courses on our webpage, attend college events, and

branches in Tijuana, the State of Mexico, Campeche, and

CONACYT always promotes the courses. CIDESI is recruiting

Monterrey in the research and innovation park in Apodaca.

students throughout the whole year, and when the time

CIDESI offers many different courses and the institution is

comes we test 10% or 20% of them, in order to select the best

certified to provide master’s and PhD degrees. However,

students. Our plan for the next five years is to have 20% of

we do not compete with the universities in Queretaro

the students working on their PhDs with a dual-degree from

because they work at a college level, while we focus on

a foreign university. The University of Sheffield in particular is

post-graduate degrees in manufacturing, mechatronics,

very ambitious in terms of accepting students from all over

electronics, energy, and advanced materials. We currently

the world. Sheffield has a strong capacity in the aeronautic

have 180 students and 100 of them are PhD students. They

sector, it has a Boeing center where it makes turbines, and we

work on institutional projects and develop the designs that

hope to be able to do that in the next 20 years.

are needed for several industrial applications. In Mexico, we have many post-graduate programs supported by the

We selected a few institutions in the world with which we

National Council of Science and Technology (CONACYT).

wanted to have a relationship, and in my previous center

Most master’s students are between 24 and 26 years old,

I selected the University of Sheffield, SUNY University in

while PhD students range between 26 and 30.

Albany, and UT in Austin. CIDESI follows the same strategy; Sheffield is very strong in manufacturing and Aachen

Q: With manufacturing being the most popular subject,

in mechatronics, which is why CIDESI looked for those

how does CIDESI boost the popularity of the other areas?

collaborations. All these universities share their knowledge

A: There is no bias toward any area of the institution,

with our center. These institutions are really pleased

but since CIDESI is recognized as one of the leading

because we only send our top students to these programs.

manufacturing centers in Mexico, most students come

At the moment, the institution is negotiating with Ford in

to study manufacturing related fields. We have dual-

Dearborn, Detroit to extend the collaboration between

degree programs with universities outside the country,

Detroit Mercy, Ford, and CIDESI. However, Ford no longer

like the University of Sheffield in the UK, for example.

wants to focus only on computer design in Mexico, and the

Other examples include Aachen University in Germany,

idea is to form capable human capital to tackle design and

which offers a dual-degree in mechatronics. Similarly, this

development problems in Ford’s plant in Cuautitlan.

semester CIDESI started a program with the University of Detroit Mercy, related exclusively with subjects in the

Q: What kind of automotive innovations are coming from

automotive area. CIDESI’s campus in the State of Mexico

CIDESI in the next few years?

is neighboring Ford’s plant in Cuautitlan; we have a joint

A: We are now opening the coating research area that will

venture with them and currently there are ten students

complement the ones we already have. Every component

working on their masters degrees in Detroit. The four major

that is exposed to air and other environmental factors

divisions in CIDESI are administrative, R&D, aeronautic and

eventually needs to be protected. CIDESI is buying

aerospace, and post-graduate. The latter has a high rank

instrumentation to carry out different kinds of coatings

in the institution, and its staff is in charge investigating the

and we already hired three PhD experts in this area. We

development of global trends and the current needs of the

are going to be developing our coating capacities, while

industry. Based on this, the team evaluates and reconfigures

keeping in mind the needs of the industry in Queretaro and

the courses to better target the automotive industry.

the rest of the country.

285

INNOVATION CENTRAL TO PROFESSIONAL DEVELOPMENT During 2011, the Governor

entailment companies. The process begins with a program

decided

called Use of Ideas, which is developed through collaboration

admissions

and startup procedures. Companies begin as ideas that

Chihuahua

increase

state

measure

Antonio Ríos, Director General of Parque de Innovación y Transferencia Tecnológica (PITT)

universities, that

are later developed, a business model is created, and the

the

project is introduced into the incubation program. By this

Autonomous University of

stage, the business model has already been drafted, so PITT

Chihuahua (UACH) increase

provides support in terms of fiscal, accounting, economic,

its enrollment by 25%, while

and financial counseling. These incubation programs tend

admission to the Chihuahua

to last between two to three months, but the timeframe

Institute

Technology

is contingent to the type of project that is going to be

saw

(ITCH) increased by around

developed. Lasting approximately one year, the acceleration

15%, and the Chihuahua Technology University (UTCH) saw

stage refers to companies that are already operational but

a 30% rise. The state is collectively promoting the effective

wish to expand capabilities, at which point counseling and

education of more students so that the high demand for

expert validation of internal processes is provided. The

professionals within the various industries in Mexico can be

incubation stage also contains important subdivisions,

met. As a result, the Innovation and Transfer Technology

including the basic incubation program, which is dedicated

Park (PITT) at the Chihuahua campus of Monterrey Institute

to traditional companies, the high technology incubation

of Technology and Higher Education (ITESM) has been

program, where companies are geared specifically toward

capitalizing on this influx of talent to promote innovation and

that industrial sector, and incubation for social companies,

collaboration within the automotive industry. With around

including those with no guarantee of profitability. Companies

15-20% of the state’s professional offering composed of

are offered access to an impressive infrastructure and

engineers, PITT is working on exposing professionals to new

additional incentives such as collaboration opportunities

environments, such as new laboratories, startup programs,

with the innovative minds of the future.

and additional innovation techniques, as well as introducing many innovation professionals from the US and Europe in

During the entailment stage, collaborative programs are

order to promote new methods of local testing, prototyping,

created to promote entrepreneurship or social service

and development. In terms of operations, the center focuses

plans with companies that are already well-established.

on incubation companies, acceleration companies, and

This stage also connects university professors with

CHIHUAHUA CLUSTER PROMOTES SPECIALIZATION IN UNIVERSITIES Automotive clusters are popping up all over the country,

state’s universities in an effort to synchronize each of its

mirroring the expansive nature of the industry. Chihuahua

components in Chihuahua, and these efforts have come to

has now followed suit in order to promote the growth

fruition when taking into account the business orientation

of the sector and the sharing of best practices between

of the technological schools in the area.

different players. The state holds a reputable position

286

for automotive job creation, which has been achieved

In order to maintain the state’s position as the leader in the

through capable human talent, solid academic institutions,

automotive sector, Mendoza believes that understanding

and a strong labor environment, according to Sergio

the industry’s landscape is crucial to affecting change.

Mendoza, President of Chihuahua Automotive Cluster

To achieve this, the cluster has held business intelligence

and CEO of Factoria. “The relationships that are created

meetings

in terms of people and unions are extremely important,

entrepreneurs and customers, and will soon incorporate

and we have taken important steps in promoting these,”

plant managers into the process. One of the issues that

he explains. “Chihuahua has established solid business

the cluster has identified through this process is the lack

practices, which has been essential in this evolution

of Mexican companies within the state, and is therefore

process, with a considerable focus on producing talent.”

formulating strategies to create an attractive atmosphere

As a result, the industry has been working closely with the

for Mexican entrepreneurs. “A key indicator of success is

with

different

industry

players,

such

companies so that they can develop ideas or products.

Students from each partnering institution will be able to

Each company has the freedom to enter at any given

use the facilities and laboratories of others in order to

stage of the development process. Even though the center

receive a fuller and more complete specialized education.

has now reached 100% of its capabilities, demand has not

“We already have the space, the people, and all the right

increased to a level that forces the researchers to deny

labs but we must have the appropriate infrastructure if the

access to ideas during the incubation process. “During

program is to function properly,” states Ríos. In order to

the acceleration and entailment stages, there is a need for

achieve this goal, the center’s main relationships come from

physical space that leads to availability problems,” says

Arizona State University and Oklahoma State University,

Antonio Ríos, Director General of PITT. Consequently, PITT

both of which have prestigious research projects for the

is considering expanding its capacity if the project proves

automotive industry. Additionally, PITT has entered into

to be a success among local companies and university

an agreement with MIT, and is currently developing some

students.

projects in conjunction with the university. Although initially aiming to remain within the remit of the automotive and

The center tries to promote the local market, but even

aerospace industries, work is currently being developed on

though companies and individuals from other states and

medical devices and nanotechnology, due in part to close

other countries are integrated in the program, it has set

relationships with CONACYT and the Investigation Center

a record in that 2016 will be the first year in history when

of Automotive Mechatronics (CIMA).

there will be a surplus of professionals. For this reason, Ríos foresees investment in Chihuahua increasing significantly.

The center not only looks to innovate in terms of

“If the surplus of professionals proves to be too high for

technology, but also in terms of teaching methods. In 2014,

recruitment into existing companies, those professionals

challenge projects were set for students, which comprised

may be able to start their own businesses,” he explains.

of the center’s staff reaching out to well-established

“ITESM has signed an agreement with automotive and

companies like Ford and Visteon for information about

aerospace clusters because we want them to provide

challenges that OEMs had previously faced. This helped to

support to professionals, such as engineers, so they can

prepare students on the methodology of problem solving

be developed as suppliers.” PITT is capitalizing on the

for real situations. During the first half of 2015, PITT was

opportunity to channel engineers into the automotive

given between 15-20 challenges by such companies, but

cluster by the end of their college studies. As an additional

is going ahead with the plan to have 100 further challenge

incentive, the institute is developing a three-month training

projects for the beginning of its next phase at the end of

program within those clusters, where each student spends

2015. These programs not only extend to automotive, but

between eight to ten hours training every day in order

to all disciplines, helping greatly in the creation of a highly-

to gain experience. Another program is being developed

qualified and innovative workforce for every sector of the

to incorporate a variety of universities within the state.

Mexican economy.

by measuring it against previous failures, so it is important

valuable fields of knowledge for Chihuahua, so the state

to teach the younger generations of the value of learning

finds it easy to promote certain research specializations.

from mistakes,” Mendoza explains.

The cluster’s model starts at school age and includes an integrated specialization process to equip students with

A key value of the cluster is collaboration, with the aim

the needs of the industry. This model also implements a

of reaching as many universities as possible. “Federal

two-year work period undertaken between high school and

decisions on funding are made in Mexico City through

undergraduate studies, making the country a world leader

the Secretariat of Public Education (SEP), which does not

in manufacturing processes. The Technological University

necessarily accommodate the needs of the industry at

of Chihuahua (UTCH) is one example of a university with the

all times,” explains Mendoza. “Consequently, the cluster

freedom to modify their academic programs without long

has focused on the specialization of universities within

and complicated authorizations from federal regulators.

R&D areas, as this helps the competitiveness of each

When the industry is in need of specific specializations,

academic institution to rise to world class levels in specific

UTCH helps the cluster to collect a critical mass of students

fields, while allowing manufacturers to hone specific

trained towards those disciplines. Their ability to make

skills and limit both their research efforts and economic

key decisions has been favorable to everyone involved,

expenditures.” Collaborations between different research

especially the students. Without the talent, attracting new,

areas would also be promoted, meaning that the more

domestic companies may prove problematic for the state,

specializations existing, the broader the field of knowledge

but Mendoza expects that 2016 will bring 10,000 new jobs

the state will have. Currently, manufacturing processes

to the Mexican industry, so domestic professionals will be

for the automotive and aerospace industries are the most

needed to fill those positions.

287

SOFTWARE OPTIMIZING GLOBAL WORKFORCE MANGEMENT Optimizing the workforce’s contribution to corporate

benefits of this have also been seen by employees who

success requires many factors to be considered, from

gain increased job satisfaction and the peace of mind that

improving productivity and ensuring compliance with

employees are earning what they deserve in line with their

HR policies, to specific labor laws, or benefit agreements

work, skills, and experience. Employees also understand

with unions. According to Gabriel Alvarado, Director of

that they will be paid in accordance with their productivity

Kronos Latinoamérica, this complexity creates space for

and skills, laying the groundwork for a healthy, competitive

a product that can alleviate the automotive industry’s HR

working environment. Depending on the customer, it

concerns, while motivating employees to be more invested

can take between six and nine months to program and

in their work. “Kronos software works with a particular

implement the solution. During the primary mapping stage,

understanding of employee profiles that outline individual

labor standards are established, determining quotas for

productivity statistics of each worker,” he states. “This

each workstation. The second stage is to input employee

includes the level of quality to which they are working, their

information, and the third is to provide software training

certifications, and their different skillsets and abilities for

and tools to customers. Companies must create training

different production processes.” The company then uses

plans to increase the productivity of each employee, which

this information to assign the most appropriate staff to the

is something that Kronos can monitor through the systems.

required jobs, in an effort to help automotive companies

From a consulting perspective, after the labor standards

optimize their labor costs. Another benefit of the software

are created, Kronos is given a clearer outlook on the labor

is the cost management aspect, which can outline real-time

process, enabling the creation of a blueprint of labor

labor costs for each individual process on the production

processes and labor standards that is agreed upon by the

line. Most companies take the total monthly payroll and

clients. This blueprint is subsequently used to configure the

divide it by the average monthly cost of production to

software and at that point testing can begin in a production

calculate labor costs, but Kronos’ software can provide a

environment. With these terminals, employees can access

much clearer labor-related cost figure by taking various

features such as vacation requests, benefits checks, and

cost centers into account. For instance, if two different

confirmation of the amount on their next paycheck.

production lines require two workers with varying abilities, the labor costs of each employee can be specified within

The most fundamental platform supplied by Kronos is called

the system, and daily processes can be tracked in order to

Make the Perfect Check, which ensures that all employees

provide a much more accurate representation of cost. The

are receiving an accurate paycheck, as well as ensuring

| TECHNOLOGY SPOTLIGHT: KRONOS INTOUCH Gone are the days of punching in and out of work with

speaker, and a microphone. Integrated into the terminal

archaic time clocks and cards. The Kronos InTouch

are various card readers designed for compatibility

employee interface is a significantly updated, digital version

with barcodes, magnetic strips, and smart cards.

of this invention, with the added ability of controlling

Urgent notifications can be provided upon access to

labor costs, minimizing compliance risks, and increasing

the interface and biometric technology ensures that no

productivity within a company. Kronos InTouch is used

fraudulent transactions can be carried out. The system

in tens of thousands of companies across 100 countries

can be configured in a variety of languages and has

to control attendance and scheduling, as well as offering

integrated backup generators to ensure that it remains

features for absence administration, time management, and

functional in the event of a power cut. The equipment is

workforce analysis. Employees can also use the interface to

also durable enough to withstand impact, meaning it can

check remaining vacation time, ask for time off, and check

be used in a wide range of environments. The system has

scheduling, meaning that management spends less time on

2GB of flash memory, 512MB of RAM, and is capable of

administrative tasks related to human resources.

connecting with the cloud. Data is well-protected by SSL encryption that also allows for remote access. Its Voice

288

The InTouch terminal contains a seven-inch, interactive,

over Internet Protocol (VoIP) support system allows

resistant touchscreen with a multicolor LED indicator, a

operators to quickly report any system issues, before a

“Kronos software works with a particular understanding of employee profiles that outline individual productivity statistics of each worker” Gabriel Alvarado, Director of Kronos Latinoamérica

compliance with any relevant union benefits. Other modules

of Kronos and, in just one year, PepsiCo Foods in Mexico

help companies to optimize labor forces based on their

reduced its overtime costs at a plant with over 1,000

own individual supply chain requirements, help to define

employees by US$1.8 million. The tactic was not to

the daily activities of the workforce, or allow companies

reduce the number of hours, but to split the hours more

and unions to gain full visibility of labor on a company-

intelligently, optimizing resources and efficiency. “One

wide scale. Kronos has found that, with the integrated

of the things that Kronos can immediately help with is

automation of various workforce management processes,

management of overtime,” says Alvarado. “In Mexico, this

productivity can reach anywhere from 5-20% above the

tends to be managed manually, with decisions made based

efficiency levels that individual processes provided. With a

on personal relationships. Kronos removes this decision

customer-friendly interface that is standardized across all

from the equation and fairly selects the appropriate

end users, the system also offers language options, meaning

person for the job based on skills and knowledge.” With

that companies can monitor the productivity of plants on

the software’s installation, payroll mistakes and errors can

a global scale. Kronos has now been implemented in 100

be drastically reduced due to the reduction of human error.

countries, across a range of languages, payroll systems,

The other issue that can cause hemorrhaging of labor

laws, and cultures, albeit on a fully localized basis. Today,

budgets is absenteeism, which is a particular concern in

Kronos is covering 47% of OEMs, Tier 1, and Tier 2 suppliers

Latin America, according to Alvarado. “Absenteeism in

worldwide, and around 38% in Mexico. Some notable clients

Mexico is high, at more than 7.3% of the working year,

include Henkel, Autoliv, Bosch, Johnson Controls, TRW and

representing a considerable issue for the companies

Denso, among others. Brands like GM, Nissan, Ford, Jaguar,

now entering the country,” he explains. “For example,

Mitsubishi, Hyundai, Volkswagen, Renault, and KIA are also

one minute of absenteeism in a Volkswagen plant costs

using Kronos for some of their global operations.

US$25,000.” Even with the attractive low cost of labor, the impact of absenteeism can clearly have a significant

Mitsubishi has reported a saving of US$50-100,000 in

financial impact, effectively nullifying the benefits of a

workforce and labor expenses thanks to its implementation

cheap workforce without proper management.

representative logs in to fix the problem. The software

battery, and a Wi-Fi adaptor. Kronos integrates with all

also has facilities for showing video messages, meaning

platforms for supply chain solutions and is certified by

that corporate messages can be conveyed directly to

certain vendors, particularly SAP and Oracle.

staff through the terminal. Furthermore, companies can choose either the standard, built-in features or

Despite its variety of features, the system is easy to

personalize the software to suit their individual needs.

operate and training and tools are both provided to Kronos customers. Companies can also create training

Operating with an integrated Ethernet power source

plans to increase the productivity of each employee,

with both an internal and external transformer, the

which Kronos can then monitor to provide a visual

functioning temperature of the system is 0-40°C, but it

representation of that training’s value. All of these

can be stored at temperatures ranging from -20-70°C.

factors have been found by the company to reduce

Additionally, humidity levels can reach 10-95% without

absenteeism,

causing condensation in the terminal. With a shell made

optimize resources, reduce the likelihood of human error,

from ABS polycarbonate resistant resin, the terminal

increase job satisfaction, and streamline costs, resulting

weighs just 2.26kg, and optional features include biometric

in untold benefits for both employers and employees in

components for touch ID, a direct CA cable, a reserve

the industry.

streamline

administrative

processes,

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| VIEW FROM THE TOP

FINDING A FRESH GENERATION OF EXECUTIVES LEFT: Rafael Yturbe, Country Manager of Russell Reynolds Associates RIGHT: Jaime Padilla, Head of Automotive Practice at Russell Reynolds Associates

Q: When searching for talent, how does Russell Reynolds

strategy of the company worldwide, but also understand the

identify forward thinkers who can address and resolve

local market and have a strategy of their own.

problems in the industry? JP: It is important to differentiate between the two different

Q: What proportions of Mexican and international

profiles of executives. In an automotive company, the

executives are you placing in the automotive industry?

same person will rarely be in charge of both operative and

RY: As opposed to other executive search firms, Russell

commercial areas. Operations in the automotive sector are

Reynolds is able to work across borders without any major

all about having the right skills to improve productivity,

difficulties. In fact, while our Planning and Logistics, Human

efficiency, and timeliness. In the commercial segment,

Resources, and Accounting divisions are all managed by

candidates have to be aware of what is coming next, as well

our headquarters, we still look for candidates abroad and

as understanding the ever-changing trends and consumer

bring them here when needed. We do find that there is a

needs. The local market is growing, but chocolate cars are

shortage of talent for higher level positions, but it is more

absorbing most of the growth, therefore a commercial

expensive for companies to bring candidates from abroad,

executive needs to be creative, bold, and disruptive. There

since they usually require an expensive expat package. As

are some excellent professionals in the industry, but the

an example, if a Mexican company tells us that it wants

market is looking for individuals who are more than just

state-of-the-art innovation in terms of digital and mobility

good executives with a passion for cars; it is becoming

technology, we will try to source someone from Silicon

increasingly important for applicants to have a broader, more

Valley, California, but then we will face a challenge since

comprehensive background. An individual who has climbed

the candidates must speak Spanish.

the corporate ladder in one company, in the same industry, and in the same country, might not have the right experience

JP: Within the automotive industry the majority of our

to be a top player in a new and changing environment. The

candidates are based in Mexico and around 80% of them

right executives are those who understand the complete

are Mexican nationals. If one of the requirements of our

GRASSROOTS RECRUITMENT FOR THE QUERETARO AUTOMOTIVE CLUSTER

290

In June 2015, the Queretaro manufacturing industry

in order to boost the capabilities of the sector within

registered a production value of MX$19.2 billion (US$1.28

Queretaro. The main factors driving this process are people

billion), according to the National Institute of Statistics and

and knowledge, according to Antonio Herrera, President

Geography (INEGI). This represents an increase in value of

of the Queretaro Automotive Cluster. As a result, there

MX$2.9 billion (US$193.3 million) since June 2014. One third

is active participation with universities, with a university

of the workforce in Queretaro is involved in the manufacturing

chairman included on the board. Besides its 34 company

industry, which is largely dominated by automotive and

members, the cluster works with seven universities and

heavy industry sectors. Heavy investment from a number

R&D centers, namely the Monterrey Institute of Technology

of Japanese OEMs has been a key contributor to this

and Higher Education (ITESM), the Autonomous University

growth, as well as the efforts by the Queretaro automotive

of Queretaro (UAQ), the Technological University of

and aerospace clusters. The automotive cluster is formed

Queretaro (UTEQ), the Polytechnic University of Queretaro

by a combination of government agencies, automotive

(UPQ), the Polytechnic University of Santa Rosa Jauregui

companies, and universities in the region, collaborating

(UPSRJ), the Technological University of San Juan del Rio

clients is extensive knowledge of the Mexican market, then

of 20% may still be enough for an executive to migrate

the best candidates are likely to be based here.

to another company. We recommend having a holistic program that is tied to compensation, but at the same time

Q: How does the Mexican work ethic and culture differ

considering all other factors as well.

from that of foreign OEMs in this country? JP: The differences in work culture are a general concern,

RY: We have seen a trend in the automotive industry

and the leadership skills that are required from a director

where companies export executives. Executives will

or a vice president must address this. In general, the

be sent abroad to return a few years later with a wider

stereotypical Mexican work style tends to lean toward

vision and more international experience. Right now,

following orders and not questioning them as much as

young, talented people are looking to have mobility; they

most other cultures. Yet, since many foreign OEMs and

want a career path that will take them to higher levels

Tier 1 companies have established operations in Mexico,

down the road. We are seeing an increase in demand for

it has spawned a sizeable workforce that knows how to

our leadership and succession services, which include

work with them. European and US work cultures favor

executive assessment programs.

transparency, clarity, and collaboration when needed, which is not typical in Mexican culture. Companies are not

Q: How is Russell Reynolds showing OEMs and Tier 1

only looking for individuals who can follow orders, but

suppliers that it understands the needs of the automotive

for people who can work independently, get things done,

market better than its competitors?

and be culturally flexible.

JP:

combine

international

expertise,

functional

expertise, market knowledge, and insight to properly RY: Every Japanese company has its own culture. They are

consider all the conditions of the industry. We take time to

very organized and hierarchical, and they will need people

get to know the company, focusing on quality and quantity

who are result-oriented. Soft skills are not their priority

to become true advisors for our clients.

demand; they focus on detail orientation, quality, good organization, clear results, and respect.

There is a large pool of people who have worked in the automotive sector, but it is true that increasing demand

Q: What kinds of incentives are OEMs offering their

from automotive and its adjacent industries will tighten

employees in Mexico in order to retain talent?

the market for experienced talent. Some amount of

JP: Some people are motivated by being able to go

talent will be imported from other countries and other

abroad to either work for a couple of years or to receive

industries. However, this should be done strategically

training. While people appreciate the efforts that are put

and the companies that will win are those that get this

into expanding their capabilities, a compensation increase

balance right.

(UTSJR), and the Center for Engineering and Industrial

Public Education (SEP), the aim is to attract students from

Development (CIDESI). One of the main targets of the

an earlier age by displaying the benefits of working in the

cluster is the promotion of engineering professions in

automotive industry. One potential strategy to achieve

a strategy developed with ITESM. Herrera believes that

this takes inspiration from Volkswagen in Puebla, which

there has been a continuous decrease in interest in these

organizes tours for school-age children in order to generate

professions, while there is a simultaneous lack of skilled,

more interest in a future career in automotive engineering.

experienced personnel within the automotive industry. â&#x20AC;&#x153;Most universities offer a large career portfolio and they

There is an urgent need for mechanical, metallurgical,

do not always know how to promote their engineering

and material engineers, according to Herrera, and the

division, or how to attract the proper talent for each

difficulty lies in both initial recruitment and retention. The

degree,â&#x20AC;? he states. For this reason, the cluster is concerned

cluster is therefore exploring further options with its HR

about how many good engineers are being produced by

committee in the hopes of following the German model of

these institutions. The cluster has been working with UPQ

dual education provided through the manufacturing plant.

to develop appropriate programs for each discipline, and

In this way, the cluster is implementing a renewed focus

the government is currently constructing a project for

on solutions for human capital shortages, attempting to

an automotive university, similar to the institution for the

provide effective training from a young age in a grassroots

aerospace industry. In conjunction with the Ministry of

approach to recruitment.

291

| VIEW FROM THE TOP

LEVERAGING GLOBAL RESOURCES TO SOURCE TALENT LEFT: Gerado Kanahuati, Managing Director of Hays RIGHT: Mariana Villa, Automotive Leader of Hays

Q: Hays is a leading international recruitment company

clients have, which makes us experts in the field and

with presence in more than 30 countries around the

able to offer a fast response time. We are also able to

world, but why did the company decide to enter the

gather in-depth information by leveraging our global

Mexican market?

presence and experience. In fact, one of our strategic

GK: Aside from Brazil, the company did not have any

pillars is to maintain standardization with our clients,

operations in Latin America, so when the group began

so if we are already working with them in Germany or

researching the region, it became obvious as to which market

China, they will receive the same level of service with the

had the most potential to grow. Even despite recent economic

same standards whenever they approach us elsewhere.

events, everything seemed to point to Mexico. The country

We utilize information that is gathered globally in order

has a booming economic market, affordable manpower, and

to understand the trends within the industry, and then

close proximity to the US, which is particularly attractive

provide feedback to our clients, not only in a recruitment

for the automotive industry. As a manufacturing country,

sense, but also at a consultancy level. We can advise

engineering and supply chain services in human resources

them on what they will be facing, and how they should be

have become indispensable. The company has adjusted its

preparing themselves in terms of talent.

offerings based on the needs of the market, but we also plan MV: Talent is becoming scarce in the automotive industry.

on increasing these offerings when required.

We see more companies investing in Mexico, but we do not Q: When compared to other recruitment firms, what are

see the same percentage of people exiting university with

the main advantages that Hays can offer its clients in the

the skills that these companies require. This is a serious

automotive sector?

bottleneck. Our integral service can help anticipate the

GK: Hays is specialized and has good knowledge of the

needs of our clients, while advising them on how to seize

market. We understand the technical issues that our

future opportunities. In highly skilled specializations such

TERNIUM LEADING THE WAY IN ENGINEERING HUMAN RESOURCES Ternium classes its workforce as its most important asset

the opportunity to be part of flexible work programs in

and as such, its staff is provided with a series of highly

order to promote the balance of work and personal life.

specialized

and

292

comprehensive

training

programs. by

Ternium, in cooperation with Techint and Tenaris, sponsors

the capabilities of its human resources, so Ternium is

the Roberto Rocca Education program, which was founded

constantly seeking new ways in which to develop its

in 2005 to provide scholarships and fellowships to students

talent. Currently, 132 young professionals are recruited

and graduates of engineering and applied sciences.

each year to train across 38 university education centers

Moreover, in mid-2015, Ternium invested MX$462 million

with which the company has collaborative arrangements.

(US$30.8 million) in the construction of the Roberto Rocca

Approximately 83% of Ternium’s management has been

Technical School in Pesqueria, Nuevo Leon. The school is

initially trained through the ‘Young Professionals’ training

to offer three-year programs of technical and practical high

program and subsequently ascended through the ranks of

school-level training in mechatronics and electromechanics.

the company. With this focus on highly qualified staff, 65%

Ternium conducted a study in Pesqueria that found that of

of the directors at the company have obtained degrees at

the 800 high school graduates in the area, less than 20% go

postgraduate level or above. Ternium also offers employees

on to further education since there is a lack of educational

Competitiveness,

says

the

company,

defined

as this one, it is easy to poach people from a competitor

hotter, the talent pool will dry up, and salaries will increase

as opposed to developing talent. This has repercussions

to the point of being unpayable.

in terms of salary inflation and market competitiveness, so we have to keep in mind the reasons for companies to

Q: How are companies balancing the need for foreign

come to Mexico.

talent and local talent, and how is Hays contributing to that?

Q: How does Hays participate in discussions between

MV: I think that the paradigm of automotive companies

universities and OEMs in order to align their needs?

hiring from within the industry needs to be shattered. We

GK: While Mexico has a significant amount of people, the

are trying to persuade companies to hire from industries

skills they require to work with these companies are not

like aviation, due to the engineering similarities of the two

yet fully developed. By the time some people are ready

sectors. Once we repeat this idea many times, companies

to work, their knowledge has become somewhat obsolete

begin to see its merits. It may sometimes take a little

or archaic due to new technologies being introduced at

longer for these hires to develop, but they will pay off in

a significant pace. The educational system has to change,

the long term. They also have a little more loyalty because

and some companies have already taken the first steps

of the opportunity to develop their own personal skills and

to achieve that. Some companies have established their

improve their credentials. This trend already works the

own universities, while others have been liaising with

other way, and people are jumping ship from automotive

educational institutes to find solutions for their problems.

companies to other types of manufacturing industries.

One of these solutions is for students to work and study at the same time, enabling them to provide feedback about

Q: What are the companyâ&#x20AC;&#x2122;s plans for expansion in the

how to improve their programs. The main complaint,

automotive industry in 2015?

however, is that people lack the skills that companies

GK: The creation of the next Hays Global Skills Index will

require in specific fields.

begin in the second semester of our financial year, which is between July and June. We are already gathering

MV: In highly skilled industries such as automotive, there

some information in order to develop and structure

is an issue with retaining talent, so many companies think

the index. To be honest, it is very difficult to predict

twice about training people, only for them to leave a few

because, economically speaking, GDP is constantly being

months later. Automotive companies really need to work

revised. Having said that, the automotive industry is very

together in order to develop the industry as a whole,

susceptible to oil prices, so I think we will see a slight

reducing competition in the retention of human talent. If

improvement in the way that the skill index behaves, but

this does not happen soon, the market will become much

this change will not be dramatic.

provision at this level. In an effort to bridge the gap, these

a daily work plan, as well as an independent project

companies sponsored the Roberto Rocca Technical School

to measure management capabilities. Students across

in order to foster the talent that is demanded in the area.

Mexico, Argentina and Venezuela collectively participate in the Ternium Virtual Classroom with weekly seminars in

Alongside this program, and as part of the Techint

company processes and management tools. Finally, the

Organization, Ternium offers three internship options for

Young Professionals program is aimed at recent graduates

graduates, namely Young Technicians, New Graduates, and

who may have carried out experience in the field within

Young Professionals. Aimed mainly at individuals under

another company. The program is implemented with the

25 with degrees in a variety of fields including metallurgy,

aim of consolidating the traineeâ&#x20AC;&#x2122;s position as an expert in

mechatronics, and electronic systems, the objective of

the field, developing personal, social, technical, operational,

the Young Technician program is to promote practical

and management skills. The personnel enrolled in this

learning within the educatory environment, supporting the

program must participate in annual seminars on a range of

infrastructure of schools, teachers, and administrators. At

topics, including business overview, project management,

the end of the program, based on performance, the intern

and process improvement, as well as undergoing sectorial

may be offered a full-time position at Ternium. The second

programs in technical training. In anticipation of the

New Graduate program lasts for two years, with a direct

growth of the steel industry, Ternium has had the foresight

internship in industrial plants that rotates twice per year

to implement these projects in a pro-active manner,

in two different sectors. The program guarantees at least

recognizing that the fostering of human resources will be

two monthsâ&#x20AC;&#x2122; experience in production shifts and involves

its greatest advantage in the coming years.

293

CULTURAL TALENT SEARCHES AT THE HIGHEST LEVELS As a company that has been recruiting in Mexico for the

Stuart Mexico. “This firsthand knowledge provides the firm

last 20 years, Spencer Stuart is well-positioned within both

with a comprehensive understanding of the talent gaps in

the Mexican and global markets. Founded in 1956, the firm

the sector, as well as an indication of the direction in which

specializes in the identification of global executives, with a

the industry is headed, and the functional requirements

primary focus on C-suite, as well as vice presidents, directors,

and leadership skills required in today’s market.” As part

and boards. Spencer Stuart works on behalf of a variety

of the recruitment process, Spencer Stuart carries out

of automakers and top-tier suppliers, providing support

an extensive referencing process and works closely with

for functional roles or management roles at all levels. In

clients in order to identify the perfect candidate. Moreover,

Mexico, in fact, a significant proportion of the firm’s industrial

due to the global spread of the company, it has the distinct

business comes from the automotive industry, representing

advantage of being able to easily assemble a team of

more than 35% of its revenue. Relationships are leveraged by

candidates on a global scale, a feature that Hernández

enabling consultants to proactively visit the US, Europe, and

believes will be key to the leadership demands of the

Japan in order to understand the key transitions within the

automotive industry.

“This firsthand knowledge provides the firm with a comprehensive understanding of the talent gaps in the sector, as well as an indication of the direction in which the industry is headed” Germán Hernández, Director General of Spencer Stuart Mexico

industry, and potentially anticipate changing trends. The firm

Spencer Stuart measures its success as a search firm across

aims to contribute the most comprehensive and reliable

three main areas: performance, durability, and cultural

advice regarding candidates and industries, but the ability

integration. In terms of performance, this is measured

to assess those candidates relies on the experience of the

through KPIs, sales figures, and levels of growth witnessed

consultants that perform the searches. “Consultants at

within the company as a direct result of the candidate

Spencer Stuart are senior employees with considerable

selection. Durability is gauged by the impact of the

experience within the industry or within recruitment,”

employee on the company over the course of their career,

states Germán Hernández, Director General of Spencer

and a favorable balance in terms of recruitment costs,

GLOBAL EXPERIENCE BLEEDING INTO MEXICAN TALENT As the global business world is becoming increasingly

marketing experience, giving them an edge when facing

connected, global automotive companies are searching

the strong competition that exists in the market,” explains

for great leaders with global experience. Leaders Trust /

Elizabeth Falcón, Managing Partner of Leaders Trust / Alto

Alto Partners has over 20 years of experience in executive

Partners. “Traditionally, CEOs have been expected to run

search for senior level positions, advising clients on how to

automotive operations in their entirety, but this profile

attract, assess, retain and develop their management teams.

has recently seen a change. Given recent technological

Working in both national and international environments,

developments and the global economic crisis, a strategic

the company has been successful in understanding

mindset is now essential for developing initiatives that

the context of its clients’ organizations and business

have a real impact on company results.”

strategies, enabling it to anticipate the needs for better

294

management structures and to assist clients in their search

Today’s automotive CEOs have to become more flexible,

for the world’s finest talent. “Most CEOs in the automotive

displaying strong leadership and strategic skills while

industry come from a manufacturing background, but have

simultaneously maintaining personal and professional

complimented their professional career with sales and

development. These days, most business negotiations are

energy and training time. To measure cultural integration,

beginning to prepare for an era of R&D, product design,

the firm employs an enhanced methodology for assessing

and advanced manufacturing, but the gap in the talent

candidates, which examines factors such as the ability to

pool will hold the country back,” he explains. “Many OEMs,

work individually or in teams, and the ability to comfortably

for instance, are opening their design centers in Silicon

adapt to change. This process is important for measuring

Valley because they understand that technology is driving

the way in which individuals align themselves with the

most consumer decisions in terms of car sales. Mexico

prevailing company culture or cultures.

is not yet mature enough to develop that type of talent, which is extremely unfortunate since those kinds of roles

The firm works closely with automotive companies in order

can have a significant impact on a country’s landscape.”

to find the best candidates to fit individual strategies, and spends significant time communicating with HR

The biggest change in automotive, however, is that

managers, hiring managers, and boards of directors in

companies are starting to focus on innovative ways to

order to understand the potential duties and requirements

attract consumers. This is no longer simply driven by

of a CEO. “Searches like this are not simply about filling

vehicle specifications, but considerable emphasis is placed

a vacancy, but finding leaders who will perform, and

on the customer experience while driving. CEOs must

will ultimately constitute the correct candidate for the

understand the importance attributed to the purchase

company,” says Hernández. With tremendous emphasis

of a car, in order to build automobiles that satisfy this

placed on the organization’s culture, a great deal of time

customer need. In Mexico, focus should be shifted away

is spent on measuring potential for compatibility. The way

from manufacturing, concentrating instead on the NAFTA

in which Spencer Stuart evaluates executives is unique, in

market. However, this can prove problematic since existing

that a case-based interview is carried out by specialized

momentum within an organization can sometimes hold

consultants, the insights from which can help the CEO

back a new CEO’s agenda, and this is why time is essential,

in making decisions about employee roles, which can

both to find the appropriate CEO candidate, and for the

significantly minimize the risk of failure for the CEO.

CEO to gain traction within a company.

With the arrival of new OEMs and suppliers in Mexico,

Spencer Stuart is currently undergoing a considerable

the demand for qualified, high-performing talent in the

development plan for Mexico, increasing its team while

automotive field has increased dramatically over the last

expanding to larger facilities. The firm also expects to

few years, which puts significant pressure on companies

enhance its capabilities to provide leadership advisory

like Spencer Stuart to find the correct candidate for a

services such as executive assessment, board effectiveness

given position. The expansion of the automotive market

assessment, and CEO succession planning. In such a robust

has been rapid, but the talent pool has not developed at

market wherein Mexico’s businesses have an important need

the same rate, meaning that many high-level positions in

for advice, insights, and an understanding of the industry

Mexico are occupied by foreign talent. R&D is a critical

and its many complexities and opportunities, Spencer

piece of this puzzle, according to Hernández. “Mexico is

Stuart has identified a key opportunity for expansion.

global, so CEOs should also have a strong ability to adapt

centers close to the operational headquarters, so most

to and negotiate with all cultures. For example, executives

experienced executives are already located within them.

in Korea may regularly end up working overtime in an

However, as a result of the emerging automotive industry

effort to be successful. Similarly, Japanese companies value

in this country, an increasing amount of Mexican executives

loyalty and have a distinct focus on accuracy. The multi-

working abroad are now returning to Mexico, taking their

cultural understanding necessary to adapt to these varying

place as heads of region. Additionally, salaries tend to

environments has been defined by Leaders Trust / Alto

be similar between companies, meaning that a potential

Partners as a catalytic management style, pertaining to the

career evolution, such as international exposure or a

fact that these positions have become far more dynamic.

more challenging role, can be the determining factor for executives in terms of recruitment.

In comparison, Mexico’s automotive sector in general relies heavily on Mexican executives, but certain key positions

Having taken this broad range of factors into account,

are normally covered by foreign talent with experience

Leaders Trust / Alto Partners works with a small number of

of either working abroad or within the company’s

customers in order to ensure maximum market access for

headquarters. Usually, these positions constitute the

the right candidates. This exclusivity guarantees that the

board of the company and contribute highly to specialized

company can attract the upper crust of executive talent,

areas, such as technology and research and development

providing automotive clients with a world-class selection

(R&D). Many automotive companies position their R&D

of the industry’s next great CEOs.

295

Behind closed doors, there has been fierce competition between Mexicoâ&#x20AC;&#x2122;s automotive states as they compete to secure the substantial investments that are being made by global vehicle manufacturers and their main suppliers. Offering land, world-class labor, competitive overheads, and other incentives, localities in Northern Mexico and the Bajio region are rapidly filling up, securing serious investments this year. The inflow of new investment brings economic growth and job creation as well as new challenges and opportunities in terms of logistics and infrastructure. With 56% of the cargo in the country being transported by truck, many opportunities are emerging for both trucking intermodal logistics solutions providers, while increasing the urgency to upgrade Mexicoâ&#x20AC;&#x2122;s road network.

In this chapter the leaders of automotive clusters across the country share their perspectives on the development of the industry, the integration of new companies into their regional industries, and the logistics and real estate development that is ongoing to accommodate the increasing number of investors. Moreover, the emerging limitations of the countryâ&#x20AC;&#x2122;s infrastructure are explored, and industry experts challenge the status quo by proposing increasingly innovative solutions to ensure that these do not become bottlenecks for industry growth.

LOGISTICS & LOCATION

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Hellmann Automotive Logistics offers individualized automotive logistics solutions for procurement, production, and distribution. Along with our proven global automotive logistics experience, we provide industry leading intelligence and unique transportation solutions. Our warehousing and short-term storage help keep the transportation chain moving smoothly and without delays. With over 440 offices worldwide, and a dedicated team of 16,000 employees, Hellmann offers you speedy delivery along the most stringent shipping standards. For more information visit us online at: www.hellmann.net or contact your local Hellmann Branch. THINKING AHEAD – MOVING FORWARD Norte 3 No. 90 Bodega F Col. Federal Del. Venustiano Carranza Mexico , Distrito Federal 15700 Mexico Ι +52 55 5010 1200 Ι infomex@mx.hellmann.net

CHAPTER 11: LOGISTICS & LOCATION 300

VIEW FROM THE TOP: Manuel Montoya Ortega, Automotive Cluster of Nuevo Leon (CLAUT)

300

INSIGHT: Celina Villarreal, Secretary of Economic Development for Nuevo Leon

302

INSIGHT: Salomón Noble, Intermex

303

VIEW FROM THE TOP: Sergio Argüelles, FINSA

304

VIEW FROM THE TOP: Sergio Mendoza, Chihuahua Automotive Cluster

305

VIEW FROM THE TOP: Alejandro Lara, American Industries

306

VIEW FROM THE TOP: Javier Lomelín Anaya, Colliers International

307

VIEW FROM THE TOP: Roberto Cantú Alanís, Grupo Avante

308

VIEW FROM THE TOP: Elisa Crespo Ferrer, Automotive Cluster of the State of Mexico

309

VIEW FROM THE TOP: Antonio Herrera, Queretaro Automotive Cluster

310

VIEW FROM THE TOP: Griselda Hernández, Kelly Services Mexico

311

VIEW FROM THE TOP: Gilberto González, Castro del Rio

312

PROJECT SPOTLIGHT: Nissan A2 Vehicle Distribution Center

313

VIEW FROM THE TOP: Gustavo Rubio, Williams Scotsman

314

INSIGHT: AMPIP, Industrial Park Requirements

315

VIEW FROM THE TOP: Gerardo Bocard, Argo Industrial Group

316

VIEW FROM THE TOP: Michele Porrino Perassi, WTC Industrial

317

VIEW FROM THE TOP: José Antonio Lorca, SIL Logistics

318

VIEW FROM THE TOP: Alex Theissen Long, ANTP

319

VIEW FROM THE TOP: Fernando Ramos Casas, AMTI

320 VIEW FROM THE TOP:

José Antonio Icaza, Hellmann Automotive Logistics Honorio Rodríguez, Hellmann Automotive Logistics

320

INSIGHT: Joanne Handley, Hellmann Worldwide Logistics

322

VIEW FROM THE TOP: Jorge Torres, FedEx Express México

323

VIEW FROM THE TOP: José Luis García, DHL Supply Chain

324

VEHICLE SPOTLIGHT: Freightliner Inspiration Truck

326

INSIGHT: Luis Gómez, Senator International

327

VIEW FROM THE TOP: Eduardo Vega, Toyota Material Handling Capital (TMHC)

328

VIEW FROM THE TOP: Jorge Almanza, Autotransportes de Carga Tresguerras

328

INSIGHT: Torge Koehnke, DSV Air & Sea Mexico

299

| VIEW FROM THE TOP

ARRIVAL OF KOREAN OEM SPURS LOCAL SUPPLIER DEVELOPMENTS MANUEL MONTOYA ORTEGA Director of the Automotive Cluster of Nuevo Leon (CLAUT) Q: How does the arrival of KIA in Nuevo Leon change the

A: Attracting new companies is the responsibility of the

state’s positioning as an automotive production base?

Ministry of Economic Development. If Nuevo Leon needs a

A: Many Mexican and international suppliers are based

new supplier, we talk to the state government to attract that

in Nuevo Leon, so KIA will develop differently than other

investment. However, acquiring an OEM was vital to bring

OEMs, as these tend to favor smaller cities where there

more activity to our companies and expand the market.

is no solid supplier base. Establishing in Nuevo Leon is a

As a cluster, our challenge is to help KIA and its suppliers

great opportunity for the OEM, because even though labor

establish operations in the country, while also introducing

is not as cheap as some other regions, there is a wider

them to local suppliers and sourcing a specialized

pool of specialized workers within the automotive and

workforce. It is not a question of not having more OEMs in

other industries. Last year, the state had 69,000 people

Nuevo Leon, but of overcoming the challenge of integrating

working in the automotive industry. This year, KIA expects

local suppliers into KIA’s supply chain.

to provide 9,000 jobs between the manufacturing plant and its suppliers and it is expected to create greater

competition and salary increases. Nuevo Leon already has

accommodate KIA’s presence in the state?

How

are

the

cluster’s

strategies

evolving

the highest income per capita, close to US$20,000 per

A: CLAUT is a private and non-profit association in which

year, while the average in the country is around US$10,000.

members can take advantage of the synergies that we are

There are states in which people are willing to work for

developing. We are not planning to change our strategy

less, but if automotive companies are looking for lower-

for new companies; on the contrary, we believe that we

cost labor, they will end up with less specialized workers.

have an important insight to offer and we will continue to invite new companies to join. Being an automotive

Q: How successful has Nuevo Leon been in attracting new

cluster, we mainly focus on technical programs and

automotive suppliers to the state?

education. Obviously, as these new companies bring their

ANTICIPATION AND PREPARATION FOR THE CLUSTER’S NEWEST OEM During late 2014, the Ministry of Economic Development

that Nuevo Leon would provide the infrastructure that was

held the first seminar for Mexican and Korean Tier 1 and

not already in place for electricity, water, and natural gas,

2 companies. This was an opportunity to attract foreign

among others. The next step for Nuevo Leon is to deliver

investment, but also to integrate local suppliers into an OEM

on its infrastructure promises in order to ensure that KIA’s

supply chain. The automotive cluster in Nuevo Leon was

production will start in May 2016. To ensure everything is

elated about KIA’s recent decision to enter the region; the

ready on time the Ministry of Economic Development has

existing companies actively helped to attract the OEM, even

mapped each commitment with KIA and has delegated

though they knew it implied more competition as well as

the responsibilities of infrastructure and site preparation to

opportunities. The industry in Nuevo Leon sought growth

specialized teams.

and some companies are seeking partnerships with KIA,

300

while others will benefit from improved infrastructure and

After the entry of KIA there will be a whole new center of

transport links, as well as an increased perception of prestige

gravity in the cluster and a new focal point for regional

for this automotive hub. One of KIA’s main concerns, besides

development. Companies that already have a presence

the availability of a skilled workforce, was the guarantee

in Mexico might consider expanding into the state and

own culture and customs, there is a lot that they can

Tier 1, Tier 2, and SME companies together and lead them

offer to us too. Through local universities, we have been

through the process.

accommodating specialized programs for the industry over the last seven years. These programs are broadly

Q: How has Ternium’s new US$1.1 billion cold-rolling steel

focused on developing technicians, supervisors, directors,

mill affected automotive production and steel imports in

and even management skills, which we manage through

Nuevo Leon?

the Center of Managerial Training and Improvement

A: This is an important investment and a crucial project, as

(ICAMI). We also offer various engineering degrees

previously we were importing 100% of the steel needed for

through Monterrey Institute of Technology and Higher

vehicle production. For Ternium, this is an opportunity to

Education (ITESM), Autonomous University of Nuevo

supply the entire market. For Mexico, it will revolutionize

Leon (UANL), and University of Monterrey (UDEM). This

the manufacturing process, creating a reduction in

has developed excellent operations, engineering, and

logistics prices and timeframes, enabling companies like

lean manufacturing tools, but the administrative and

KIA to benefit enormously.

management positions have lost focus. It is not enough to know how to design or manufacture components;

Q: With the 11% growth in the automotive industry from

corporations need management knowledge, which led

2013 to 2014, how are the cluster’s companies preparing

us to instruct on corporate management skills. Many

for a similar situation in 2015?

managers start with a technical education, eventually

A: They are more than preparing, they are investing, and they

growing in their companies and learning more about their

are trying to attract more business. Many of these companies

fields, but management competences are often sidelined.

work to order, so the arrival of new automotive assemblers will boost their sales. Additionally, many companies are bringing

Q: Alongside the focus on large suppliers and OEMs, what

their R&D, design, and engineering departments to Monterrey,

efforts are being made to empower SMEs in the state?

representing the next step for Mexico to be valued not only

A: CLAUT has relations with around 40 SMEs, applying

in manufacturing, but also in engineering and development.

the knowledge that was gained from larger companies

Navistar, for example, started an engineering group five years

to provide different programs that improve their quality

ago, and today they have 100 engineers designing trucks in

and production systems. As for companies that are not

the country. They now have an agreement with ITESM and

yet in the automotive industry, we are helping them grow

they are planning to build a design and engineering facility.

and gain enough experience to enter. Normally, there are

CLAUT is already formulating a plan to attract more of these

companies that can work in this sector, but someone has

companies, to offer them support, and to prepare the state’s

to give them the opportunity. We attempt to bring the

engineers for their entry into this industry.

foreign companies now find Nuevo Leon a more attractive investment destination. The federal government has asked the Ministry of Economic Development to emulate the model of the Bajio cluster, meaning that both the supply chain and logistics infrastructure must be strengthened to optimize the trickle-down effects for the economy and the country’s wealth. Unfortunately, Celina Villarreal, Secretary of Economic Development for Nuevo Leon predicts that some potential investors will be reluctant to locate directly next to KIA and would rather find a location that is better positioned to supply multiple OEMs, a gap that she expects Coahuila to fill. On a more positive note, Villarreal also expects to announce the arrival of approximately 13 Korean companies in the near future, while LG’s group of Korean suppliers, which has been operating in Nuevo Leon for more than 14 years, is also looking to supply KIA. “Nuevo Leon is completely ready for the next OEM,” Villarreal concludes.

301

COLLABORATING WITH CLUSTERS TO SELECT LOCATIONS Traditionally, industrial supply chains around the world

INTERMEX

are in place before OEMs arrive and their degree of

strategically locating industrial buildings and land offerings

collaborates

with

automotive

clusters

comprehensiveness is commonly correlated with the

within industrial parks, making the most of Mexico’s

maturity of the relevant clusters. Mexico is unique in that

geographical advantages. The supply chain developments of

this trend is inverted as in certain locations the OEMs

OEMs and Tier 1 companies can generally be anticipated, so

arrived first and are now working diligently to attract

INTERMEX has found that it can position strategic industrial

suppliers. Unfortunately, this has resulted in infrastructure

assets accordingly, and offers new companies the appropriate

challenges related to key variables such as the supply of

infrastructure, zoning, and industrial permits, with a location

electrical power, water, drainage services, and even primary

that is close to densely populated areas. Clusters are creating

services for human capital, such as housing and education.

opportunities for new foreign companies, as well as national players or co-investors that are interested in supplying OEMs.

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INTERMEX has decided to address this issue, approaching

In central Mexico, investors and suppliers are focusing on

OEMs and their accompanying suppliers to help them with

the domestic market potential, but also capitalizing on the

site selection processes. The company’s pro forma cost

favorable location for exports to South American markets.

model allows the strategic sourcing candidate to evaluate

“As workers relocate and training is implemented, I expect

various locations and quantitatively evaluate each site

there will be a shift on the supply side of the equation, but

before making a decision. “It is important to define the key

until supply matches demand, there will also be temporary

variables in each company’s criteria in order to assemble

labor shortages,” states Noble. This conclusion was reached

a sound list of potential locations with the customer,”

in light of a similar situation in Ciudad Juarez, which was led

states Salomón Noble, Director General and CEO of

by the US driving a surge in demand for production. The

INTERMEX. “We have to consider the local availability

result was a talent migration phenomenon from Veracruz

of labor, the proximity to customers and supply sources,

and Oaxaca to Ciudad Juarez, as workers moved to take

accessibility, and infrastructure. INTERMEX focuses on

advantage of the abundant job opportunities. Evidently,

the most fundamental variables; we have available assets

higher demand is attracting qualified laborers that are willing

and territorial reserves in key strategic markets, which are

to relocate, but the ideal solution to satisfying demand for

serviced with the right infrastructure, as well as zoning

manpower is intelligent locations that are close to transport

and industrial permits. Fundamentally, they are located

infrastructure or existing populations of skilled labor.

in areas that are close to densely populated areas, as

INTERMEX has recognized this trend and is primed to help

this tends to be the most important variable in the site

more than 200 companies with premier locations near large

selection process.”

cities in the center and north of Mexico.

| VIEW FROM THE TOP

ENERGY-EFFICIENT AND SUSTAINABLE INDUSTRIAL PROPERTY SERGIO ARGÜELLES Director General of FINSA Q: What factors have defined FINSA’s growth trajectory

industrial park for this sector in all of Latin America in

and led to the company managing one of the largest

Peubla. As a result, Volkswagen was able to integrate its

property portfolios in Latin America?

suppliers into the park. To date, FINSA Puebla continues

A: During the 38 years that FINSA has been operating,

its expansion process and has become one of the most

we have strived to offer completely integrated property

successful industrial parks that is specifically targeted

solutions, providing assistance with site selection and the

toward suppliers. We work with a wide variety of industrial

ongoing maintenance of property. Additionally, the social

sectors besides automotive, including logistics, metal-

and sustainability focus engrained in our developments

mechanics, electronics, pharmaceuticals, alimentary, and

has enabled us to position ourselves as market leaders in

aerospace, among others. Our 25 industrial parks in the

industrial development in Mexico. The ability to completely

North Region, the Bajio region and Central Mexico occupy

integrate all of these services into one package has been

eight million square meters of land in total. Included in this

our differentiator. In terms of construction and design,

total are another 17 locations in other cities that our clients

we offer our clients the possibility of adjusting aspects

have chosen in order to remain close to the available

to meet their preference, as well as giving the option of

manpower, and according to their potential growth, should

renting rather than buying. Once they have the keys to

they need extra space to develop at a later date.

the property, we actively maintain its quality, as well as focusing on the building’s sustainability features during

Q: Where have you been focusing industrial park

operations. All of this simplifies the process for the client, as

development around the country, and what have been

they can rely on one group from start to finish, rather than

some of the most interesting success stories?

contracting several companies to complete the process

A: We always look for the most industrially dynamic cities

and the aftersales service. In terms of sustainability, FINSA

for our developments. Nuevo Leon remains one of our

is the leading industrial park operator in Mexico, developing

principal investment locations, and to date we have four

the most certified parks according to the Federal Attorney

industrial parts in the state, which will undoubtedly increase

General’s Office of Environmental Protection (PROFEPA)

in the near future. The Bajio area, especially Queretaro and

program. All of the raw materials used in construction are

Aguascalientes, are also markets which we never lose sight

certified in order to save the maximum amount of energy

of, and in which we will continue to invest. Furthermore,

possible, and our new developments integrate the most

the center of Mexico is of great interest and we are on the

advanced infrastructure, equipment, design, and execution.

verge of announcing some new developments. Generally, property occupation rates are steady on the Mexican

Q: To what extent has industrial real estate demand from

border with the US, and we are sure that by the end of 2015

the automotive industry in Mexico been instrumental in

they will have improved further. Contrastingly, the markets

fueling the company’s domestic growth?

in Bajio and Central Mexico are much more dynamic, and

A: The automotive industry currently represents 50% of

are becoming increasingly sought after. The number of

FINSA’s property portfolio. The boom within the sector has

companies arriving in these states is converting them

positively influenced our growth in primary automotive

into the preferred states to invest in. However, regarding

bases, such as Ramos Arizpe, Puebla, Aguascalientes,

the ease of operations for international companies within

Querétaro, and Nuevo León, but in general, all of Mexico

the real estate sector in terms of the regulatory and

has been influenced positively by this growth. In 1977,

commercial environment, the main hurdles for which new

when FINSA began operations at the Matamoras park

companies should prepare include the legal paperwork

in Tamaulipas, GM was our very first client. Since that

required to establish a business here. Fortunately, the

moment, the automotive industry has become one of the

most important improvements have already been tackled

growth catalysts for the company throughout Mexico. In

and state governments are increasingly supportive during

1992, together with Volkswagen, we established our first

these processes.

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CLUSTER FOCUS ON BOLSTERING LOCAL ADVANCED MANUFACTURING SERGIO MENDOZA President of Chihuahua Automotive Cluster Q: What makes Chihuahua an attractive location for

Q: What techniques is the cluster using to shift Mexico

automotive companies looking to invest in Mexico?

toward a more world-class manufacturing mindset?

A: Chihuahua began its internationalization efforts in the

A: Firstly, we must understand the environment before we

late 60s, when a group of executives got together to define

can change it. We have held meetings with different industry

a strategy that would propel the state’s economy in the

players, plant managers, and customers, and we have realized

right direction. After due research, it was decided that the

that one of the main areas of opportunity in the country is

state would reach out to international companies that could

the lack of large Mexican players in the industry. Therefore,

take advantage of lower labor costs. We now have over

we must create opportunities for Mexican entrepreneurs to

200 automotive companies in the state, 70% of which are

be successful, teaching them how to take risks and learn from

located in Ciudad Juarez.

their failures. However, to be successful with this strategy we need identifiable players that can implement complex

Q: What important investments is the state working on?

manufacturing and research projects. The cluster is currently

A: In 2015, Ford Motor Company announced the arrival of

working on strengthening its own structure, so we are able to

its new engine plant in Chihuahua. They will manufacture

support the new suppliers coming to the state with whatever

about 700,000 units of a new 3-cylinder engine every

requirement they may have.

year, doubling the size of Ford’s current plant in the city.

304

Bombardier Recreational Products also has significant

We want every higher education institution to choose

expansion plans, as they will now build additional

an industry specialization in their R&D efforts. They are

models in a second Ciudad Juarez plant. In the same

currently very broad in what they offer, and that does not

way, Superior Industries just inaugurated their fifth plant

match the industry’s trends when it comes to manufacturing

in the city of Chihuahua, and other Tier 1 companies are

processes. Through specialization, the competitiveness of

growing significantly. All of these changes are merely

each academic institution could rise to world-class levels

the consequence of the positive changes that Mexico’s

in their specific field. This allows manufacturers to stick

automotive industry is undergoing. Overall, Chihuahua’s

to what they know, and limit both their research efforts

strategic location between the Bajio area and the border

and economic expenditures when given new product

gives us an added advantage for certain industries,

specifications. The more specializations, the broader the

especially the automotive sector.

field of knowledge the state will have.

| VIEW FROM THE TOP

REAL ESTATE DEVELOPER WELL-PREPARED FOR RAPID TURNAROUND ALEJANDRO LARA Director General of American Industries Q: How has the market evolved for American Industries,

some uncertainty to our IMMEX sector, but we have seen

and what new strategies have you implemented to attract

an open and proactive attitude from the authorities, giving

new clients?

us a sense of certainty for the upcoming years.

A: Approximately 40% of our clients come from the automotive sector, so we are currently working with

Q: Now that the country is moving away from IMMEX

various OEMs to create strategies for presenting the shelter

operations in order to become a proper design and

program to more automotive suppliers. This product is a

engineering hub, how is the shelter program adapting to

comprehensive service package that allows us to collaborate

receive these types of companies?

with any company entering Mexico and provide it with all

A: Companies that are more service-oriented can also

the necessary administrative functions, including human

take advantage of the IMMEX program, given that they

resources, accounting, fiscal operations, customs, and

may have to bring equipment from other countries.

logistics. These processes are specific to Mexico because

Understandably, due to the sophisticated nature of these

of our unique legal framework and business practices. That

projects, these companies present new challenges in terms

way, it is easy for international companies to establish their

of human resources, since the required workforce must be

new operations, focusing on core business competencies,

more specialized than with other companies. The best way

quality, productivity, and on-time delivery.

to address this is to work directly with universities and academic institutions in order to provide the appropriate

Q: What challenges has American Industries faced while

training and even create specific educational programs

bringing new companies into the country?

designed to target the needs of the specific company. For

A: Normally, the main concern is assessing the cost

example, in terms of advising our clients on salaries and

business model, but there is also a focus on the quantity

benefits policies, we use our own data in collaboration

of required paperwork, logistics for importing equipment

with local index chapters, chambers of commerce, and

and raw materials, corresponding customs strategies,

other associations depending on the region.

and basic logistics of setting up the company. We have addressed these issues by bringing these companies

Q: Now that many new OEMs are entering the market,

through the shelter program. They can elect to use our

how are you working to attract all the suppliers coming

legal entity in Mexico, which is already certified in customs

with them?

transactions by the Mexican IRS, taking advantage of our

A: We are fully prepared to receive all these new players,

expertise gained by supporting more than 200 companies

and we have a sufficient inventory of land in states such

already operating in the country. We know the best

as Guanajuato, Queretaro, San Luis Potosi and Nuevo

strategies to optimize tariff payments and tax processes,

Leon to supply these companies. Additionally, we have

and we offer this service not as a consulting company,

investment plans in strategic locations throughout the

but as a day-to-day administrative partner. We manage

country to offer inventory space. Some corporations

everything in conjunction with our clients, and thanks to

have specific requirements such as thicker floors, clean

our administrative systems, robust IT platform, and ISO

rooms, or temperature control, so our strategy is to

certified processes, the client has a reliable and accountable

construct standard buildings, and then adapt them

partner in American Industries. To complement our offer,

to client specifications. For clients with more unique

we actively work with the state and federal governmentâ&#x20AC;&#x2122;s

requirements, we collaborate to customize a build-to-suit

investment promotion agencies. Since the government is

option for them. In terms of sustainability, there has been

proactive about receiving foreign direct investments, and

an increasing interest in the industry, and with the arrival

there is actually a lot of competition between states to

of many European and North American companies who

attract the best companies, this is a mutually beneficial

place a considerable emphasis on this factor, we expect

arrangement. The latest Fiscal Reform initially brought

this to become a priority.

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SERVING THE INDUSTRY’S MULTITUDE OF REAL ESTATE NEEDS JAVIER LOMELÍN ANAYA CEO LATAM of Colliers International Q: Which services that Colliers provides have proven most

on a global scale, we must follow international trends that

popular in the automotive industry, and why?

will allow us to learn from more developed and mature

A: Site selection is our most popular service in the sector.

markets, putting us ahead of the curve. We offer training

The automotive industry is very static from a real estate

courses for these types of solutions through what we call

point of view, meaning that companies do not move from

Colliers University course packages.

place to place on a regular basis. On some occasions they do need help to dispose of their properties, but that

Q: What makes a good location for different companies

only happens when a given property is surrounded by a

in the automotive industry, and what are the differences

metropolitan area, which is not a frequent occurrence.

between those types of locations?

The necessity for site selection is a standard within

A: There is quite a large difference between them all. For

the industry’s supply chain, which includes suppliers,

instance, the manufacturing plants need a location with

manufacturers, and dealers. Zoning is a particular challenge

a good source of labor, and decent infrastructure for

when it comes to dealerships because they need smaller

communication purposes, water, gas, and electricity. We

locations in areas of high consumer volume. Due to the

attribute a lot of importance to the work force capabilities

multiplicity of developments within the same space, getting

of any given state, which will in return allow the company

the right permits can be rather complex. We could encounter

to consistently reach their goals. In terms of distribution,

a mixture of maintenance shop areas, as well as office and

location and infrastructure are very important in order to

exhibition space, which makes it challenging. Additionally,

have reliable communication for logistics. Finally, when it

while having to find big spaces, we also have to keep price

comes to dealerships, exposure and location is essential.

ranges reasonable. The price does not fluctuate much unless

Having the right location means having the appropriate

we are seeing a new unexplored market area. In that regard,

place in accordance to the demographics that the company

if somebody is taking a risk in terms of a location, we could

is targeting. As such, it is common to see different brands

see a 50-60% price rise. However, dealerships are usually set

occupying the same space.

up in business locations that have proven to be successful and fruitful, which would not represent a large peak in the

Q: What are Colliers’ major advantages over some

price fluctuation.

Mexican industrial real estate firms? A: One of our major advantages is the ability to combine

306

Q: What have been your most important projects in

the best of local and international markets. We have

Mexico to date?

international

A: We have been involved in several projects with

coupled with a strong, 70-year local presence in the

major automotive brands in the industry, from OEMs to

Mexican real estate market. In that regard, the combination

suppliers in different tiers. The company has helped out

of domestic expertise, processes, and relationships, along

with manufacturing plants, supply chain companies, and

with international standards, makes us quite a unique

dealership centers, which are the most obvious projects.

company. Through our specialized teams, we are able

However, our involvement extends to providing the

to provide our clients with a range of services from an

necessary business solutions that a company needs. For

office, industrial, retail, and distribution standpoint. Finally,

example, after one of the recent market crises, one of our

and most importantly, our national presence throughout

clients approached us to evaluate every dealership site

Mexico’s major cities, which matches the needs of the

they owned. This helped them to acquire the necessary

automotive industry, allows us to partake in Mexico’s major

credit and overcome the crisis by offering those properties

areas of growth. We do not offer our own properties, nor

as collateral. As such, we worked alongside their credit and

do we invest in properties, so there is not a conflict of

finance department to help them ascertain the right value

interest. That is how we guarantee our clients that the best

of the property. Although we share a lot of best practices

available products in the market are being offered.

quality,

experience,

and

relationships,

| VIEW FROM THE TOP

INDUSTRIAL PARKS REACHING FOR AVAILABLE LABOR POOLS ROBERTO CANTĂ&#x161; ALANĂ?S Director General of Grupo Avante Q: How has Grupo Avante set itself apart from its main

companies are our targets. We are developing a new

competitors in Mexico?

industrial park in Apodaca, very close to Pesqueria, which

A: Grupo Avante develops industrial real estate that

is one of the most important industrial areas in the country

increases our customersâ&#x20AC;&#x2122; probability of success. What

where hundreds of companies are located. The demand

distinguishes us is that we have the best locations in terms

for labor is such that the area is an importer of talent. We

of labor supply. Most of our clients are manufacturing

have chosen to settle in Santa Rosa because it is close to

companies coming to Mexico for the first time so we help

the airport, restaurants, hotels, and customers like KIA, but

them find the best locations offering the lowest labor costs.

most importantly, close to an abundant labor pool.

Our locations in the Monterrey metropolitan area and the north of the country have an abundant labor pool, where

Q: Besides providing an advantageous location, what

workers can walk, cycle, or take a bus to work. In other

does Grupo Avante do to specifically address automotive

locations, companies have to provide transportation, which

needs?

can make labor more expensive. On top of that, when

A: In comparison to other industries, the automotive

employees are living close to their work and can spend

sector requires more improvements to their buildings. Our

more time with their family it enhances company loyalty.

engineering and construction staff can easily adapt to every phase of the automotive production cycle as they

Q: How attractive is the automotive industry for your

make improvements to the buildings. Monterrey has one

business, and what are you doing to attract automotive

of the most competitive industrial real estate markets in

clients?

Mexico, as a result of the considerable industrial investment.

A: The automotive market is very attractive to us because it is

Therefore, the cost of land is higher than in other markets.

a growing sector, so we want to be a part of it. We understand

While construction prices are similar to other areas, leasing

that automotive companies are very sensitive to costs, so we

prices are low due to the strong competition in the region.

aim to be competitive in that aspect of business. Some of

This makes the CAPEX higher and the internal rate of

our customers even require flat rates for a five-year period,

return rates lower than in other cities, but creates a more

meaning that we have to be creative in offering solutions.

stable market that lowers the investment risk.

Currently, around 20% of our buildings are designated for the automotive industry, but this will rise to 40% with our

Q: How does Grupo Avante collaborate with brokerage

Apodaca location which is specifically targeting that sector.

firms in order to gain a broader presence in the industry?

Our studies have shown that employees are more loyal in

A: Industrial brokerage firms have gained great prestige

our locations. This lowers costs because companies have

and presence, and consequently brokers will represent

to offer less economic incentives for people to reduce

foreign companies through tenant listings. With 80% of our

staff turnaround. Differences in rent costs are no longer a

transactions carried out through brokers and 20% directly

deciding factor when the location benefits represent such

with clients, most of our marketing efforts are focused

important savings. The savings might even cover the rent if

on providing information and sharing our products with

companies have a large workforce. This focus will become

brokers who know the market very well, and have a deep

more important in the coming year.

knowledge about client needs. Our typical customers are foreign companies that are concerned about the wellbeing

Q: What strategies are you implementing in order to serve

of their staff, eager for their employees to live close to

the new suppliers that will arrive for KIA?

work, and interested in transforming these advantages into

A: Although Korean companies have a tendency to buy

economic benefits for the whole operation. Moreover, they

land and buildings to suit, some of those companies are

are customers that need high-quality service standards

still interested in leasing. Out of all companies arriving

from a developer. When those factors are met, the brokers

to Mexico, just under half will look to lease, and those

will typically recommend Avante.

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INTEGRATED APPROACH TO AUTOMOTIVE INDUSTRY ELISA CRESPO FERRER Director General of the Automotive Cluster of the State of Mexico

Q: Who were the founding members of the Automotive

throughout the region. This has also been considerably

Cluster of the State of Mexico and what motivated them

useful in improving external perceptions of the country.

to form the cluster? A: The founding members of the automotive cluster were

Q: The automotive industry in the State of Mexico has

Grupo Merik, Hitachi Automotive Systems, Sag Mecasa,

expanded rapidly in recent years, but has this created

Sypris, Macimex, Grupo Tamer, Mikel’s, JSP, Organización

any constraints in terms of available land, talent, and

Brenn, Tebo, Lara, Hitchiner, YE Automotización, Suzuki,

infrastructure for future expansion?

TCSMX, Sivalco, and Catolsa. The whole group firmly

A: As one of the largest states in the country, the existing

believes that collaboration and sharing best practices

resources can easily handle new investment. With plentiful

between companies is the ideal strategy to motivate and

resources to accommodate new investors, the industry

improve competitiveness within our own entities. From

and the government must work responsibly to protect

the information gathered from other clusters we can try

and harmonize the natural resources and infrastructure.

to implement the strategies that are applicable to our

Now that premium brands such as Infiniti, Mercedes-

specific area, in the same way that the cluster in Nuevo

Benz, and BMW have made their plans clear, the cluster is

Leon handled its development.

considering which roles they will play in the development of the sector. Many companies in the cluster already supply

Q: How do you balance collaboration with the government

these brands and their presence undoubtedly contributed

to promote the existing automotive players with the

to these premium brands’ decision to relocate within

search for new investments?

Mexico. The government and the private sector must

A: We have collaborated with the state government,

work together to facilitate this type of investment, and all

acting as an ally to raise the state’s profile as well as its

over the country clusters will be collaborating to ensure

installations, while promoting the opportunities that

the state infrastructure is up to scratch and continues to

exist through continued improvements. We have had no

develop, creating better paid and more stable sources of

problem doing so while upholding our own position and

employment.

our reputation. Realistically, in comparison with other states with clusters, such as the aforementioned Nuevo

Q: Considering the 11% growth that the Mexican automotive

Leon, we are the region with longest automotive history in

industry experienced in 2014, how is the cluster preparing

the country, since our state hosted the first manufacturing

for the growth predicted in coming years?

plant. As a result our companies have a long tradition of

A: In the short term, we would like to be able to measure

high quality development and innovation. Furthermore,

our work not through numbers, but rather through

our human capital offers excellent added value as it

people’s reactions to the cluster’s growth and investor

is the most qualified in the country, thanks to the large

interest. However, we will subsequently measure employee

quantity of universities and training centers that exist in

retention to gauge the success and sustainability of this

the area, all of which were created in response to ongoing

growth. Businesses in the sector must be made aware

industry demand. The cluster has made a concerted effort

of savvy infrastructure locations, reevaluate their human

to join forces collaboratively with several technological

capital, and be able to locate financing schemes that are

universities and colleges to adapt engineering courses, or

realistic for SMEs. It is important that even smaller players

create new ones when necessary.

are able to contribute to the cluster’s response to demand and client requests. We aim to create free communications

308

The State of Mexico Cluster stands out as an automotive

and trust between all those involved, particularly the R&D

hub in Mexico, and is promoted to international investors

centers that are currently established in the area, including

via a Cluster Route, conceived to allow interested parties to

Ford, GM, Nissan, Magna, and the Mechanical Engineering

experience and understand the diversity of the companies

Center of Investigation (CIMA), among others.

| VIEW FROM THE TOP

ATTRACTING TALENT IN AN INCREASINGLY CROWDED MARKET ANTONIO HERRERA President of the Queretaro Automotive Cluster Q: What have been the cluster’s major achievements in

earlier stage and show kids that working in the automotive

attracting new automotive suppliers to the state?

industry can be fun, as is everything they could be doing

A: While the Queretaro cluster is still really young, the

with our companies. After all, we need to have more

association is generating momentum with automotive

engineers in Queretaro, otherwise we are going to face

suppliers by collaborating with companies, academic

major problems in the future.

institutions, and the government, to create a sense of unity between the suppliers. We also want to focus on service

Q: What strategies do you want to implement, looking at

providers, since we normally do not detect them despite

what other clusters at doing?

the impact they have on our organizations. The cluster’s

A: I am grateful to the clusters of Nuevo Leon and

creation was a big step forward for the automotive sector

Guanajuato, as they have been really open with us. Both

in Queretaro. Right now, we have 34 members among the

clusters have shared their experience and have given us

260 automotive companies in the state.

tips on how to grow faster. Also, they have enlightened us about the challenges we might face in the initial

Q: What level of collaboration has the cluster had with the

stages. The clusters are driven by businessmen and we

Queretaro state government?

are all working toward the same goal. The collaboration

A: The state is doing a very good job focusing on how

is gaining great momentum, as everyone is realizing the

it can bring more and better jobs, and the automotive

benefits it generates. We already have five applications

sector has been able to deliver that. Many of our Tier

for new members and we have not even started the

2 suppliers are SMEs that need better conditions to

cluster’s promotion. This is exactly what the other

increase their competitiveness and take advantage of

clusters told us would happen. Previously we were talking

great opportunities in the automotive sector. Clusters

about competition, but this is more about collaboration.

are excellent partners for governments in terms of

Guanajuato has all the OEMs but it does not have all the

implementing economic development policies and we

suppliers, so it makes sense to help each other.

have developed programs with state funding to support quality certifications, training, and business opportunities

Q: How will your strategies to attract new suppliers boost

for SMEs. We have confidence in this mechanism because

Queretaro as an automotive production base?

the cluster proposes programs and activities aligned with

A: We have to keep up with this regional view. We have

the industry’s requirements.

many OEMs around us, but most companies in Queretaro still send their production to the US. There are companies

Q: What strategies have you implemented regarding

that export 70-80% of their production, so we need to be

Queretaro’s human talent?

open to what is happening in the region, obviously without

A: The first challenge from a human resources standpoint

neglecting the opportunities outside of Mexico. The world

is to determine what we need from our university partners

is getting smaller, and even medium-sized companies are

in terms of knowledge and focus. Another target is to

exporting 50% of their production.

promote engineering professions. We are developing a strategy with ITESM to get young generations interested in

We are all working in the same industry and we are all facing

engineering fields, such as mechanical, metallurgical, and

the same problems, so we must work as a region to find the

material engineering. There has been a continuous decrease

best solutions and share them with our fellow companies.

in interest in these professions and now there is a lack of

Even though we only have 15% of the automotive companies

talent in the industry. Additionally, most universities offer

in the state, everyone is really excited about getting things

a large career portfolio, without knowing how to promote

started and supporting each other. Nobody can do this

their engineering division or how to attract the proper

alone, and that is why we need to strive for a community

students for each career. We want to attract people from an

that focuses on social responsibility for the state.

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HIRING LOCAL TALENT IS A BUSINESS ADVANTAGE GRISELDA HERNÁNDEZ CEO and Country General Manager of Kelly Services Mexico

Q: What differentiates Kelly Services’ offering from other

must also match the corporate culture. When we assess

recruiters for the automotive industry?

talents for specific companies, we seek to understand if

A: Kelly Services is differentiated from its competitors in

the person’s abilities and values will meet those of the

terms of specialized services. Our competitors are focused

searching company. Our psychometric and psychological

on leadership and key positions and, while we can do the

tests assess whether the candidates and companies will

same, we find talented people down the ranks or even

match. Not doing so would be unfair for both companies

people working on the assembly line or manufacturing side.

and candidates. The career development path and its

We also deliver Business Processing Outsourcing solutions,

accompanying opportunities for professional growth are

in which we manage the entirety of a company’s process

also important, and could involve cross-training, which

outside of its core business operations. For the automotive

is very popular among engineers. The opportunity to

industry, Kelly Services can build up solutions for supply

go abroad is also crucial for Mexican talent so they can

chain management, logistics, inventory, or packaging. We

be exposed to different ways of doing things. When

are also aligned with automotive companies on the human

they return, they will apply their knowledge to support

talent side, through a program called Flexible Human

the growth of the local automotive business. Engineers

Capital. The automotive industry has peaks and troughs in

with more experience will be interested in comparing

its production schedule, so if companies need 500 more

companies, the different technologies they will work with,

people at peak production times, they cannot afford to have

and alternative ways of doing business. Incorporating

500 more employees at other times throughout the year.

those opportunities into a job offer will make it easier for

That is when they come to us and we supply that extra talent

OEMs and suppliers alike to capture and retain the best

for the period of time that is required. When a peak season

engineers.

has ended in the automotive industry, we will move that staff to another industry that has a different peak season.

Q: Mexico is progressing as a destination for automotive R&D and engineering. To what extent has Kelly Services

Q: Many automotive companies around the world are

been seeking executives who will develop these types of

shifting from a static to a fluid leadership style. How

ventures?

do you see this playing out in the Mexican automotive

A: We are focused on specific targeted talent that can

industry?

support the investment that automotive companies are

A: Management styles in Mexico will not migrate toward

making in Mexico, while finding the right talent for the

those seen in other countries. This is not because the

culture and mobility required by the industry at this time.

companies here cannot make this change, but because

We are specializing in medium- and high-level managerial

culturally, Mexican workers need a structured management

positions. For technical and professional specifics in the

approach. A structured, yet strategic management style,

automotive industry, 95% of positions are now staffed

will pull the talent along and make them feel they have

by Mexicans. Some vacancies are still filled from abroad

a specific path to follow. The automotive industry needs

because of corporate decisions made at the top. Japanese

precise goals. I know this fluid management style is a

companies like to have Japanese leadership abroad,

growing trend but I would not recommend any automotive

and the same is true for Italian and German companies.

firms do so in Mexico, given the nuances of this market.

However, it is increasingly evident that once a company and its technology are deployed, executives realize that

310

Q: How do talent searches change when looking for

having nationals in management is an advantage. The

someone who can fit into a Japanese, German, or

knowledge and expertise that Mexican executives have

American corporate culture?

about how to do business locally is an obvious advantage.

A: There are major differences. In the automotive industry,

Companies like Ford or GM that have been here for many

the right candidates have the right knowledge but they

years already have 99% local employment.

| VIEW FROM THE TOP

INDUSTRIAL PARK INITIATIVES TO SOLVE HUMAN CAPITAL CRISIS GILBERTO GONZĂ LEZ Director General of Castro del Rio Q: What is the history of Castro del Rio, and what led

area inside the park for CONALEP to build its campus.

Marabis to the decision to first establish the industrial

After students complete the program, some are taken

park in Guanajuato?

to Germany, China, or Poland to continue their training,

A: Since its establishment in 2006, Castro del Rio has

while others enter a collaboration program with the

been directed toward the automotive sector, but only had

Irapuato Institute of Technology and Higher Education

German companies in the park to begin with. Now, 11 out

(ITESI) to obtain their engineering degree. The companies

of the 25 German companies in Guanajuato are located

provide funding for tuition, meals, and transportation as

at Castro del Rio. Alongside these, there are around 72

long as students continue to work weekdays and study

Japanese companies in the state, 27 of which are located

at weekends. The companies are not obliged to hire any

in the park. Castro del Rio is the largest private industrial

percentage of the students in their programs, but there

park in the state, just behind the state-funded public

are incentives from the government to employ close to

industrial park, Puerto Interior.

80% of the people enrolled in different kinds of training programs.

The location is a key contributory factor to our success, the park is in the center of Mexicoâ&#x20AC;&#x2122;s three large cities and

This program has increased our specialized labor, there is

is connected to the Pan-American Highway. We have easy

less migration to the US, and companies are now looking

access to the seaports, and we are intersected by two

for local workers. The reason for the success of this

railroads. Additionally Guanajuato has one of the busiest

program is that we found an opportunity in the need for

airports in central Mexico. Many companies are coming

specialized labor and we are only focusing our efforts on

to the Bajio area and 80% of automotive companies are

developing students in technical areas that the companies

within 400km of Irapuato, allowing us to target every

require. The program was originally created to reduce

OEM in the region. Another reason for our growth in the

the school dropout rate. At first, parents were concerned

area is that companies here are either partners or supply

about sending their daughters to work at the plants, but

one another. We have created an association of general

every time the program starts, each facility invites parents

managers in the park with three different committees:

and teachers to see how they operate. Once the family see

HR, Environmental, Health, and Security (EHS), and

the benefits and the good working conditions, they are

Purchasing. These committees are in charge of reviewing

keen for their children to take advantage of everything the

the requirements of the companies in these areas.

program has to offer.

Q: How is Castro del Rio helping the government to

Q: How is Guanajuato attracting foreign investment while

address the potential bottleneck in automotive human

ensuring that its benefits are distributed across the state?

capital?

A: The government is worried about overpopulation in

A: We have a lot of specialized labor available in the

certain cities and is trying to spread work opportunities as

area. The average population age in the country is 27, but

widely as it can. It is important to target other communities

in Guanajuato it is 24, and in Irapuato it is as low as 21.

that also need job opportunities, otherwise we risk large

Schaeffler Technologies was the first company to address

waves of migration. We are requesting the implementation

the need for technical training directly. The company

of the necessary incentives and financial support to

decided to bring its German dual education model, hiring

develop new facilities, and in return we are pledging to

apprentices from schools that would be willing to adopt

maintain the same prices, preserving the market for the

particular educational strategies. They partnered with the

entire state. In our current facilities, we have already sold

National Council of Professional Technological Education

65% of our capacity, and the government is now looking

(CONALEP) and designed a program targeted at students

for us to expand our operations to new locations closer to

with minimal resources. Castro del Rio designated an

the new OEMs.

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| PROJECT SPOTLIGHT: NISSAN A2 VEHICLE DISTRIBUTION CENTER Nissan has proven its dedication to Mexico with a number

Intermodal Center near Houston in 2009. Having seen a drop

of recent investments, one of which is vehicle distribution

in business in recent years, it is likely that Nissan’s VDC will

center (VDC) at the company’s Aguascalientes A2 plant. The

boost trade for the company. The VDC was built to cater

investment of US$31 million aimed was at expanding exports

specifically to the current and upcoming logistics operations

for the Sentra models manufactured at the plant, with a

created by the strategic alliance between Renault-Nissan and

goal of sending 720 to the US on a daily basis. The VDC was

Daimler. This cooperation project will be housed at a further

completed in August 2014 and now distributes 720 vehicles

plant in Aguascalientes, to be built near the A2 complex,

by rail to the US or Brazil, as well as a further 629 vehicles via

and at full capacity Nissan projects an annual production of

road freight. Six hours after a vehicle is produced in Nissan’s

300,000 vehicles. In light of this, Nissan is also planning a

A2 plant, it is ready in the VDC. Another six hours later, the

second phase of development in which the plant capacity

vehicle is either at the US border or in Veracruz, ready to be

will be expanded to export 1,320 units daily by rail and 650

exported by sea. Boasting 14km of railroad infrastructure, the

by road. Aguascalientes has become pivotal for Nissan’s

VDC is capable of the simultaneous loading of 144 platforms.

Mexican operations. Manufacturing capacity of the Sentra

Nissan’s principal third party logistics provider is Wallenius

can reach 170,000 units per year, and accounts for more than

Wilhelmsen Logistics, which covers all yard and transport

half the units produced in 2014 by Nissan. Furthermore, the

operations for the company. Any by-rail vehicles are sent

impressive combined production rates of both Nissan plants

across the border at Eagle Pass, El Paso, and Laredo. The

in Aguascalientes means that the manufacturer is producing

development has been good news for railroad operator

a new vehicle every 38 seconds, so the move to develop

Kansas City Southern, which opened a new distribution

a VDC that could handle this volume was essential for the

center for Nissan vehicles at the 800-acre CenterPoint

company to sustain its success in North America.

| VIEW FROM THE TOP

PLANT RELOCATION AND BESPOKE SPACE SOLUTIONS GUSTAVO RUBIO Commercial Director of Williams Scotsman

Q: Which contribution does Williams Scotsman aspire

of our success is the relationship we established with KIA

to make to the development of the Mexican automotive

for whom we are the main space solutions provider. These

industry?

recommendations were generated by our fleet of over

A: Williams Scotsman builds small cities that complement

3,500 units, which is unparalleled in Mexico.

and provide services to project developments. Our space solutions for industrial developments include schools, mobile

Q: What type of space solution is most commonly

offices, bedrooms, libraries, and restaurants. The automotive

requested by the automotive industry?

industry will rely heavily on this type of service, since recent

A: The automotive industry usually requires office spaces,

expansions exceeded their expectations. Our focus has been

training rooms, and dining halls, although we only provide

channeled toward building light vehicle plants and facilities,

the shell for the latter. Schools are also demanded in some

although we have a strong involvement with Tier 1 and Tier 2

instances, but we remain skeptical about the success of this

suppliers in both light and heavy segments. Ideally Williams

type of service. Our traditional office space is comprised

Scotsman starts working with OEMs as soon as they have

of cubicles with drawing boards, training rooms and

chosen a plot of land to build on. Being able to assess the

meeting rooms, which are essentially normal offices with

number of employees our clients will have to account for, as

furniture and screens but with added mobility features.

well as the equipment they will need in order to run their

Our relocation services have also been welcomed across the

operations efficiently allows us to determine the hydraulic,

automotive industry and in Mexico as a whole. Many projects

electric, and furniture specifications of our solution’s layout.

carried out by the oil and gas, automotive, and educational

As space solution providers, we offer value propositions

industries are relocated, and we can provide flexible

such as adapting plant developments as OEMs expand their

solutions based on the project needs. In the past, most of our

workforce and occasionally helping to modify clients’ internal

workforce was focused on the oil and gas market niche with

offices. Additionally Williams Scotsman differentiates itself

the help of PEMEX. However, Williams Scotsman has stressed

with fitting interior equipment, tailored for our clients to

the importance of the automotive industry and has therefore

lower their workload and stress levels. In the past, our value

rechanneled resources toward our Redi-Plex solution, which

added product services represented 5% of our total revenue,

we believe fits the automotive industry perfectly.

but that percentage increased to 15% during 2015 and our short-term goal is for this to reach 30%. We have two basic

Q: What are Williams Scotsman’s priorities and ambitions

products, the first being our trailer camp establishment, while

for the automotive industry in the years to come?

the second is our AS Flex solution. Although the plots of land

A: Audi’s plant development is a priority that we are

where plant developments take place are extensive, most

working on meticulously. The second stage of the plant

spaces have already been destined for specific purposes.

development is an ambitious project, which makes it

This makes vertical solutions very attractive for customers

even more attractive, since it would be a record breaking

who wish to use space that already houses developments,

project for Williams Scotsman Mexico. Furthermore,

and our AS Flex solution can grow vertically, contrary to the

as a result of our relationship with Audi, we have been

most basic solutions, which can only expand horizontally. KIA

able to enter negotiations with BMW’s San Luis Potosi

and Mazda combine both solutions, which works for them.

plant. In addition, we are working with Mercedes-Benz in their Aguascalientes plant and KIA on various ventures

Q: What specific benefits does Williams Scotsman obtain

throughout 2015. Finally, we are also working with Chrysler

from operating in the Bajio region?

on its Toluca plant expansion. Once we close negotiations

A: We have directly benefited from the boom in the Bajio

with BMW, our next aim, albeit long-term, is to have

region by receiving business from OEMs during their

presence in every automotive plant across the country, as

expansions thanks to recommendations from suppliers,

well as every orbiting supplier. We try to generate long-

particularly Mazda, Nissan, and Honda. Another example

term relationships with automotive companies.

313

THE FACE BEHIND MEXICOâ&#x20AC;&#x2122;S INDUSTRIAL PARKS Since 1999, the Mexican Association of Industrial Parks

Finally, it should operate under by-laws and adhere to

(AMPIP) has represented the interests of owners, investors,

relevant government legislation, while possessing an

and managers within the national industrial park network.

administrative facility to oversee security and operations

The association offers a platform for these individuals to

in the area. Although state governments are eager to

share best practices, communicate through forums, and

foster industrial parks to create jobs, their budgets and

overcome the challenges faced by the industry. AMPIP

human infrastructure have not been enough to develop

can also facilitate the process for multinational companies

industrial parks within the scope and standards required by

looking to begin operations in Mexico, and currently has

multinational companies interested in locating in Mexico,

56 affiliate members, consisting of private land developers,

giving AMPIP a significant opportunity to step in.

investment trusts, real estate investment trusts (REITs) and public real estate trusts belonging to state governments.

Currently, AMPIP is working with the Tax Administration

These players control around 250 industrial parks across

Service (SAT) on the New Scheme Certified Company

the country, which constitute a base for approximately

(NEEC) accreditation in order to attract more companies

2,500 national and international companies, generating

as affiliates, especially from the automotive industry.

1.7 million positions of employment. Since 2012, this sector

The NEEC program applies to any company involved

has seen a continual increase due to a greater liquidity,

with exports and imports and seeks to strengthen the

and correspondingly the vacancy rate of industrial parks

logistics process through the implementation of minimum

dropped from almost 10% at the beginning of 2014 to 7.8%

international security standards for the benefit of its

in the first quarter of 2015.

members, which are largely private sector companies. A further proposed benefit of the NEEC scheme, expected to

According to Mexican guidelines, an industrial park is a

be published next year, would involve tax breaks for those

delimited area of land that meets three certain specifications.

accredited companies. In line with this process, AMPIP

Firstly, the land must have the necessary permissions for

has now standardized the policies and security protocols

the construction of manufacturing plants and distribution

across its affiliated industrial parks, in an effort to make

centers. Secondly, it must contain urban infrastructure,

the movement of goods safer and more efficient, as well as

such as water, electricity and telecommunications facilities.

attracting further investment from desirable clients.

| VIEW FROM THE TOP

OEMS BOLSTERING INDUSTRIAL PARK DEVELOPMENT IN SLP GERARDO BOCARD Director General of Argo Industrial Group Q: What have been the highlights for Argo Industrial

different options available in the state to more than 30 KIA

Group since BMW’s announcement of a new plant in San

and Hyundai suppliers. The two reasons why a company

Luis Potosi?

would choose Millennium over any other industrial park are

A: Our future changed on July 4, 2014, when BMW’s

flexibility and quality. We are open to meeting the needs

directors decided to build a new facility in San Luis Potosi.

of our customers, and we are flexible in terms of size,

We had been expecting this news since 2000, when Toyota

services, and payment. In general, Millennium is a better fit

first announced its desire to build a new plant in Central

for medium-sized companies.

Mexico. Even though Toyota did not settle in San Luis Potosi, GM did so in 2008 and it has been very successful.

Q: Last year, Millennium Industrial Park was at 80% of its

Given the high-quality standards expected by BMW, the

capacity, but how has it developed in the last 12 months?

company will expect its suppliers to be close, resulting in a

A: Two new companies have been welcomed into the park

huge growth for the state over the next few years.

over the last year, and we have assisted in the expansion of two of our existing companies. Daikin recently decided to

Q: How did BMW’s announcement change the position of

relocate its national production facility to San Luis Potosi,

San Luis Potosi in the Mexican automotive industry?

but had plans to continue growing, leading to the company

A: We will continue to see Japanese companies coming into

acquiring 5 hectares of land, representing a 50% increase

San Luis Potosi. KIA and Hyundai in Nuevo Leon will help the

to their property. The Japanese company Mitsumi started

state of Queretaro due to the number of Korean companies

operations in February 2014, and a Swiss company called

already working there, but they will also benefit San Luis

Metalor started in April. Additionally, a Spanish company

Potosi. There will be two kinds of markets consisting of

called Viscofan came in 2004 and is now tripling its size. In

big companies that directly supply to the OEMs, and small

terms of land, we are at 85% capacity. Millennium Industrial

corporations coming to supply Guanajuato, Aguascalientes,

Park is growing, and this year we have already started

Nuevo Leon, and the entire Bajio region. We have to align the

working on the fourth stage of the park. By the end of the

educational training centers with the German companies and

year we should have 70 more hectares of available land,

find out what they expect from Mexico. The Technological

completing a total of 170 hectares. At the moment, we are

University of San Luis Potosi (UTSLP) is going to initiate a

negotiating the sale of 12 hectares, but this is currently

new training program this year in order to prepare for BMW’s

being evaluated by all participating companies and their

arrival. They are going to invest in a different teaching

suppliers. By the end of the year there will be enough land

method for the Mexican workforce, working alongside the

available, so companies will be able to have more location

companies to develop human capital in the state.

options in San Luis Potosi.

Q: To what extent is Argo Industrial Group cooperating or

Q: To what extent are you already building infrastructure

competing with other industrial parks in the region?

for companies that have not arrived in the country yet?

A: The private industrial parks in San Luis Potosi have been

A: We have already planned to have SPEC buildings with a

working together for many years, and this year we will

size of around 5,000m2, which has proven to be the right

embark on our fourth trade mission to promote the state

size for companies. At the moment, we have one building

outside of Mexico. When a company decides to settle in

and we are going to construct another. Although these will

a certain location, it will not change its mind. Therefore,

be starter buildings, companies may choose to expand them

we have to team up to promote the state, the city, and

at a later date. Energy will already be available, and the

the security advantages of the state. We have first class

minimum time required for occupancy will be five months.

parks with the necessary infrastructure, and a 100-year-

By the end of 2015, we expect to have six companies already

old history of managing industrial facilities. We have

signed with Millennium or Logistik. The industry is going to

already been to Taiwan and Korea and we presented the

radically change in the next year, especially in Central Mexico.

315

| VIEW FROM THE TOP

INDUSTRIAL PARKS BECOMING MICRO CITIES FOR TENANTS MICHELE PORRINO PERASSI Director General of WTC Industrial

Q: What were the main hurdles that you had to initially

A: We are constantly looking at how to offer more amenities,

overcome to recruit companies for the industrial park?

in addition to the standard infrastructure of any industrial

A: WTC Industrial has gone through different cycles since

park. The free trade zone was something so innovative that

we started in 2001 and is now entering an expansion

many people predicted it would not be used, but now it

phase. The rules are changing and we must keep up with

offers a considerable competitive advantage. We use a large

the speed of the industry, ensuring that our infrastructure

logistics company from Japan that just started operations,

is prepared. WTC is negotiating with many potential

and another company managing Kawasaki is taking

customers and plans to double the industrial park to 700

advantage of our free trade zone. Moreover, spaces created

hectares, adding a further 350 hectares onto the western

for corporate offices resemble a comfortable college campus

side in the next two or three months. We may double that

environment. This office space is attracting companies that

space again in the medium term, possibly further from our

offer services to park tenants, such as customs, logistics,

current facilities, but remaining within the industrial zone

legal, and language services.

of San Luis Potosi. Only 15-20% of the current space is still available, and in a period of six months we expect no more

In order to provide a smooth transition upon arrival,

than 20% of the new 700 hectare park to remain vacant.

we assess potential customers and offer headhunters, legal consultancy, accounting services, technical, and

How

have

your

priorities

changed

since

the

architectural services. We are opening a business center

announcement of the BMW investment last year?

in our offices, so that our clients can rent offices or

A: Approximately 70-80% of the new projects are

meeting rooms on an hourly or daily basis, and we will also

related to the automotive industry, with BMW serving

provide virtual offices, a less expensive option to boost

as a magnet that attracts even more companies. We are

the professional image of a company. We are planning to

seeing interest from other industries, such as companies

host a hotel, a gym, and every facility that may be used

with manufacturing facilities in Asia that are interested

by the tenants in the park to create a small city, and we

in returning to the Americas. The automotive industry

are looking into the possibility of building housing within

is growing rapidly in Central and Northern Mexico, with

the park. Other industrial parks have already started

Nissan and Mercedes plants in Aguascalientes, KIA in

implementing our solutions, such as the free trade zone.

Nuevo Leon, BMW in San Luis Potosi, and Honda and

Nevertheless, it will be essential to devise new ideas to

Mazda in Guanajuato. Additionally, GM announced that

maintain our position at the forefront of the industry.

they will double their production capacity in San Luis Potosi. This entire zone is becoming a sizable automotive

Q: Mexico is moving from a low-tech to a high-tech

cluster, and we are in the ideal geographic position with

environment. What can WTC Industrial offer to ease that

the adequate logistics solutions to serve these companies.

transition?

WTC Industrial is the only park with a customs office inside

A: We can offer our services independently of the

the facilities and with a multimodal terminal. Companies

standard ones that industrial parks offer, hence creating

like Honda in Jalisco and Samsung in Queretaro are using

an environment that will eventually attract other kinds

our terminal to receive their components for manufacturing

of industries, ideally complex corporations. In order to

processes. We expect to build another terminal to handle

professionally develop companiesâ&#x20AC;&#x2122; human capital, we are

liquids and general cargo so the existing terminal can focus

negotiating with different universities to sell their services

on containers. We are also looking into the possibility of

inside WTC Industrial and the entire industrial zone. Our

expanding outside of San Luis Potosi.

vision is to incorporate these aspects to create an ecosystem into which one day we could even add schools for the

316

Q: Which strategies have you implemented to compete

children of our employees. There is a huge opportunity for

with other industrial parks in the area?

industries in Mexico, particularly in San Luis Potosi.

| VIEW FROM THE TOP

WAREHOUSING ALLOWS COMPANIES TO FOCUS ON THEIR CORE BUSINESS JOSÉ ANTONIO LORCA CEO of SIL Logistics Q: Where did SIL Logistics originate and what have been

The international competitors lease a facility to provide

its principal recent developments?

services to their clients, but do not operate with low costs,

A: We entered the market ten years ago with an investment

making it difficult for them to close contracts with Tier 2

for what is now the biggest warehouse in San Luis Potosi.

or Tier 3 companies. SIL is competitive on price, service

We provide efficient services in terms of logistics, quality

quality, and local customer adaptability so we are currently

inspections, and outsourcing. We are located on the most

transitioning toward gaining larger contracts.

important highway of Mexico, 1.5km away from BMW facilities and 4km away from GM. Most companies come to

Five years ago we were working with 140 customers,

Mexico planning to begin with 50% of their capacity from

around 75% of which were small companies. However, we

their home countries and to acquire the other 50% once

realized that having such a large customer base was not

they are established. We offer warehouse management to

cost effective, so we decided to target fewer customers

these companies, receiving and delivering their materials

with higher requirements. Three years ago, we had

in a timely manner, so that they can concentrate on

only six customers filling our entire capacity, but this

other core business activities, and accordingly operate

presented more risk, and when two of them built their own

at lower costs. We have received considerable demand

warehouses, we changed our strategy once again. Now, we

for our industrial park after the announcement of BMW’s

aim to manage 25 clients at a time, and to strengthen long

new plant. We are also receiving business from Japanese

term business relationships with all of them. Around 50% of

companies, ten of whom are already working with us, with

our business is currently directed at the automotive sector

25 more that will arrive in the next three years.

since SIL began with a complete focus on automotive but have diversified since then.

Q: What major achievements have been the company highlights since it was established?

Q: Why would you advise against companies building

A: Our first client was a French automotive company that held

their own warehouse facilities?

MX$150 million (US$10 million) in stock per month divided

A: In terms of cost reductions, cost avoidance and working

between 32 suppliers. We presented a five year plan which

capital reduction, the advantages of specialization are

would save them MX$120 million (US$8 million) monthly

clear. Warehousing is complex, consumes space, and

by operating eight delivery windows per day, seven days a

implies more liabilities such as leasing forklifts. We are

week. Specifically with a US automotive company, we grew

concentrating on warehouse services, so our floor may

from employing eight people to 400 people and managing

be 100 times cheaper than on-site facilities. To assist

4,000m of storage for chemical products and raw material

automotive companies, we are focusing on those that

in the first two years of collaboration. In terms of racks and

are already customers and are introducing assembly lines

height, with 26,000m of storage space, SIL Logistics is the

into the state. When we achieve this, we will be at 85%

most efficient warehouse company in San Luis Potosi. We

capacity, which is our maximum limit. We also plan to

use double density racks and have double reach forklifts,

develop our industrial park, to offer warehousing, delivery,

which gives us an advantage of 33% against any other

and shipping services to the manufacturers established

warehouse. Height gives us another 20% advantage, given

there. Over the next five years, we expect to be managing

that most warehouse heights in San Luis Potosi reach only

five small- to medium-sized Tier 3 automotive companies

6m while we offer 10.5m at our lowest point.

with warehousing space of between 5,000m2 and

8,000m2. We currently offer the same logistics services Q: Between local and international competition, which

in Aguascalientes and we have been exploring options

would you consider to be SIL Logistics’ biggest threat?

for expansion in Guanajuato. We have already acquired 3

A: To date, a total of 18 companies are operating in San

hectares in Aguascalientes, located 2.5km away from the

Luis Potosi, 14 of which are local and four international.

nearest Nissan facility.

317

| VIEW FROM THE TOP

NEW TRUCKING TECHNOLOGY KEY TO STRENGTHENING ROAD SAFETY ALEX THEISSEN LONG President of the National Association of Private Transport (ANTP) Q: How do transportation and logistics companies benefit

Q: Many believe that the limits outlined within the NOM-

from being affiliated with ANTP?

012 are a cause of road accidents. What is ANTP’s stance

A: Our association of transportation users and service

on this issue?

providers represent 80% of Mexico’s shipments moved by

A: Many factors affect road safety, including truck

truck. We have more than 150 affiliated companies, most

dimensions, road types and conditions, and the skill levels

of which are major companies that need transportation

of the drivers. Risks are also increased because everyone

services. These include FEMSA, Bimbo, CEMEX, PepsiCo,

is looking to boost productivity. If loaded correctly, a truck

Lala, and Walmart, as well as other shippers that export large

with large dimensions can achieve high productivity levels

volumes of products from Mexico. Some of our members

without compromising safety or damaging infrastructure.

are the transportation companies that service our affiliates,

We are pushing for the introduction of bigger trucks

or are looking for those opportunities. The main benefit

and the appropriate infrastructure in order to reduce

for companies being associated with ANTP is that they

the number of trucks on the road and the probability of

have legal representation. Whenever a new law that affects

accidents, as well as lowering emissions and toll costs.

the industry is put in place, our organization protects our

Mexico’s highway infrastructure is being underused due

members’ interests and ensures that the best guidelines

to its high toll costs, therefore we suggested changes

are established in terms of logistics and transportation. We

regarding double axle vehicles to the government. We

always offer views and opinions to the pertinent authorities

proposed that they must have air suspensions, electronic

before any regulation is established, specifically in four

engines, and controlled speed mechanisms, to name a

areas of concern, namely safety, environmental friendliness,

few adaptations. There is technology available to match

infrastructure, and protecting the productivity of companies.

the double axle needs, such as dollies, tires, engines, and

For instance, we are currently implementing the new

electronic transmissions, which all further improve the

NOM-012 for weight and dimensions alongside the federal

ease of driving and, therefore, driver safety. The industry

government to determine the permit process and necessary

should focus on driver training and fatigue management,

documentation. In addition, we are working with Mexico

and ultimately safety specificities must be applied to the

City’s local government on the new mobility law, which

legal norms by the government. By promoting productivity

restricts the hours of service, the types of vehicles, and the

without losing sight of safety ANTP can help to reduce

roads our members can transit, in order to define a strategy

operating costs in the logistics business.

that will not affect the industry negatively. We also work with other associations such as CANACAR and CONCAMIN, in

Q: What are ANTP’s major ambitions for 2015?

order to represent the industry in the best way possible and

A: Our biggest project is implementing the NOM-012 without

to come up with the fullest ideas to reach our goals.

harming Mexico’s productivity, while working on promoting safety, technological developments, and establishing proper

318

Q: What are ANTP’s flagship projects?

guidelines. Many government regulations will be changed,

A: ANTP has now been awarding the National Security

as well as connectivity rules such as a road permit program

Award for 15 years in order to promote companies that

that will slightly affect productivity but will immensely

have high levels of safety in the transportation field. To

improve safety. These permits will restrict the use of roads

achieve this, we request information regarding drivers,

to those who have been credited with the appropriate

driving habits, and truck specifications, before holding an

documentation to verify that they meet safety standards.

auditing process to ensure that companies comply with

There is a direct correlation between connectivity and

our standards, or to give them the information they need

productivity, and we must ensure the correct mechanisms

to make appropriate improvements. We also award drivers

are in place to solidify this. Finally, we are working directly

based on their driving record and tested abilities, holding

with OEMs on the creation of new vehicles that comply with

an event in Mexico City to present them with the awards.

new environmental specifications.

| VIEW FROM THE TOP

COMMUNICATING AUTOMOTIVE BENEFITS OF MEXICO’S INTERMODAL LOGISTICS FERNANDO RAMOS CASAS President of the Mexican Association of Intermodal Transportation (AMTI) Q: What have been AMTI’s greatest contributions to the

what they have to implement, after which it becomes much

development of intermodal services in Mexico?

easier to do business with them. Comparatively, intermodal

A: AMTI was founded in 1999 because of the importance of

requires a little more communication and preparation.

intermodal growth in Mexico during that time. Back then,

When comparing the transit times and the ease of business

due to the growth of the automotive industry, the decision

between the two modes of transportation, then road is much

was made to create a specialized intermodal terminal

more preferable. Now, there are specialized companies that

called Pantaco. The first company to transport containers

offer door-to-door delivery for practically every requirement

using intermodal services in Mexico was Chrysler in 1990,

in the supply chain, helping manufacturers and suppliers to

assisted by APL logistics. By 1999, other active players

meet their logistic needs and provide a singular invoice for

in the industry decided to create AMTI in order to have

the combination of the services.

one voice for negotiating with government authorities, customs, and the railroad industry. Over the last 15 years,

Q: To what extent are AMTI and other associations lobbying

the intermodal transportation industry in Mexico has been

the government to prioritize railroad infrastructure and

growing between 14-18% every year. This was originally

help intermodal logistics to grow?

focused on the NAFTA corridors, but before long intermodal

A: Right now, we are having a discussion within the

transportation began to grow in the arena of privatized

association because there is an opinion that all the

imports, mainly at the ports of Manzanillo, Lazaro Cardenas,

investment needs to be made by the railroad companies.

and the Port of Veracruz. Right now, specifically at Lazaro

These kinds of investments need to be made by the

Cardenas, at least 65% of the port’s containers are moved

government because railroad companies will unlikely see a

through intermodal techniques. In Manzanillo this is only

return given that the concession for the railroads last for

around 20-21%, mainly because of the lack of infrastructure,

30 years. The country requires this, so the government

and in Veracruz the percentage is only around 9%.

must step up. The problem is that we see an absence of authorities in terms of the railroad industry. The Railroad

Q: How does AMTI support logistics companies trying to

Reform that took place in December 2014 states that the

align themselves with the sector’s dynamism?

government will create a new railroad agency; so many

A: In terms of what Mexico can offer, there have been more

things should then start to change.

and more industrial parks and free-trade zones working with customs services every year. With those in place, the

Q: When automotive companies are trying to decide

suppliers used by auto parts manufacturers can handle the

on the best intermodal logistics, how much do these

merchandise on their behalf, which will improve the supply

companies consult with AMTI?

chain. In those free-trade zones, you bring in a shipment

A: We have a lot of talent within this association, which

without paying any tax, you can perform all the necessary

now represents almost 50 companies with significant

inventory control, and when the industry requires one specific

human expertise. These companies operate within the

part, these suppliers can provide it quickly and efficiently.

railroads and intermodal terminals, and are made up of consultants, customs brokers, IMC companies, carriers,

AMTI has been trying to develop much smoother, singular

and Mexican transportation companies, of which we

services with customs at road borders. We have prepared

are focusing on trying to involve more this year. The big

an inbound customs document called a Transit Internal to

transportation companies are road-based, but we really

simplify the process of bringing goods into the country’s

need the intervention of these specialized carriers in order

internal terminals, changing the way that the whole

for them to understand that intermodal services are quite

process is approached. Since NAFTA was established,

different to those provided on the road. Their customers

some importers think that the process of importing broad

are not the beneficial owners; their customers are the

freight is simple, so they need a better understanding of

carriers.

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| VIEW FROM THE TOP

TAILORING LOGISTICS SOLUTIONS FOR NAFTA REGION LEFT: José Antonio Icaza, Sales Manager of Hellmann Automotive Logistics RIGHT: Honorio Rodríguez, Customer Service Manager of Hellmann Automotive Logistics

Q: How do Hellmann’s operations in Mexico connect with

branches in Europe or Asia, our teams can act on behalf

the company’s global automotive strategy?

of our clients. So far, we have had successful experiences

JAI: Hellmann Worldwide Logistics has an extensive

with even the most demanding automotive companies in

presence in 154 countries, with strong automotive units in

our network. This is thanks to our continuous improvement

25 of them. One of our main advantages is that we have

process, as well as our knowledge of how to sustain good

international specialized teams that are thoroughly trained

relationships between OEMs and their suppliers.

to understand each of our products. We also present several service options through our control towers,

Q: What major factors have attracted so many companies

providing them with the best solutions in terms of time

to Mexico and how is Hellmann preparing to receive them?

and costs. Furthermore, we are well supported in case

JAI: In 2011, our automotive division in Mexico City covered

of any emergency, since we can work during weekends

the entire country. Now, we have designated a national

or holidays, always maintaining constant communication

automotive team covering all the major automotive

with the client. Even though we manage distribution

clusters in Mexico including Puebla, Queretaro, Leon,

warehouses for OEMs in other regions, our main focus in

Guadalajara,

Mexico is currently with Tier 1 and Tier 2 suppliers.

position connects North America with South America,

and

Monterrey.

Mexico’s

geographical

Asia via the Pacific, and Europe via the Atlantic, giving HR: Our automotive teams in Mexico and the US are able

the country a defining advantage. Likewise, the country’s

to oversee the supply chain of each of our customers,

investor-friendly environment has convinced several

depending on their specific needs. Hellmann does not

global companies to invest in the nation. While keeping

outsource any of its management operations, since part of

these distinct benefits in mind, Hellman analyzes the

our goal is to be close to our customers at all times. That

supply chains of its customers and offers advice on

way, although there might be time differences between our

potential areas of opportunity.

CREATING A TALENT PIPELINE, HR BEST PRACTICES By Joanne Handley - Due to the current employment

the essential skills to potentially climb up the Hellmann

market situation, it is becoming increasingly difficult for

career ladder as well as to provide better support for our

Hellmann to recruit, develop and retain the right people

customers. The principal goal of this talent programme is

for our organization. In order to address these issues, in

to prepare our people for new challenges, to enhance their

accordance with our company ethos, we have put a lot

strengths and help them deal with environmental change

of effort into gaining visibility among talented potential

for the success and further development of Hellmann.

employees around the world. This is necessary in order to

From a corporate perspective, it is an opportunity to retain

ensure that we put the right development programs in place

our talented employees and encourage internal employee

to support them in achieving their full potential. In 2008,

promotions in order to live sustainably.

we launched our first International Logistics Management

320

& Leadership programme (ILM). With this programme

As important as it is to develop our senior level talents it is

we select employees from all around the world through

equally important for Hellmann to ensure we have a stable

a rigorous recruitment process and put them through a

talent pipeline so we can easily promote from within. As

number of key development modules, providing them with

a result, we also support the development of our talent

HR: Our dedicated team has enough experience in the

represent dangerous competition for Mexican companies.

automotive industry and the Mexican market, and even

NAFTA states that companies can import and export

though Hellmann’s core business is logistics, most of our

freely between Mexico and the US, but these conditions

clients are part of this sector. Furthermore, our People

are currently restricting this kind of collaboration. At

Development Programs ensure that our team members

the moment, we have three or four companies with

are prepared to take on new leadership roles within the

permission to enter the US. However, we must also

organization.

comply with US regulations in terms of the fuel our units use, which creates a completely new obstacle.

Q: What are the main challenges of developing logistics plans to enter the US market from Mexico?

Q: What will be the highlights of Hellman’s automotive

HR: Competitiveness and security are the main challenges

logistics in 2015 and in the future?

that

JAI: We know the benefits that a reduction of two or three

rail

Mexico

infrastructure

currently

facing.

between

both

Underdeveloped requires

days can create for our customers. We always attempt

considerable investment before we can consider rail freight

countries

to reduce costs and transit time, but our clients are the

a viable option. Part of our strategy is to standardize

ones that make the final decisions. We foresee a huge

logistics plans for our clients, which will enable them to

amount of growth between 2015 and 2017 among OEMs

manage all their facilities in the country simultaneously.

that are about to start production, as well as those that

Many global companies still operate their logistics

are already operating. However, we are concerned about

independently, unaware of the benefits of our system of

the infrastructure in Central Mexico. This region has now

integrated logistics.

reached its limits in certain areas of the Bajio and we are not sure how much more growth it can sustain.

JAI: While our focus is currently overseas where we possess developed infrastructure, we may begin these types of

HR: We are working on transit time reduction by moving

operations in Mexico in the near future; it all depends on

our operations to the most convenient locations. In

the requirements of our clients. US protectionism still

Germany, for example, we reduced transit time by 20% by

poses a challenge for logistics companies, given that the

relocating our clients’ operations. The Mexican government

country tries to protect its national players from foreign

is promoting local sourcing, and the expectation is that we

competition. Similarly, the Mexican market does not

will have more airlines and shipping lines offering services

allow US companies to have their own fleets in Mexico.

to and from Mexico, as well as more efficient transportation

Furthermore, US companies with sizeable fleets could

channels.

at all levels of the organization. Consequently in 2014 we

projects and assignments related to either our customers or

made the decision to invest in an International Graduate

innovation, in virtual cross-border groups.

Program despite the challenging economic conditions. The key aim of the program is to give our entry-level talents the

In Mexico we are extremely proud to be at the forefront

opportunity to thoroughly familiarize themselves with our

of these key development programs by having our

core business, to become part of a global talent network,

employees participate in both. The advantages this brings

and to grow into future specialists or leaders. Our “Hellmann

our business are diverse. By learning and understanding

Graduate Program” is a 30-month program, consisting of six

innovative logistics practices with our external professors

three-month “Foundation Modules” rotating through each

from the German BVL Logistics Academy, as well as

of our core business units - Airfreight Export and Import,

knowledge sharing from various countries, we are able to

Sea Freight Export and Import, Road Freight, Contract

bring back these practices to our business and adapt them

Logistics, and Sales. After completing the first 18 months of

to the needs of our customers to provide better solutions.

job rotations, which also include an international placement,

In return we are also able to share our successes and best

our graduates will have the opportunity to decide between

practices with our colleagues to promote better exchange

following a 12-month Specialist or Management career track.

and further innovation within Hellmann.

The entire program is structured through competencybased and on-the-job training, in which all candidates

Joanne Handley, Head of Global Learning & Development

participate jointly. In addition, they work on internal business

at Hellman Worldwide Logistics

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| VIEW FROM THE TOP

INDUSTRY EVOLUTIONS GUIDING LOGISTICS SOLUTIONS JORGE TORRES President of FedEx Express México Q: How have you personally participated in shaping the

Q: How have recent changes in global manufacturing and

development and presence of FedEx Express in Mexico

procurement strategies impacted the way that FedEx

over the years?

serves its automotive clients in Mexico?

A: Of the 24 years that I have worked for the company,

A: Due to the necessity for us to adapt our strategies and

process

processes to the needs of the industry, we developed new

improvements. I started as a quality specialist, and then

ways to benefit our automotive customers. As an example,

became a quality manager for FedEx Mexico and Central

FedEx has daily flights from Toluca, Guadalajara, Monterrey,

America. In 1994, we obtained the ISO 9001 certification

and Queretaro which arrive at 07:00 and depart at 08:00, as

for the 52 countries and territories in the Latin America

standard. However, when a customer requests a shipment to

division. Our evolution led us to implement our Quality

be delivered only a few hours in advance, we are prepared

Driven

concept

to serve them with a dedicated aircraft for these specific

combines the best practices of all of our operating

situations, adding the possibility of one or two additional

companies’ systems and state-of-the-art methodologies

flights per day. FedEx previously operated only in Toluca,

adopted from other high-performance organizations,

Guadalajara, and Monterrey. However, we learned that the

further solidifying our relationship with our customers.

most important markets were in the Bajio region, so we

Every single operation in Latin America is certified to this

set up a 727 flight in Queretaro in 2012. The demand in this

standard.

region was so large that we increased the capacity to a 757.

Q: How important has Mexico’s automotive industry

Q: How closely is FedEx collaborating with governments

become to the company, and what adaptations have you

and colleagues on both sides of the border in order to

made in order to serve it?

develop simpler transit regulations?

A: Automotive is hugely important for us because we

A: FedEx is working toward implementing electronic

have become a logistics solutions provider, assisting

systems for transmitting information for pre-selection and

with the transportation of raw materials and final

pre-clearance at the borders. This would be beneficial for

products within the sector. FedEx participates in the

large companies that supply known, certified products on

distribution of information, from the moment an idea

a regular basis. There is no need to inspect every single

is incepted, right up until a product is designed. Even

package and shipment when the company is well-known

during the prototype stages, and when raw materials

and its products are trusted worldwide. We have also been

come into play, we are able to act as a key partner in

actively participating with the US Chamber of Commerce

terms of logistics solutions.

and the Mexican Association of Express Couriers in an

dedicated

seven

Management

quality

(QDM)

control

initiative.

and

This

attempt to fast track this service. FedEx Express México had 400 employees in 2001, today

322

we have 5,200. Since the acquisition of MultiPack, we

Q: What are your plans to increase FedEx’s market share

have developed full coverage in the country and have

in Mexico?

the ability to connect Mexico with the 220 countries and

A: Globally, FedEx has operations in 220 territories,

territories that we serve. For the automotive industry, this

but Mexico is an important location for the company

means connectivity, access, and flexibility, particularly

for a number of reasons, one of which is its proximity

for Mexico’s automotive clusters. FedEx has learnt a lot

to the US. In 2011, FedEx invested US$160 million in its

from the automotive industry, including the importance of

Mexico operations, and we will continue to invest as we

location, coverage, transit time, and precision. In the past,

see automotive companies doing the same. Economic

the logistics industry was based on standard office hours,

projections for growth driven by automotive investments

but the automotive industry works 24/7, so we adapted

are exponentially positive, so FedEx is open and ready to

our approach to suit our customers.

continue growing alongside the industry.

| VIEW FROM THE TOP

GLOBAL LOGISTICS PROVIDER BOLSTERING MEXICO’S TALENT POOL JOSÉ LUIS GARCIA Vice President of Operations AEMCE of DHL Supply Chain Mexico Q: What have been DHL’s most significant additions to its

capacity of the country. On the other hand, these companies

automotive offering over the past year?

expect to have clearer rules from the government on how

A: We have incremented our assembly operations beyond

the rail business is going to progress. Right now, 85% of

minor components. Now, we are assembling parts that

Mexico’s freight goes via road, which will be unsustainable

require specific dies and tools that need to be calibrated

for the future. For that reason, we need to develop more

periodically, bringing us closer to the combination of

intermodal systems, even for domestic shipments. Road

being a 3PL and a Tier 1 supplier. This has propelled us

freight will continue to be very important and investment

toward improving our quality system, and now, beyond

should continue there. As for air freight, the challenge is that

having some of our operations ISO 9001 certified, we are

most international freight goes through airports in the Bajio

looking into further certifications such as TS16949. We

region, Mexico City, Guadalajara, and Monterrey. We need to

can assemble interior components like the dashboard and

diversify the shipments between all 89 airports because 30

the instruments panel, and exterior parts like components

of them are international, but they are not used for freight.

of truck cabins, for example. We have also evolved our service portfolio beyond sequencing to include a metering system, enabling the delivery of parts on fully loaded pallets. That makes the external operations of the plant less complicated, resulting in a smaller necessary workforce and the ability to break up full pallets in-plant, lessening their distance from the assembly points. Q: How did a logistics company find the appropriate human capital to move into that field? A: We are at a crucial point in terms of talent in Mexico. We have a significant abundance given that we have such a young average population, but proper logistics education is a challenge due to a lack of sufficient academic programs

Q: What are the limitations for fleet ownership in Mexico,

and apprenticeships. Mexico has to set an objective

and is DHL affected by the restrictions?

not just to have millions of engineers and technicians,

A: There is a limitation of gross weight for foreign capital

but to make sure they are well-trained in specific areas,

companies, which is about five tonnes per truck. This means

particularly logistics. The logistics sector needs to find

we are allowed to have our own fleet for express deliveries,

people that have financial experience, management skills,

but above that gross weight we need to subcontract other

and leadership abilities. In terms of maintenance, tooling,

companies, and that represents a potential problem in

and fleet management, Mexico needs proper technicians.

terms of quality and availability. In Mexico, the average

The country is already working on that, with a four-year

truck is 17 to 19 years old. Around 80% of those trucks

graduate program for engineers, and two-year programs

belong to really small companies, and normally they

for technicians. These programs are effective, creating

do not have proper procedures or quality standards.

highly talented technicians after only two years in college.

Signing a contract with these companies is different from working with bigger companies, since they do not have

Q: What kind of challenges does DHL face when trying to

the capacity to respond easily to claims, and prices may

access the US market from Mexico?

vary greatly depending on the quality of the service and

A: The main challenge at this point is increasing our rail

the equipment. Having the support of a company like DHL

freight capabilities. Mexico has two rail companies in

provides a guarantee to our customers that environmental,

Mexico that need to invest more, given the current limited

legal and safety regulations will be complied with.

323

| VEHICLE SPOTLIGHT: FREIGHTLINER INSPIRATION TRUCK The road leading to full autonomy has many twists and

After Mercedes-Benzâ&#x20AC;&#x2122;s presentation of the autonomous

turns, and there are many obstacles that must be addressed.

Future Truck 2025 in July 2014, Daimler took one further

However, there are companies that have made tremendous

step toward autonomy with the Freightliner Inspiration

progress toward developing semi-autonomous vehicles,

and its Highway Pilot (HWP) system. This technology

with the perfect example of this being offered by Daimler.

includes a front radar unit and a stereo camera, which link

The company officially presented the first licensed semi-

with the powertrain Engine Control Unit (ECU) to control

autonomous truck on May 5th, 2015, at the renowned

the brake system, the steering gear, and the security

Hoover Dam in the state of Nevada. Simultaneously, the

systems included in the truck. With these, the vehicle is

company won a Guinness World Record title by turning

capable of regulating its speed, braking, and steering,

the dam into the largest projection screen ever seen in

while integrating lane-adherence and collision-preventing

North America, with the highest light output projection of

functions. The radar unit has both long-range, narrow

1.17 million lumens. During this astounding presentation,

vision up to 250m with an 18-degree span, as well as

the new Freightliner Inspiration Truck drove autonomously

short-range vision with a 70m range and 130-degree span.

across the dam, making its debut as the first semi-

Both sensors offer constant feedback about surrounding

autonomous truck with a road license for the state of

obstacles on the road, while the stereo camera scans a

Nevada.

100m area, with a horizontal span of 45 degrees and a

vertical range of 27 degrees, to detect lane markings and

time to respond and take over the vehicle, or the system

activate autonomous steering.

will find a way to safely come to a full stop.

While this is undeniably a tremendous breakthrough for

Regardless of these restrictions, the HWP and the

Daimler and for autonomous technology, the truck does

Freightliner Inspiration Truck is a true revolution in the

have a few limitations. Firstly, the system still does not

transportation world. This system effectively reduces the

fully replace the driver. HWP can only be activated once

driverâ&#x20AC;&#x2122;s stress and fatigue levels. Additionally, since the

the truck is safely on the highway, which means that it is

truck will be operated entirely by the ECU, the computer

ideally set to a constant travel speed. However, the system

can drive the vehicle in the most efficient way possible.

is perfectly capable of starting and stopping the engine

This in turn will enhance fuel efficiency while reducing

autonomously. Secondly, in certain situations the HWP

brake and component fatigue. In terms of total cost of

system does not have the capabilities to respond on its

ownership, the new Freightliner will offer considerable

own, which is why a human must be present as the main

advantages given that maintenance costs will be reduced

driver of the vehicle. The HWP is also linked to the HDMI

due to effective driving practices. Overall, this innovation

display on the dashboard, which sends a message to the

will improve the transportation sector in terms of safety,

driver in case of an emergency, after which the driver has

reliability, and more efficient predictive route planning.

WORKING TO OVERCOME CROSSBORDER LOGISTICS BARRIERS One of the main challenges

attract new investment. Without a doubt, the process has

for

companies

been simplified, but it remains a complicated operation,

is how to navigate the

according to Gómez. “The best way to avoid these

strange waters of Mexican

potential delays while importing cargo is for a company

bureaucracy.

logistics

Regulations

to have their own warehouse or ‘fiscal strategic location’,”

are constantly changing,

he explains. “This would allow companies to declare the

new

cargo in their own facilities and create a personal FTZ.”

the

Senator is not yet looking to move into that area, but the

market are all trying to find

company has seen the need to be much more present in

the most effective way

FTZs, keeping a direct communication with customers

to manage their freight

regarding the status of every cargo inspection.

the

companies Luis Gómez, General Manager of Senator International

many entering

operations. However, after 13 years in the market and having successfully managed BMW’s auto parts export shipments

A much more significant challenge is the restriction of

for more than 40 suppliers, Senator International is now well

Mexican drivers in US territory, which sometimes means

versed on these matters.

there are no available drivers in the US, despite having Mexicans available to cover them. As most companies

Senator is a family-owned company that offers a more

work under a just-in-time program, these regulations

fluent process for its clients, providing customized logistics

have the potential to put a real dent in the whole process.

solutions and personalized service. Approximately, 60% of

“Ironically, US drivers are allowed to enter Mexico,” states

the automotive business managed by Senator is consigned

Gómez. “This is a long-standing political matter, but

via air freights, while the other 40% travels by sea. As well

something has to be changed to create a more dynamic

as recently including truck services, its primary strategy

logistic framework for the customers.” In addition, even

over the last two years has been the implementation of

though Senator subcontracts all its trucking services,

an effective emergency concept. “Most companies in

the company still has to compete with these players for

the automotive industry work with yearly contracts or

the customers’ attention. It is a problematic situation

requests for quotations, so the ability to adapt those

given that profit margins are exceedingly tight, making

services to the timescale of an urgent request is a huge

it impossible for Senator to match these companies’

competitive advantage for any logistics company,” explains

prices.

Luis Gómez, General Manager of Senator International. “However, this has posed certain challenges for Senator,

Since BMW made the decision to come to San Luis Potosi,

especially regarding road-based operations.”

Senator has been liaising with this OEM as they seek new collaborative projects. Ambitiously, the company now

326

Currently, Mexico uses the same customs procedures

intends to oversee Audi’s individual automotive accounts

for rail and sea logistics. However, three years ago, the

with third-party logistics (3PL) and fourth-party logistics

Mexican customs office has made considerable efforts to

(4PL) at the new plant in San Jose Chiapa. Senator has

align and digitalize all the paperwork for these procedures

also acquired new business with Volkswagen, starting

through VUCEM, which is a unique single window for

import and export truck operations between Volkswagen

mexican foreign trade. Now, every importer and exporter

Puebla and Volkswagen Alabama. In light of such

is forced to digitalize their documents before issuing the

impressive partnerships, it is surprising that the company

import declaration. There are special import programs that

began operations only five years ago with a staff of 12

allow the merchandise to enter without passing through

people. Now, the staff has grown to a total of 40, leading

customs, declaring every item on arrival at the warehouse.

to the inauguration of a new office in Puebla at the end of

However, companies need to comply with highly specific

2014, as well as a hopeful expansion plan to include new

requirements in order to enter this program. Additionally,

branches in Guadalajara, Queretaro, Leon, Silao, and San

the military or other transportation authorities are entitled

Luis Potosi. Furthermore, the company is working with

to inspect the merchandise if they desire. Between

a customer that wants to establish its new operations in

Laredo and Mexico City there are several checkpoints

Silao or Leon in order to supply Nissan in Aguascalientes.

where truckers can be stopped to have the cargo or

“Senator wants to offer the best solutions for our clients,

the paperwork inspected. Despite these complications,

focusing on core opportunities and exploring options

free trade zones (FTZs) help Senator International and

for re-engineering their current logistics processes,”

similar companies ease their logistics operations and

concludes Gómez.

| VIEW FROM THE TOP

FORKLIFT SUPPLIER AGGRESSIVELY PURSUING NEW OPPORTUNITIES EDUARDO VEGA Managing Director of Toyota Material Handling Capital (TMHC) Q: What ratio of business does TMHC receive from leasing,

meaning that during slow sales months our customers

renting, and buying, and which of these is your strongest

pay less, and increase the payment once the high season

profit center?

rolls around.

A: We established the company in June 2013 and started our operations in October of the same year. We service

Q: Which of your financial services are most in demand

many of the large OEMs in Mexico and many other Tier 1s

in this region, and which service presents the most

that lease, rent, or buy Toyota or Raymond forklift trucks

profitable options for TMHC?

directly from us. Before TMHC started business in Mexico,

A: I would say operative leasing, but that depends on

Toyota and Raymond only offered direct sales or short-

the financial and fiscal strategy of the customer. If the

term equipment rentals. If the companies wanted financing

customerâ&#x20AC;&#x2122;s strategy is to go through a finance lease,

for a fixed term, they had to get it from an external financial

they can register the asset into the books and also

institution. Nowadays, with Raymond, we see around 45%

of all sales being conducted through leasing, whereas, on

the equipment through the contract period, whether it

for Toyota this is around 32-33%. The rest is made up from

is 36, 48, or 60 months. Then, at the end of the lease,

direct sales or short-term renting, which is usually no more

they have a purchase option of 1% of the invoice value

than 12 months.

of the asset. So, if the forklift truck was US$40,000, they only pay US$400 to keep the truck. These leasing options

Q: How quickly has Mexico grown in importance for TMHC,

help companies with their cash flows and their leverage

and what does the country represent for the company on

ratios, and they also help the company free up cash that

a global scale?

is better used on materials that are going directly into the

A: Mexico is a very strong market and represents the

production line.

number one market for TMHC in Latin America. Mexicoâ&#x20AC;&#x2122;s new forklift truck import volume is around 8,500 per

Q: How do your financial services differ across the

year, but there are also around 17-23,000 used trucks

different brands that you provide?

being imported on top of that. The secondhand market

A: We are very aggressive toward offering competitive

is very strong locally, with companies that are going

lease plans. By being able to earn a larger market share

directly through dealers in the US to import those

within the material handling industry, we are then able to

used trucks into Mexico. The new truck market is worth

sell more spare parts, as well as repair and maintenance

around US$300 million per year, but with the addition

services, and we are also able to provide our customers

of the used trucks, the whole segment is worth around

with a replacement of the truck every few years. If we

US$850-900 million. TMHC is the current market leader

are focusing on operative leasing, then by the end of the

in Mexico, with our whole leasing portfolio of combined

contract we can replace old trucks with new ones. This will

assets for forklift trucks in Canada, the US, and Mexico

drastically avoid downtime, which is essential in material

sitting at over US$2.8 billion. Canada buys 35-40,000

movement and handling procedures.

forklift trucks per year, the US buys 160,000 new forklift trucks per year, however Mexico only buys 8,500, so it

Raymond Corporation of Mexico has an inventory of

does not make sense to open a manufacturing plant for

around US$5 million of spare parts for Raymond trucks

forklifts here yet. However, we can offer an unparalleled

in Queretaro, as well as a network of five dealers with a

level of flexibility to our customers in terms of lease

small warehouse of their own. Toyota Tsusho, the importer

terms, equipment exchanges, and Cascade accessories

of Toyota trucks into Mexico, has an inventory of around

for the trucks. Finally, there is the option to provide an

US$7 million in spare parts in Mexico City. Alongside our

increasing or decreasing lease scheme that is tailored

own warehouse of spare parts, this allows us to guarantee

to the production and sales cycles of our customers,

a 24 hour delivery schedule within the country.

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| VIEW FROM THE TOP

ADDED VALUE SERVICES EVOLVING ESTABLISHED LOGISTIC FLEET PROVIDER JORGE ALMANZA President of the Board and Director General at Autotransportes de Carga Tresguerras Q: Tresguerras is now celebrating its 80th anniversary

certification leading to a systematic improvement in internal

of operations. What have been your most important

processes, with clear service indicators. We are currently

achievements throughout the company’s lifetime?

being evaluated for the ISO-28000 certification, which

A: In 1935, Tresguerras started as a small regional company

is more focused toward safety than quality. The priority

in the city of Celaya. At that time, there were only eight

is prevention, so we try to stay at the forefront of every

available trucks, and the route merely covered Celaya to

technological advancement to minimize any safety risk that

Acambaro with a stop at Salvatierra. Operational growth

could materialize. Secondly, our Tresguerras Digital Services

was limited for the first 30 years, leading to the company

tool was developed to collect information that will inform

almost going bankrupt in the 1960s. My father, Leopoldo

clients about the status of their shipments, including delivery

Almanza Vera, decided to liquidate the company in 1968

confirmation, an email status service, and digital signature

and establish the current variable capital corporation. After

collection. Regarding infrastructure investment, we currently

this strategic move, the company’s growth soared. Today,

have 104 warehouses in 60 branches across the country,

Tresguerras specializes in package transportation and truck

which has led to strategic alliances with key transportation

loading services, and is considered a packaging leader on

players. Seven years ago we signed an agreement with

the Mexico City to Ciudad Juarez route. Since I took over

UPS, which contracted a broad range of services from us.

in 1992, we have focused on the three main areas of quality,

We now manage all of their Mexican packaging but we can

technology development, and investment in infrastructure.

also receive international shipments to any of our facilities as we offer cargo consolidation between Mexico, Canada, and

Q: What have been the primary approaches in ensuring

the US. We are about to consolidate another alliance with a

that this growth and focus continues?

company that manages transportation processes in Central

A: Firstly, we certify our service quality with the highest

America, and our aerial cargo program is already in motion

available credentials. In 2003, we received an ISO-9001

with a different company.

TRANSPARENCY AND REACTIVENESS TO TRANSPORT CHALLENGES Considering that 56% of the total cargo in Mexico is

2, and Tier 3 clients, and also offers warehousing services for

moved by truck, many companies focus on this segment.

companies that have their own logistics.

However, multimodal logistics offers many advantages to

328

manufacturers and distributors, and is the area of expertise

Most of DSV’s contracts are for import logistics, while

on which DSV Sea & Air focuses, offering an alternative to

exports to Europe, Asia, and the US represent between

competitors who mainly offer rail and road logistics. Mexico’s

2-3% of its revenue. Having grown from zero shipments

many free trade agreements with Europe and Latin America

three years ago, to 800 shipments per month to and from

offer a particular advantage to the company, given that most

the US, DSV Mexico has expanded significantly. Moreover,

of its automotive clients are based in Germany and Spain. DSV

transporting products by truck from Mexico to the US

comes from a trucking background with a fleet of more than

remains a more expensive option than sending them by

17,000 trucks in Europe, which has provided the company

sea via Asia. Approximately 37% of the company’s sales

with substantial experience in the traditional logistics model,

come from the automotive sector, making Mexico an

allowing it to develop a reliable and cost-effective service for

extremely relevant market for DSV and one of its top ten

its customers. DSV has a strong network of OEMs, Tier 1, Tier

countries in terms of profitability. Furthermore, Koehnke

Q: How will the company increase its 95% coverage in

A: According to the PIVE regulation program, every year

Mexico to reach the complete territory?

we purchase 250 vehicles, of which 150 are acquired to

A: Mexico City, Guadalajara, and Monterrey, have proven to

expand our fleet, while 100 vehicles replace existing units.

be the most fruitful for Tresguerras. Mexico City alone holds

As a result we operate one of the most modern fleets in

one third of our total business, but Puebla and Toluca have

the country. We have a close relationship with Kenworth,

also developed considerably. We expanded to the Pacific

Volvo,

region four years ago and, although there were already

discussions are held every year to assess details regarding

well-established companies, we have been able to create

quality levels. This may include fuel economy, price range,

solid connections with Tijuana, Mexicali, Hermosillo, and

financing plans, and post-sale service. The latter is the most

Ciudad Obregon, to name a few. The packaging volumes

important for maintenance and spare parts. Therefore, we

that we work with specifically alongside automotive

have our own workshops in place where most of our truck

OEMs are quite small. Even so, we are currently holding

maintenance is held.

International,

and

Freightliner,

with

whom

meetings with a Japanese logistics and transportation company that is very closely related to the automotive

Q: What strategies is Tresguerras implementing to attract

industry, as well as being very well positioned in the

new business?

US with a keen interest in working in Mexico. If we can

A: The most important approach has been strategic

reach an alliance with this company, we will immediately

alliances. As well as UPS, we have signed partnerships

have an advantage in the automotive industry, leading

with CEVA, CFI, and recently with DHL. These companies

us toward 100% coverage and the expansion of our

help us attract clients, and we complement their services

logistics operations. Tresguerras also offers services to

with ours. Our strategic alliances are extremely important,

complement our main packaging business, encompassing

and we must continue to develop new partnerships. Our

home collection and drop-off services, merchandise

2015 expansion targets have already been met. Therefore

insurance, and storage facilities. The company is now also

we have shifted focus toward setting up additional

starting to be recognized as a logistics provider since we

warehouses in large cities so that our clients do not have

started offering storage, inventory, and reverse logistics

to drive long distances to drop off their packages, and

services to our 8,000m Tultitlan warehouse, and we are

our aforementioned aerial cargo project is a step we are

opening another warehouse in Monterrey.

very excited about. Our IMMEX division also improved its

operations, taking on simple operations like stamping and Q: What is your new vehicle acquisition approach in the

packaging. Everything is performed manually without the

context of the Incentive Program for Efficient Vehicles

need for a plant and we are expecting to close 2015 with

(PIVE) program?

15,000 operators in this division.

and his colleagues are now working with the Automotive

whole process. “We cannot provide a solution for every

Cluster of Guanajuato, looking for new ways to increase

problem, but we can offer our clients an insight into

awareness of the brand.

the situation and possible alternatives for shipping their most urgent products,” expands Koehnke. Many

DSV tries to maintain an international outlook. In that

customers, especially those in the automotive sector,

sense,

many

require backup services as soon as any problems appear.

European countries has meant that Mexican workers have

DSV is equally competitive in trucking as it is in sea and

learnt about European work culture, while Europeans have

air transportation, and its online platform offers a great

discovered new things about the Mexican market. “It is

way for companies to plan their timeframes and costs,

a win-win situation,” explains Torge Koehnke, Managing

according to their destination and shipping information.

Director of DSV Air & Sea Mexico. “Our European employees

Furthermore, in case of a strike in the trucking sector,

learn more about the logistics business, and they help us

DSV will remain largely unaffected since it operates its

communicate with foreign companies.” Furthermore, DSV

own fleet. The multimodal approach is what gives DSV

trains its staff in every area of the business so that operators

its privileged position in the market. “We try to promote

know how to run each department comprehensively.

our multimodal services, but there is still resistance from

temporarily

relocating

workers

from

Mexican clients that are accustomed to definite trucking DSV has developed solutions specific to the Mexican

services and timeframes.” Koehnke primarily attributes

market,

this to the difference in transportation time.

which

offer

transparency

throughout

the

329

330

The aftermarket in Mexico is going through a metamorphosis. There is high demand for auto parts and workshop retail in the country because of the amount of old cars on the road. However, with the increased availability of new vehicles through financing, the aftermarket sector is likely to grow in favour of branded dealerships. As consolidated companies work to improve their operations, new players are seeking to integrate into the challenging Mexican aftermarket. Small companies face considerable hurdles along the way, while wholesalers and large distributors have the strongest foothold in the market. Tool suppliers and CNC equipment providers are faced with intensely specific demands from their OEM clients as they enforce stricter requirements, pushing companies into generating more efficient and effective processes that lead into an Industry 4.0 future. Even so, with a blossoming domestic market, an aging vehicle park, and significant growth expectations until 2020, there is still great potential for aftermarket and equipment companies to explore.

This chapter details the market conditions these players are encountering in Mexico, documenting challenges such as the lack of comprehensive information for forming effective marketing strategies. These challenges are examined by industry analysts, aftermarket suppliers, and market innovators, leading to the generation of new approaches and technologies that will improve the already advanced auto parts sector. Lastly, the chapter discusses the increasing quality of the components, and the potential of the aftermarket segment to challenge leading OEMs.

AFTERMARKET & EQUIPMENT

332

CHAPTER 12: AFTERMARKET & EQUIPMENT 334

VIEW FROM THE TOP: Gerardo Varela, ZF Services Mexico

335

VIEW FROM THE TOP: Benjamín Centurión, Dacomsa

336

VIEW FROM THE TOP: Óscar Balcázar, GiPA Mexico and Central America

338

VIEW FROM THE TOP: Roberto Rodríguez, EXEDY Mexico Aftermarket Sales

339

VIEW FROM THE TOP: Arturo Cadena, Cadena Automotriz

340

VIEW FROM THE TOP: Gemma Ixtla, Itaro

342

INSIGHT: Vicente López, BPI Distribution

343

INSIGHT: Eduardo Tamer, Mikel’s

345

VIEW FROM THE TOP: Antonio Trujillo, PFI de México

346

INSIGHT: Javier Silva Garza, Korcut

347

VIEW FROM THE TOP: José Luis Díaz del Castillo Líe, DC Gaskets

349

VIEW FROM THE TOP: Sergio Bautista, ABB México

350

VIEW FROM THE TOP: Mario Rodríguez, KUKA de México

351

VIEW FROM THE TOP: Takeshi Yamamoto, Hypertherm

352

VIEW FROM THE TOP: Sergio Robles Treviño, ALTTEK

352

TECHNOLOGY SPOTLIGHT: Grupo Hi-Tec – Haas UMC-750SS

354

VIEW FROM THE TOP: Andreas Le Noir, Grupo Hi-Tec

355

VIEW FROM THE TOP: Fidel Guajardo, Fronius Mexico

356

VIEW FROM THE TOP: Juan Carlos Padilla, Hexagon Metrology

357

VIEW FROM THE TOP: Jorge Escarcega, Mahr

333

| VIEW FROM THE TOP

END USER AWARENESS FUNDAMENTAL FOR AFTERMARKET GROWTH GERARDO VARELA General Manager of ZF Services Mexico Q: What are the internal and external factors that account

are currently handling a BOGE campaign to teach them

for the lack of detailed statistics about the Mexican

how to drive safely and to keep an eye on preventive

aftermarket?

and corrective maintenance. However, isolated efforts

A: In the 1980s, all vehicles that were bought in Mexico or

by private companies are not enough and we must

imported had to be fully registered, but the government

bring these ideas to INA. We plan to build a workshop in

stopped enforcing this regulation around the year 2000.

Mexico City to start directly supplying to and servicing

There are private institutions that are attempting to

the major fleets.

produce this information, but different entities have their own data and the figures vary wildly. The aftermarket

Q: How can better communications be achieved between

is not as developed as it should be, since there are no

fleets and their providers?

market rules that define what kind of auto parts should be

A: As providers, we want to approach the end user

produced or imported. As a result, nobody knows how big

directly, avoiding confusing lines of communication in

the aftermarket is. We have already collected information

order to properly provide the service and parts that fleets

on the total number of vehicles sold over the last 30 years

need. The OEMs are extremely supportive of this as they

and, through a series of algorithms, we are able to calculate

directly benefit from this streamlined process. One of our

how many vehicles there are in the country today. Still,

approaches towards OEMs is to inform them of the quality

the vehicle park data collected by Melgar de Mexico, INA,

and durability of our components, and of how specific

and AMIA does not coincide, meaning it is very difficult to

products stay competitive. As for aftermarket readiness,

formulate reliable data on the vehicle park in Mexico.

OEMs need to know that we have service readiness to supply them in Mexico, Central America, and the Caribbean. As

Mexico has the seventh highest number of automobile

such, we communicate with both sides. We constantly talk

accidents worldwide, which is largely due to the poor

to our OEM customers so we can sell more transmissions as

conditions of vehicles. For instance, most heavy vehicle

needed, but we also speak with fleet technical managers so

accidents are caused from old brakes that stop working.

we can be sure their mechanics can handle minor repairs

We must raise consciousness among the consumers to

while sticking to our control standards.

raise the aftermarket to its optimal level. As a result, ZF Services is creating communication campaigns to make

Q: What are the main pillars of your strategy to target

our customers conscious of the dangers of using low-

OEMs in the US?

quality parts for repairs.

A: Unfortunately, the US market is mainly price-oriented and there are suppliers for those customers. In comparison,

334

Q: How is ZF Services seeking to better reach the end

European brands are more concerned with security and

user, both to highlight your brand and products, and to

quality and ZF is not willing to sacrifice security, quality,

educate them about proper aftermarket behavior?

or efficiency for price. We are now trying to find the right

A: This is one of our main objectives in Mexico. If we

combination of ZF and TRW technologies to balance

are able to convince end users to really understand

durability and quality with price to cater to the needs of

more about their cars and how to keep them in a

US companies. This also involves the needs of other OEMs

decent condition, we will increase our market share.

that export most of their vehicles to the US market. We

For example, 26 million tires are replaced each year,

intend to rely on TRWâ&#x20AC;&#x2122;s experience to reach the US market.

but shock absorbers, which should be changed with

In time, we will combine the advantages of TRW and ZF to

the same frequency as tires, only sell 7.5 million units

form a hybrid entity that can service both the European

a year. To reach a higher level of sales, we need to be

and US markets. We estimate that within three years,

able to communicate certain messages, such as the

we will see a complete merger between ZF and TRWâ&#x20AC;&#x2122;s

risks of driving a car with worn shock absorbers. We

operations.

| VIEW FROM THE TOP

ACCURATE AFTERMARKET STATISTICS REQUIRED TO BOOST SEGMENT BENJAMĂ?N CENTURIĂ&#x201C;N Director General of Dacomsa Q: Over the last few years, what have been the main

rotation, like brake pads or gaskets, have a higher turnover

advances in the Mexican aftermarket, and how has

and are easier to sell. When you have 500 different piston

Dacomsa helped that process?

numbers, for example, you would not stock the entire

A: Dacomsa has been steadily increasing its offerings for

range in your dealership. You have to go after specialist

aftermarket customers. As new brands and models arrive

engine components or specialist transmission and drive

in Mexico, sometimes the dealerships lack the spare parts.

train components. The products that constitute the highest

We are intent on supplying aftermarket parts for new OEMs

profit for our customers are tuning products, batteries,

as soon as we possibly can. In terms of opportunities, we

anti-freeze products, and oils, but Dacomsa does not

have been growing at a steady pace, even though the

distribute these products. We are more focused on drive

market is facing a depression. It can be difficult to supply

train, brakes, and engine components.

parts for an entire range of vehicles, so we have focused on the vehicles with higher demand. We offer parts for all

Q: How does inventory and logistics planning work when

OEMs with a commercial presence in Mexico, as well as

dealing with clients that possess large fleets?

most of their models, but the highest demand is in heavy

A: We do not supply directly to those fleets, but our

duty vehicles and intensive-use vehicles.

customers have agreements to supply them through their countrywide operations and distribution networks.

Q: When Dacomsa learns of a new company arriving in

The fleets usually have their own repair shops, so they

Mexico, how do you make sure that you can supply the

can purchase products from across the country under

aftermarket parts for that model?

the same contract and at the same price. In these cases,

A: Our marketing team is looking at every new arrival in

they use our distributorsâ&#x20AC;&#x2122; warehouses as their spare parts

Mexico and we procure all the statistics regarding new cars

warehouses. We also have a department for demand

on a monthly and yearly basis. We already know which

planning which helps us to look ahead. We have almost

products will be immediately demanded. Brake pads are a

20,000 SKU numbers so every single new part number

good example because they are needed within six months

needs to be determined around 12 months ahead of their

of a new car being sold. Almost three months after a new

production. We also purchase part of our range from third-

car is launched, we have the brake pads that are required

party manufacturers, which means these products must be

for that vehicle. Other components we offer operate on a

compatible with our product lines, and we must have the

different cycle because, during the first three to four years,

opportunity to deal with them on a long-term basis.

most of the cars are still under warranty. After this time, we offer gaskets, pistons, and other components for engine

Q: What opportunities do you see in aftermarket

rebuilding. We respect patents and brand exclusivity, but

information, and how could Dacomsa benefit from them?

our equipment design tools can be used to reverse engineer

A: The statistics we have gathered are focused on our

certain products, enabling us to develop part numbers

products, not the general landscape, and they combine

with our own formulations. We have testing equipment

aftermarket and original equipment data. There is a

for accrediting certain products, or for linking to other

huge amount of auto parts, but it is not easy to separate

laboratories within the industry. Once we develop the part,

aftermarket parts from OEM parts. Additionally, there are

we can guarantee its reliability to our customers.

a lot of imports coming directly from distributors, which do not factor into the local manufacturing statistics. Only

Q: In what area of the aftermarket does Dacomsa see the

by merging all of these figures can we gain a better idea

most revenue?

of the local aftermarket. Ultimately, access to reliable

A: There are some parts that have a smaller margin, others

statistics would enable us to continuously be aware of the

that are fast movers, and some that have a higher margin

needs of our customers, as well as focusing on trends with

but little movement. Usually, the products that have more

vehicles, shops, mechanics, installers, and associations.

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| VIEW FROM THE TOP

GREATER MAPPING OF GARAGES WILL IMPROVE AFTERMARKET SALES Ă&#x201C;SCAR BALCĂ ZAR Director of GiPA Mexico and Central America Q: When did GiPA enter Mexico and how did the company

Q: In relation to the heavy-duty aftermarket segment,

develop the proper expertise in the automotive sector?

what were the main trends you found in the 2013 survey?

A: During its first 15 years, GiPA focused mainly on

A: In terms of heavy-duty, our information is not as

the European market, particularly France, Spain, Italy,

comprehensive in comparison to the light vehicle segment.

Germany, and the UK. Then, in 1998 we established

There is little information about the aftermarket in the light

operations in Argentina, and subsequently in 2002 we

vehicle segment, but with heavy vehicles it is practically

entered the Brazilian market, and later Mexico in 2004.

inexistent. Therefore, we are among the first companies

We now cover most Latin American countries. In order

to analyze this sector, we have performed syndicated

to measure the aftermarket segment in relation to light

surveys with the same structure for three years, and we are

vehicles, GiPA began to conduct a syndicated survey,

applying the same methodology we use for light vehicles.

called ATO. This research was then offered freely within

We are interviewing large and small fleets with less than

the automotive, oil, tire, and parts manufacturing industry.

five vehicles, as long as their vehicles are heavier than 3.5

These companies could all benefit greatly from the

tonnes.

research without making a huge investment, since 70% of the aftermarket information was equally relevant for

In the case of light vehicles, we have advised aftermarket

all of them. After that, we became a company specialized

companies not to promote their products to the driver of

in understanding and analyzing the aftermarket. To this

the vehicle. In the heavy-duty sector, however, we have

day, ATO has presence in more than 30 countries, gaining

found that it works in the opposite way, since drivers

more accuracy each year. The ATO survey has become

are more involved in their vehicle maintenance and

the most prestigious source of information for strategists

there is a persistent do-it-yourself culture. Average car

in the aftermarket.

owners have neither the time nor the interest in carrying out these activities, since there is much cheaper labor

Q: Why has Mexico failed to compile adequate aftermarket

available, and vehicles are more technically advanced than

information?

before. Additionally, heavy-duty drivers are typically less

A: The main challenge is that we are not an informatics-

attached to their vehicles, so the purchase of parts is more

oriented country. In Mexico, 35% of the independant shops

pragmatic and the driver is more involved in the decision

and retailers have just one or two employees, meaning

with different insights. Another important trend that will

that it can be difficult to retrieve the information with a

appear is an increase in the average age of vehicles, both in

computer. The independent stores are scattered all over

heavy-duty and light-duty segments. Mexico is recovering

the country, with no definite way of finding each one of

from an economic crisis, but the growth we see today

them. We performed a test census of the available shops

does not balance out the age of the current vehicle park.

in Iztapalapa to compare it with the available information

Furthermore, each used vehicle that enters our country

from INEGI, discovering that about 40% of the shops

increases the age of the vehicular park.

were not registered in INEGI, and approximately the same

336

amount no longer existed. There is no map or accurate

The heavy-duty segment is mostly based on pragmatic

information that provides shop locations in the country,

decisions, with the most important concerns in this area

and they operate rather informally. This leads to another

being time, security, and profitability. Previously, owners

important trend, which is that all small businesses are

did not necessarily care about the vehicle, and there was

going to disappear in the long term. Every year, we see that

more of an emphasis on functionality and fast sourcing of

these informal shops with few employees are performing

components. Nowadays, there is more openness toward a

worse than larger businesses. There is a need to form more

quality-oriented market. Price is still an important factor,

informatics-oriented companies, with proper training for

but customers are willing to listen and to understand

employees.

the advantages of certain products, even when they

cost more. There is a trend to acquire components that

manufacturer of the vehicle, rather than an average

last longer, and the current challenge for companies is to

mechanical garage that is located geographically closer

make their clients understand the technical advantages of

than the dealership. Drivers tend to think that the prices

their products. If a company wants to promote a product

in a mechanical garage are 54% lower than a car dealer

through its quality, it needs to use the adequate marketing

garage. As a result, the customer needs to see the value in

techniques to properly reach the market and show the

using a workshop that is further away and more expensive,

cost benefits of their products.

but has the benefit of employing original parts and the best-trained mechanics.

Q: What were the main challenges involved with conducting this syndicated survey?

Q: How is GiPA helping to establish a stronger aftermarket

A: In the aftermarket, strategists are accustomed to working

service in Mexico, and how can companies encourage

with no information whatsoever. Marketing specialists in

clients to take advantage of it?

this area commonly work with empirical knowledge due

A: Many clients show a willingness to take their vehicle to

to the misconception that there is a lack of reliable sources

the original manufacturerâ&#x20AC;&#x2122;s workshop, but most of them

of information. They struggle to find companies that

do not do this due to previous negative experiences.

understand the market and its products, and they do not

We approach the dealerships and we show them all the

normally find updated information. It is difficult for certain

potential business they are losing against independent

companies to believe that there is a company that is able

mechanical shops. We present to them their retention rate

to measure the aftermarket in a language they understand.

and, depending on the OEM, we ask different customers

In other industries, there are companies that can provide

about what they are looking for from their dealers, and

models of the marketâ&#x20AC;&#x2122;s behavior, because they are able

what areas of opportunity they detect. Most dealers

to quickly obtain data regarding purchases and prices of

struggle to understand that maintenance activities are

every product. We do not have that benefit since almost

not enjoyable for the customers. In most routine activities,

50% of the independent auto parts shops and garages

customers do not detect any change after the car has

work without a computer, with much of the business being

been serviced, which means that they do not assign any

performed informally. Even auto dealers that have access

value to the service. This mentality is unlikely to change,

to information find it difficult to analyze and compare to

so companies must seize the opportunity to offer better

the independent market, which is their main competitor in

experiences to the customers. Dealers have to be more

the aftermarket segment.

proactive in this area, focusing all their attention on the client, and they need to explain the advantages

Q: What are the main reasons behind this continuous

of maintaining the vehicle in optimal conditions, with

decline in small businesses?

adequate components.

A: The challenge that many shop owners face is that they have built their company through empirical knowledge.

Companies are now trying to implement this philosophy,

They have adopted certain practices that have functioned

but previously, when there was a lack of competition

for them, but are not willing to learn and adapt to the

with only five major brands operating in-country,

changes in the market. Each year, we observe a reduction

receiving maintenance services was not commonly

in the number of employees that attend training courses.

an enjoyable experience. There was a lack of trust

Therefore, there is an increase in the number of components

and customers felt that the shops were stealing parts

that these workers are unable to repair, due to a reluctance

from the car. Nowadays, all the new manufacturers

to change the methods and products they have always

have created a new experience, and these five original

used. However, a new generation of mechanics has already

companies are working hard to change the way they

appeared, aiming to innovate and train this older generation

approach this service. There are now open-plan garages,

in new vehicular technology and informatics abilities. This

where people can see what the mechanic is doing to

year, we may see a change in the current trend, as all the

their cars. This might be a simple thing, but it provides

invoices have to be created digitally.

a feeling of openness that makes the experience much easier for the client. There are many new initiatives and

In the case of dealers, there is a different kind of

now dealers are offering commodities such as Wi-Fi,

opportunity. These establishments need to understand

television, coffee, and they even have arrangements

that they are losing a high percentage of revenue by not

with other businesses to offer a lot of other activities to

encouraging clients to return for maintenance. The clients

the customers. These initiatives will all lead to a happier

must be aware of the advantages of using the original

client base and a healthier aftermarket sector.

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| VIEW FROM THE TOP

NEW PRODUCT PORTFOLIO TO REACH WIDER CLIENT BASE ROBERTO RODRÍGUEZ General Manager of EXEDY Mexico Aftermarket Sales Q: What are the most attractive factors about the Mexican

A: Mexico is a complicated market given that the distribution

aftermarket, and how has EXEDY taken advantage of them?

network has not undergone a significant positive change.

A: Mexico now has all the Japanese brands in the market and

A traditional distribution network includes manufacturers,

EXEDY has become the original equipment (OE) supplier

distributors, wholesalers, repair shops, workshops, and the

for all those vehicles. In the past, our Mexican operations

final consumers. However, that model is slowly changing,

only supplied auto parts for Ford, GM, Chrysler, Nissan, and

allowing distributors to commercialize directly through

Volkswagen, but nowadays we have over 50 brands. We

their multiple points of sale. As manufacturers, this process

are starting to create brand recognition, but it has been

has affected EXEDY mainly because of the price variation.

difficult since EXEDY was only known by specialists. As

A distributor with multiple branches and a large purchasing

the first stage in our current development strategy, we will

capability generally requests special terms, switching

focus on the Japanese market where we are more well-

between competitors depending on the best offers. On

known. Nevertheless, we will certainly look to develop

the contrary, we want to develop long-term relationships

relationships with German, Korean, and US companies too.

and cater to an extremely niche market due to the type of

Furthermore, we hope to see the same phenomenon in

products we supply. Our distributors must be specialists in

Mexico as we have seen in the US, where Japanese cars

the field, as well as serious companies that want to create a

are the most popular vehicles in the market. Even so, we

strong communication channel. Furthermore, we want our

cannot limit our vision only to Japanese OEMs, which is

distributors to provide us with firsthand information about

why we are currently developing new Volkswagen, Audi,

the market’s trends and the product success.

and SEAT components for the aftermarket. We launched 100 new products in 2015, but we still have to work on the

Q: What strategies is EXEDY implementing to shift the

right promotion within the aftermarket.

market’s tendencies in such a dramatic way? A: Our strongest strategy is the natural course the market

Q: What kind of advantages do EXEDY’s products offer to

is taking toward Japanese brands. Evidently, there is

the market in comparison to its competition?

competition, but it is not easy for companies to develop new

A: We are OE suppliers, so we can guarantee our distributors

components with the specifications every vehicle requires.

that the products we provide are high quality and trustworthy.

A project like that can take up to three years, while our

Our quality is also applied in our aftermarket products, which

product portfolio already has everything to fit the market.

offer something unique in the market. Additionally, since our

We know incentives are also an important factor, so we are

products are in constant evolution in terms of technology

including discounts, rebates, and reimbursements with our

and innovation, we review them annually to ensure proper

most regular clients.

functionality at all times. EXEDY specializes in clutches and components for automatic (AT) and manual transmissions

Q: In light of the current exchange rate situation, companies

(MT). Our Aguascalientes plant is currently manufacturing

like Mercedes-Benz have decided to change their prices

AT products, and we will shortly begin production of MT

to pesos. Does EXEDY have any plans to adopt a similar

components exclusively for the OE market. Our market

strategy?

share is still small, but we only started operations for the

A: We are just establishing operations, so we cannot take

aftermarket in April 2015. Therefore, we forecast that by 2023

such drastic measures straight away. We will evaluate the

we will own close to 40% market share. It will be challenging,

situation in the future, but we must first thoroughly evaluate

but we have the necessary capacity and infrastructure with

the market. EXEDY has its own strategies regarding

over 21 plants and 18 distribution centers worldwide.

fluctuating exchange rates, and right now incentives are a priority. Additionally, our rebate system is something that

338

Q: What has been your relationship with workshop and

we believe will be beneficial for our clients, complementing

repair shop networks?

our fair and competitive prices.

| VIEW FROM THE TOP

MANAGING CUSTOMER LOYALTY THROUGH QUALITY PARTS ARTURO CADENA Owner and Director General of Cadena Automotriz Q: Which of your main business areas of automatic

our clients to choose freely. Customers sometimes want

transmissions, power steering, and suspension, are the

cheap parts with excellent quality, which is impossible.

most important for Cadena?

The direction we have chosen is to constantly advise our

A: Automatic transmission and power steering remain

clients that quality is more important than price. To tackle

our two most successful business units. Both product

demand, a strong inventory is required. We must keep in

lines are linked, which means that anyone who requires

mind that the global market grows slowly, but that does

automatic transmissions also has a need for power steering

not mean that a companyâ&#x20AC;&#x2122;s market share cannot grow at

components. Business is stable, with a steady growth. We

a rapid pace. If we keep inventory volumes at the same

have some additional projects that will be released in the

level during complicated times, while others may not

near future, but we plan to stick to what we know best.

do the same, we will be ready to make the best of any

All things considered, I can tell you that we are among

opportunities that arrive. When those companies do not

the top five transmission suppliers in the country. CVT

have product availability and cannot comply with a clientâ&#x20AC;&#x2122;s

transmissions are extremely new for the aftermarket, so

requirements, we will be able to increase our market share.

our intention is to gradually incorporate them. We believe

Inventory volumes are extremely important to us.

that the market has not matured enough, but that the CVT market will continue to grow for us. CVT transmissions do

Q: How is your plan to enter the suspension part market

not have enough torque to carry the weight of a load truck,

evolving?

meaning that automatic transmission on trucks will still be

A: The project is growing at a steady rhythm. We chose

part of its original equipment.

a good manufacturer with a high-quality approach that allows us to maintain our market share. Although the quality

Q: What is your approximate market share, and what

is high, the growth rate is not what we expected. We started

factors allow you to maintain it?

with 500 items, we then added 200 more, and we just

A: We have roughly 7% of the market share on a national

approved 100 new products. My goal is to steadily increase

level. Automatic transmissions are divided into two areas:

those numbers to 1,500, and I firmly believe that we will do

soft and hard parts. Of those two areas, we only carry a

so by 2017. For 35 years, we have been selling suspension

soft part portfolio, which is precisely why providing an

and transmission parts and what makes us different from

accurate number can be a complex process. The soft

our competitors is that we do not compromise quality over

part market is formed by components that normally wear

price, which is the main reason why our growth is slow. As

out, such as bushings, oil seals, lip seals, rings, filters, and

time passes, customers realize that this is the best approach.

transmission bands. Hard parts are usually made out of metal, such as drums and gears, and do not normally wear

Q: What are your priorities for the remainder of the year

out through regular usage, only needing to be replaced

and beyond?

when the part has received severe damage. The hard parts

A: Adding a larger number of items to our inventory

market is commonly comprised of used parts, since the

will help speed things up in the suspension sector. The

price range for new ones is extremely high.

implementation of 100 new components will be a good start for our sales growth. In terms of our transmission division,

Q: Some of your products within the same category come

we are exploring the viability of hard part products, and we

from different brands. How do you manage customer

are currently manufacturing some components for FALSO.

loyalty with each brand, and how do you promote healthy

We have been exploring the development of a lubricant

competition within your portfolio?

product and we currently have the authorization from the

A: It is a simple process since we let the customer choose

government to launch our own brand. However, things are

the product that best fits their needs. That is why we take

running smoothly with the brand we are carrying, so no

pride in having such an extensive inventory, as it allows

significant changes will be made in the near future.

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| VIEW FROM THE TOP

E-COMMERCE OPERATION INCREASING PURCHASING CONVENIENCE GEMMA IXTLA CEO of Itaro Q: How much success has Itaro found in the Mexican

fleets, as well as the driver information and the distribution

market, and to what do you attribute that success?

center where they are located. For each vehicle’s serial

A: In a single online platform we encompass every tire

number we also upload the tire lot number and its mileage,

from every distributer, which generates price competition

and every time they need a tire replacement we manage

among companies. These companies really identified

it and upload their new United States Department of

with our concept from the beginning, providing us with

Transport (USDOT) number. With this procedure we

fleet pricing at a time when we were not yet purchasing

can map the important data that fleet owners require,

large volumes. Given the large supplier network that we

allowing companies to minimize their costs, as well as their

manage, we cover 70% of Mexico’s territory with a single

distribution workforce expenses. We created a tailored

platform. We have considerable capability, stocking over

solution for each of our clients, directly installing the

25 brands, each with a detailed product description,

solution in their facilities while taking into consideration all

and with competitive prices. The platform we provide

these requirements. Due to e-commerce being an extremely

allows filtering by dimensions or vehicle. After choosing

new market in Mexico, we have few online competitors,

a payment method, the site displays an interactive map

but the infancy of the industry is still challenging for us.

that lets users choose the workshop of their convenience.

Having a platform that is certified by the Mexican Internet

Furthermore, an appointment is scheduled for clients to

Association (AMIPCI) helps any e-commerce operation. It

pick up their tires the very next day. The tires are then

shows that the site is both serious and secure. We also

mounted, balanced, and the valves are changed, all free

have customer testimonies on our website, constituting

of charge. This saves time and is more comfortable and

a strong referral for new prospective clients. Creating an

convenient for our clients.

effective platform is also extremely important, as it creates satisfied customers and word of mouth marketing. Our

Q: What new approaches is Itaro applying to its business

Google placement has also been relatively critical.

strategies within the country? A: Itaro Mexico has recently opened a new business unit

Q: How attractive has the mobile workshop service been

with a business-to-business approach. We manage 2,500

for your clients?

units at a national level through an in-house system where

A: It has been a challenge, in part because it has an

users can upload serial numbers of vehicles within their

additional charge as it is a premium service, but we

El 1er sitio online para las necesidades de Encuentra tu llanta

Ancho:

Perfil:

195

Por carro

Por medida

día sigu

Rin: 15

Instalación gratis en el taller cercano a tu domicilio

Encuentra mi llanta ahora

• SERVICIO CENTRALIZADO

• CONTROL Y VISIBILIDA

have not invested many resources to position it online,

Q: What expansion plans does Itaro have for the years to

since we wanted to focus on our main platform first. It

come?

is still an attractive service that we can offer, and it is

A: Firstly, we want to reach 100% coverage within the

an additional marketing tool that has given us brand

country and increase our B2B business, for which we have

recognition within the city.

a significant number of prospective companies in the pipeline. We have very few online competitors, and we

How

successful

has

your

business-to-business

must take advantage of that by linking our company with

penetration been in comparison to business-to-customer?

key search words. If we expand our B2C participation, our

A: Even though we developed the platform beforehand,

online positioning will follow organically. We also intend to

our B2B efforts started when we realized we had a strong

introduce tire guarantees to our categories, as customers

capacity to manage large volume orders with short

generally struggle to find them. Alongside that, we would

delivery times at a national level. That is why we developed

like to adopt a strategy that Brazil implemented in the

an information system to track data about the fleet and

past, which consists of having clients suggest workshops

the tires. Without a doubt our core business is the B2C

that are not part of our network, giving us an opportunity

segment, but the B2B provides an important cash flow

to futher expand our presence. We then take care of

that enables us to improve our e-commerce operations.

evaluating them and deciding whether the partnership is

E-commerce investments take a long time to break even

feasible or not. If it is, they are added to our distributor

and rewards take a long time to materialize. We have had

network and their service availability begins. This scheme

direct requests from companies that need our services,

will be added during our second stage, as we want to

which is how we have developed our business relationships

focus on the workshops that we have with existing allies

for the most part.

and gradually expand our capabilities.

e tu auto o flota

+ 300 T AL L E R E S

www.ita ro.m x (52) 55-5262-4421

• GESTIÓN DE LA GARANTIA

Bahía de Santa Bárbara #145, Col. Verónica Anzures, Cuauhtémoc, C.P. 11590

BRAKING EFFECTIVENESS AND UNBEATABLE DURABILITY Within the heavy vehicle and transportation segments,

all equivalent components. Moreover, comparing these to

maintenance operations are gradually becoming more

basic OEE products, the difference is significant in terms

essential as owner-operators slowly transform or merge

of braking distance and safety, since these allow vehicles

into fleet companies. In order to meet these needs,

to stop 30% faster than normal, with a productive lifecycle

spare parts must be carefully selected, necessitating the

25% longer than other components. Dust emissions are also

search of effective and reliable suppliers and distributors.

reduced considerably and the feeling of deceleration through

Fortunately, having brands with more than half a

the pedal is significantly improved. This product is specially

century of experience puts BPI Distribution in a perfect

designed for vehicles manufactured during the year 2000 or

position to step up to the plate for these companies as

later, and is primarily designed for medium class or luxury cars

they amalgamate their services. The company is highly

rather than the economy segment. “We think the demand for

committed to innovation, and the braking effectiveness and

ceramic and semi-metallic components is a trend that will

unbeatable durability of its blocks put them ahead of other

continue, since the market research we conducted in the

products on the market. This has allowed BPI Distribution

US and Canada clearly shows that it is outperforming other

to secure contracts with several commercial brands like

devices. Our Mexican facilities manufacture this product in

Kenworth and Freightliner, as well as other Class 5 and Class

small volumes, but BPI Distribution has specialized plants in

6 companies such as Hino and Isuzu. According to Vicente

the US, India, and China to cover larger orders. Additionally,

López, Director General of BPI Distribution, one third of the

we recently acquired a facility in Ciudad Juarez, to support

company’s sales come from the hydraulic part of its braking

our facility in Los Reyes, and we are currently testing the

systems, another third of sales are attributed to light and

Element3 among our Mexican customers,” states López.

medium brake pads, while the final third is derived from its brake blocks. Additionally, the newest product line includes

Currently, BPI Distribution’s Mexican facilities manufacture

rubbers and drums, which represents 10% of the company’s

master cylinders, wheel cylinders, piston repair kits, and

total sales. “Our rubbers and drums division is the newest

master and wheel cylinder kits. The plant also fabricates

of their kind,” explains López. “We are currently close to

shoe parts for drum brakes, brake parts for disc brakes,

producing 1,000 parts, which reassures us that this division

and block and air disc brakes. The one product line that

will pay dividends in the near future. Furthermore, our block

it does not manufacture is rubbers and drums, since BPI

demand has been growing over the last five years, and in

Distribution’s plant in China covers all worldwide demand

some instances, at a double-digit pace.”

for that product line. “Our Nuevo Laredo plant is in charge of manufacturing brake calipers, which is complementing

With Lusac, American Brakeblok, and Raybestos Brakes as

the established manufacturing in Ciudad Juarez, as well as

BPI Distribution’s main brands in the market, the company

promoting the importance of Mexico in terms of cost and

has focused on marketing its products through wholesalers

quality competitiveness,” says López. “Our Nuevo Laredo

and Chinese retail shops. López states that the main reason

facility is also pending a new expansion. We certainly have

for this is that BPI Distribution’s structure does not suit a

the space to grow four times our current size, to satisfy

small retailer scheme. Nevertheless, the company does not

the demand across the globe, since most of our products

move completely away from these players, as it supports

are destined for export.” Additionally, the company is

them with training and information about its products.

trying to work more directly with private vehicle or fleet

“Our team of promoters approaches installers and teaches

installers, in order to mitigate problems caused by lack of

them about our product, convincing them that demand for

knowledge. There is a lot of room for improvement in public

such items is high. Even though Raybestos Brakes have

transportation, and BPI Distribution is working with installers

not been in the market as long as our other brands, it is

and distributers to push the industry in that direction.

extremely well positioned and it is well recognized in the Mexican market.” Following its innovation-driven strategy, in 2013 BPI Distribution launched its new product line Element3, which combines the benefits of semi-metallic and ceramic parts in its components. This new technology is only available in BPI Distribution products, and it will shortly debut in the Mexican market. Noise is an important factor during brake part manufacturing, and Element3 manages to outperform

342

“Even though Raybestos Brakes have not been in the market as long as our other brands, it is extremely well positioned and it is well recognized in the Mexican market”

ENDEAVORING TO REDUCE INFLUX OF POOR QUALITY PRODUCTS If you have ever found yourself standing in the middle

complement the range already on the market. With a

of the road with a flat tire, perhaps you can relate to the

manufacturing plant in Tlalnepantla, Mexico City, and

relief of knowing you have the right equipment to change

79 service centers, Mikel’s has developed a truly strong

the tire without having to pay for a tow-truck. Just as with

network. The company counts more than 650 distributors

cars, the technology in these tools has evolved, but they

throughout Mexico among its affiliates and, in terms of

have remained simple gadgets for anyone to use in any

commercial success, the company expects 22% growth for

emergency.

2015, based on promising growth figures of 12% in 2014.

“By designing and manufacturing products, as well as offering service and warranties, we have been able to provide a much stronger brand over the years” Eduardo Tamer, Director General of Mikel’s

As a privately-owned family company, Mikel’s has been

Mikel’s is an ISO/TS certified company, but Tamer believes

operating since 1960, designing, manufacturing, and

there is significant potential for the Mexican government to

marketing the hydraulic bottle jack systems used in almost

stem the import of poor quality products into the country.

every car across the country, moving to emergency tool

The company takes regulations and accreditations seriously,

kits in 2005 to complement its range. Mikel’s customer

consistently implementing quality control measures and

base is heavily tied to the fact that, in Mexico, OEMs must

complying with correct accreditation guidelines, a process

supply fire extinguishers and other emergency tools with

that is overseen by its Shanghai office. Tamer admits that the

the vehicle by law. As a result, the company has solidified

products may not be the least expensive on the market, but

its position as a supplier for 42 OEMs based in Mexico,

adherence to quality standards is top priority. “By designing

although its main focus lies within the aftermarket. The

and manufacturing products, as well as offering service and

company has presence in 14 countries in Central and South

warranties, we have been able to provide a much stronger

America, and while it has not yet been able to obtain a

brand over the years,” he states. Large distributors in Mexico

distributor in the US and Canada, Mikel’s hopes to begin

are emerging, but rather than viewing them as competitors,

operations there in the near future.

Mikel’s perceives them as potential customers. Working in collaboration with AutoZone has been a positive experience,

With more than 1,000 different products, Mikel’s has

Tamer believes, leading to his desire to incorporate other

experienced rapid expansion. OEM products represent

companies such as Napa Riley into the network. The

approximately 30% of the company’s total revenue, while

Mexican market represents approximately 5-7% of the

aftermarket sales to hardware companies, auto parts shops,

US market in terms of auto parts, and although Mikel’s

and retailers represent the remaining 70%. “Although

infrastructure is extremely robust, supplying the Mexican

hydraulic bottle jacks represent the company’s core business,

market alone could prove problematic. In a bid to maintain

there have been certain changes in the aftermarket, making

pace with the increasingly professionalized market, Mikel’s

pressure washers, motorized generators, air compressors,

is striving for optimization within all sectors of the company.

and other hydraulic products strong competitors,” states

According to Tamer, the changing landscape of the industry

Eduardo Tamer, Director General of Mikel’s. The company

has a significant impact on distribution and globalization

also saw a gap in the market and, apart from the Mikel’s

strategies, with factors such as technology, new systems,

brand, it incorporated two different product lines under

and low-level management decisions. “Development of a

the Industrias Tamer umbrella. The first one was Mr. Brillo, a

company over a number of decades requires a deep-rooted

line of auto cleaning products and cleaning hardware. The

approach, meaning that results of strategies implemented

other was Mango, a low-cost brand for imported products

now may not see success for up to 30-40 years. Therein

used by retailers. Regarding its distribution strategy, Mikel’s

lies the importance of long-term planning.” A valuable

stores hold most of the company’s catalog. Distributors, on

component for the company’s success is brand loyalty,

the other hand, tend to buy the most common products.

and Tamer wishes to continue following the same quality

For that reason, Tamer does not believe the introduction

control measures that have seen Mikel’s become a strong

of new stores will create major competition, rather than

competitor on a global scale.

343

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| VIEW FROM THE TOP

RELIABLE PRODUCTS AND DISTRIBUTION SECRET TO BEARING SUCCESS ANTONIO TRUJILLO Director General of PFI de México Q: What are PFI’s ambitions to work directly with OEMs in

40% growth in the first few years, which has since been

the Mexican market?

consistently maintained. We were pioneers in this segment,

A: PFI is not liaising with any OEMs at the moment, but

and thanks to the support of our distributor network we

we are open to building relationships with them. We have

have been able to become a strong player in the industry.

no problems in terms of capacity, and we are certain that

After so many years in this business, our import processes

we can meet their requirements should the opportunity

have been streamlined, although we still face challenges

arise. Mazda and GM’s growth has been extremely

with internal customs and port operations.

compelling, and will create new opportunities for many companies. We estimate that we are competing with 60

Q: What agreements does PFI have with other companies

different companies at a national level and, although the

to manage its logistic operations?

macroeconomic situation is not exactly what we expected

A: The only agreement we have is with a leading packaging

in terms of the US dollar exchange rate, we must endeavor

distribution company, but we normally pay for our clients’

to be as consistent as possible with our market, our clients,

freightage. The company has considered building its own

and with our business proposal.

distribution network, but that is not our core business and would distract us from our main objective, which is to

Q: What opportunities led to the establishment of PFI de

maintain efficient operations, so we prefer to outsource to

México ten years ago?

experts as a result. PFI has presence in 70 countries, as well as

A: The main factor that attracted us was the opportunity to

ten distribution centers in countries such as Brazil, Colombia,

be a trustworthy provider in Mexico. The automotive market

Chile, Argentina, the US, China, and the Netherlands. In

is immense, so using a single supplier that was capable

Mexico, we chose Guadalajara as our main location due to its

of managing a range of products and part numbers with

convenient proximity to Manzanillo and its relative closeness

reliability and precision was vital for our clients. We were

to other significant states in the automotive industry. We are

completely supported by our corporate offices, and after

also aware of the impending need to open new warehouses

that initial step, we based our growth strategy on our local

in the north and south of the country, especially considering

results. We have always maintained strong relationships

the large demand for our services.

with our customs agents, and our knowledge of logistics has helped us considerably. Something that is extremely

Q: How does PFI work with distributors to educate them

important to the company is process continuity, since this

about product specifications?

is the linchpin for obtaining meaningful results. There are

A: In an effort to create cohesion with our distributors, we

many interesting projects that we would like to participate

need to develop high levels of communication to achieve

in, but the company prefers to concentrate on one specific

competitiveness and market development. Through this

target and develop it correctly, rather than take on several

partnership, we can understand the market’s current

and do a mediocre job.

situation and detect new trends in the industry. We have implemented that same strategy within our internal

Q: What continuity strategies did you implement in order

operations. Since we are aware that our workforce is our

to achieve 40% growth?

most valuable asset, our rotation numbers are practically

A: Reliability has always been a priority. Our commercial

nonexistent, and we constantly work with our team

promise is to be able to supply at least 98% of any order

members to polish their professional skills. Communication

and normally we meet the compliance target of 100% of

is equally important within our organization, as it helps us

our clients’ volume requirements. We have been able to

achieve our goals, improve our strengths, and correct our

keep our commercial promise, allowing us to generate

mistakes. We must combat the cultural paradigm where

the kind of trust and loyalty with distributors that few

employees are distanced from upper level management,

of our competitors can match. The company measured

and create a bond between each level of the organization.

345

SUPPLYING QUALITY KOREAN AND GERMAN TOOLING PRODUCTS Sometimes, it is the smaller parts of tools that are the

supply major corporations like Chrysler, GM, and Nissan.

most important, because without these unsung heroes,

About 19 years ago Korcut began life as an SME, supplying

the overall product becomes unworkable. Korcut is a

companies with up to 20 machines. Today, the company is

distributor of these indispensable components, supplying

still serving them, showing a distinct level of loyalty to their

parts from brands such as Arntz, Korloy, and Dine. Of the

customer base.

company’s total sales, Korloy represents 50%, Dine about

346

20%, Arntz 20%, and the remaining 10% is comprised of

The company has a formal network of 25 to 30 suppliers

another eight brands. Korloy is a Korean brand established

in the country, as well as five different office locations

in 1969 that fabricates tungsten carbide products for the

in Monterrey, Apodaca, Monclova, and Queretaro, with

oil, health, and aerospace industries. Arntz, on the other

imminent plans to open a new branch in Aguascalientes.

hand, is a German company with 200 years of experience,

“We are proud to say that in the 19 years we have been

which sells bandsaws for steel cut applications in the

in this industry, we have maintained constant growth,”

same industries. As for Dine, it manufactures clamping

explains Javier Silva Garza, Co-Owner of Korcut. “Last

tools that complement Korloy’s products. While there

year, we grew by 19.8% and our goal for this year is 35%.” In

are companies that manage 50 or 60 different brands,

order to achieve this, the company is relying heavily on the

Korcut wants to avoid the corresponding reduction in

quality of the brands it supplies. “We have great potential

quality that arises from such large portfolios. With the 11

with the 11 brands that we manage, and we plan to keep

brands that Korcut manages, there is enough material and

developing and promoting them,” states Edgar Silva

room for development, but the company is still open to

Garza, Co-Owner of Korcut. “We are currently planning the

negotiations with strategic brands that could benefit its

acquisition of the premises where we work, with a redesign

existing clients. Korcut’s clients are centralized in the steel

planned to ensure the building adheres to our needs. To

and material removal industry. From there, the company

distributers like us, management of the inventory is a key

branches out into different industries like automotive, oil,

contributory factor to operating successfully.” Korcut is

metal-mechanic, and aeronautics. The automotive industry

constantly innovating and is determined to keep its clients

represents about 50% of Korcut’s total business, with the

updated on the most innovative recent developments,

primary focus being on Tier 1 and Tier 2 companies that

keeping them on the path to aftermarket success.

| VIEW FROM THE TOP

SHOEMAKER REGION NEW HUB FOR AFTERMARKET BUSINESS JOSÉ LUIS DÍAZ DEL CASTILLO LÍE Director General of DC Gaskets Q: What major steps have enabled DC Gaskets to become

our process, we have acquired equipment to laminate our

a local success story in the auto parts sector?

own aluminum and to carry out aluminum and plastic

A: DC Gaskets is deeply entrenched in Mexico’s industrial and

injection molding. We have integrated our own rubber

manufacturing history, tracing its roots back to the Second

mixing plant, as well as our own compression, transfer,

World War. At that time, the company was dedicated to

and rubber injection molding equipment. An important

the distribution of Hudson cars, but after a few years, the

factor that distinguishes DC Gaskets from other auto parts

company moved to Leon, Guanajuato, to become a local auto

suppliers is that it produces its own tooling. We have CNC

parts distributor and an importer to the US, until 1961 when it

machines to fabricate dies and molds internally, and our R&D

began to manufacture soft and rubber gaskets. The company

center and quality control lab to maintain quality control

targets the aftermarket and Original Equipment (OE)

and to ensure the proper functionality of the equipment.

segments, and at the moment we are focusing our strengths on increasing our presence in the OE sector to start supplying

Q: What are the key steps that DC Gaskets has taken to

locally. Innovation and design have been at the forefront of

always be on top of innovation and R&D?

the company’s business model. In 1962 we became the first

A: Innovation plays an important role in the growth strategy

company in Mexico to supply cork-rubber gaskets without

of the company, and we have promoted the development

pressure sensitive adhesive (PSA) backing, which is unique

of new materials and the optimization of our production

in terms of compressibility, recovery, oil resistance, and high

process. The latest product we have introduced into the

quality. In 1968, DC Gaskets became the first company in

Mexican market has been flexible graphite, which has

Mexico to use NBR latex in its products, based on Kevlar,

several benefits and is highly resistant to high temperatures.

aramid, and fiber glass. To ensure success in the automotive

We offer a wide range of products including brake pads,

industry, integration plays an important role especially when

engine pistons, and gaskets, the latter representing the bulk

sourcing raw materials. One of the competitive advantages

of our revenue. In order to provide the best products on the

of DC Gaskets is that it produces its own laminated expanded

market, we have entered the Friction Material Institute (FMI),

graphite, used in manufactured components. The company

where we can obtain quality specifications and consultancy.

has also invested in an R&D department, and at the moment

For Mexican companies, the best way to be competitive in

we have developed two patents for water-based coatings.

the industry is to approach international companies with

Another important step we took for further integration was

the adequate technology and knowledge.

to produce our own packaging, reducing costs considerably and providing an opportunity for the company to expand

Q: What important steps have you taken to increase your

and diversify its business.

traditional client base? A: DC Gaskets acquired the companies ROL and FASA

Q: What strategies have you put in place to increase the

Friction in 2010. The main driver behind this was the need

amount of local content in your components?

to acquire blanking and forming dies and molding tools

A: In recent years, there has been an influx of automotive

to further integrate our process. Even though ROL has a

companies, both national and international in the Bajio

strong presence in the NAFTA market, we wish to expand

region. With DC Gaskets being strategically located in Leon,

our presence using our own brand name. Through FASA

we are able to take advantage of the resulting development

Friction, we have entered other segments of the market.

of the automotive supply chain, allowing us to source some

At the moment we have 400 clients, most of them

of our raw materials locally. Copper and aluminum are easy

warehouse and large auto parts distributors. In the past,

to obtain in the region, but carbon and stainless steel are

we used to have 900 clients including small shops, but we

difficult to find according to the specifications we require.

decided to focus exclusively on warehouse distributors

For that reason, we buy copper and aluminum directly from

since catering to them ensures that our products are

the mills and we import the rest. In order to further integrate

spread throughout Mexico.

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Robots ABB, aliados de la Industria de Manufactura Automotriz

A cuatro décadas de haber lanzado el primer robot industrial eléctrico y un respaldo sólido en su desarrollo tecnológico, ABB brinda soluciones que simplifican y estandarizan cada vez más procesos necesarios para la manufactura de vehículos. Mediante módulos diseñados para prácticamente “Conectar y Producir” durante la línea de producción, se pueden implementar varias zonas de ensamblado de partes de vehículos con periodos de 24/7, menores costos por ciclo de vida, tiempos de entrega más cortos y alta flexibilidad. Hoy, en la Industria Automotriz, nuestro amplio portafolio de soluciones marca la pauta para una producción optimizada. new.abb.com/robotics

Centro de Contacto: 01 800 5222 365 mx.marketingdm@mx.abb.com 348 348

| VIEW FROM THE TOP

RELIABLE PRODUCTS AND DISTRIBUTION SECRETS SERGIO BAUTISTA Local Division Manager of Discrete Automation & Motion and Local Business Unit Manager of Robotics at ABB México Q: Given the specificity of the robotics products you

A: Businesses today are more complex than ever before,

provide, how important is the automotive industry for ABB?

so we have to understand their needs like never before. It

A: In 1974, ABB introduced the first industrial robot with a

is vital to be familiar with customer habits, problems, and

microprocessor. That robot, which we refer to as the IRB 6,

patterns so that we can surprise them with products and

and the robots that followed, were the result of companies’

solutions that they may not have known were possible.

growing demand for increased productivity and efficiency,

Four years ago, ABB Robotics began a journey which has

both in the mature and developing automotive market. In light

allowed us to engage with our customers in new ways,

of this, the industry has been extremely important to us, and

placing a greater focus on customer service and overall

continues to be to this day. Our customers in the automotive

customer satisfaction. Our application centers were

industry include OEMs, Tier 1, and Tier 2 suppliers. We do

established to address specific customer needs, ranging

not currently serve Tier 3 suppliers because this level of the

from technology development and greater responsiveness,

production chain is complicated for the Mexican market,

to the creation of commercial solutions. Located in various

given the fact that our robot refurbishment product line is

points around the globe, these centers are building

still relatively unknown in Mexico. The program is based on

competencies in packaging, press automation, welding and

repurchasing ABB robots from OEMs, refurbishing them, and

cutting, as well as new and base applications. The centers

then selling them on to smaller companies. This gives SMEs

have allowed ABB Robotics to create and continuously

the perfect opportunity to become Tier 3 suppliers for other

refine our strong product and solution roadmap. They also

companies, with equipment that is 100% guaranteed by ABB.

represent hubs for training and R&D, teaching us that, in the world of robotics, the customer does not simply want

Q: What advantages do ABB’s products offer compared to

a standalone robot, or what we call a naked robot. Instead,

other automation companies?

they want a robot that has its best dress on, alongside the

A: ABB can offer a broader range of products for the

whole package that includes support and applications.

automotive industry, and we consider ourselves a onestop-shop, meaning that customers can purchase an

Q: What projects is your San Luis Potosi engineering center

entire solution from us. Generally speaking, ABB’s core

working on for the automotive industry?

competencies are power and productivity, but our two

A: Our San Luis Potosi workforce is in charge of

main focuses are automation and energy. A booming

developing ABB’s solutions for the Mexican market. The

sector like the automotive industry will require a deeper

center manages computer-aided design for mechanical

approach to energy efficiency. Fortunately, this element

and control development, as well as having a robot

has been strategically embedded in all of ABB’s products

refurbishment workshop. Furthermore, the center is

since the early days of their development. Furthermore, the

equipped with robot simulation tools that can improve

drives we supply to our customers are considered crucial

productivity for any user. Once ABB receives a project in

products in terms of energy efficiency. If we compare the

Mexico City, the branch refers it to our engineering team

energy input to the production output, the cost efficiency

in San Luis Potosi. These guys are in charge of tracing the

of our products is much higher in the long run. I personally

layout of the idea, while our mechanical team develops

see the future of the automotive industry moving toward

the robot integration plan. Both teams work together

cost analyses like this. With the high production volumes

to create the best possible solution for the customer.

of the automotive industry, these types of advantages will

The solution is simulated, and then our project and site

be very important for OEMs when investing in robots and

managers go to the customer’s facilities to implement

other equipment.

the entire system. This process is much simpler in the automotive industry thanks to their extremely specific

Q: What are the major challenges of serving such quality-

requirements. It basically comes down to the maturity

driven manufacturers in the industry?

level the industry has in terms of automation and robotics.

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PUSHING THE BOUNDARIES OF ROBOTICS INNOVATION MARIO RODRÍGUEZ Managing Director of KUKA de México Q: What are KUKA’s most attractive solutions in the

thanks to high-precision robotic arms and revised motion

automotive industry, and what drives their success?

planning. Articulated robots offer many advantages, but

A: The most important KUKA Robotics products for the

with the lightweight robot LBR iiwa, KUKA goes one step

automotive industry are certainly the KR QUANTEC, KR

further, offering a further degree of freedom with a seventh

QUANTEC nano, and the KR FORTEC family series. The

axis. Alongside a high-performance collision-detection

KR QUANTEC series includes 29 different robot types

function, its integrated joint torque sensors on all axes make

and offers unrivalled power density, maximum reach, and

the LBR iiwa an ideal solution for delicate joining processes

a payload capacity of between 90-300kg for obtaining

and a perfect option to handle simple tools. Furthermore, its

optimal results and a functional range. On the other hand,

seven axes and its lightweight and streamlined design make

the advantages of the KR QUANTEC nano product line

it ideally suited to confined installation situations, and allow

are its low height and compact design, making it an ideal

easy integration with existing production lines. In terms of

addition to compact cell concepts. Finally, KUKA’s new KR

safety, the LBR iiwa also pushes the boundaries, allowing

FORTEC series completes the heavy-duty segment. These

increased speed and precision in every process. KUKA has

new robots cover a 360-600kg payload range, closing

equipped this unit with safety sensors, enabling it to feel

the gap to our service-proven KR 1000 titan series. In

its surroundings. As a result, the robot can work in direct

terms of size, the automotive industry represents the most

collaboration with its human operator, creating a safer

important market for robotic solutions developers. KUKA

environment and minimizing operating flaws.

has many years of experience in robot-based automation processes, and has also developed extensive expertise in

Q: How has the KUKA College worked to train engineers

the automotive industry. Furthermore, the company has

and technicians, and how much success has this institution

a large portfolio of solutions designed for the automotive

had in Mexico?

industry, not only in terms of mechanical components and

A: This center has helped our clients pursue more efficient

robots, but also in terms of process expertise and software

asset utilization, and has contributed to enhancing robotics

packages.

expertise in Mexico. In addition, we recently launched our KUKA KORE program in Mexico, which has generated

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Q: How flexible are KUKA’s products in effectively

considerable interest from various colleges and universities.

adapting to the requirements of different processes and

As a company, we are excited to contribute to the

applications?

development of new engineers within the robotics industry.

A: Adapting to new technologies is always one of the major

We are aware of the challenges regarding human workforce

challenges for a robotic automated cell. Technology keeps

and their advantages in certain industrial applications. In

changing, and we must continue improving our solutions so

every industry there will always be tasks carried out by

that our robots can adapt to innovations. Therefore, KUKA

humans and not by robots. However, rising labor costs in

offers a wide range of products for virtually any application,

emerging economies and the simultaneous demand for

as well as a flexible control platform and extensive process

better quality is also leading to a shift in key activities, which

knowledge. These three factors enable us to quickly develop

will ultimately lead to humans being allocated other tasks

customized applications capable of adapting to any of our

instead of losing their jobs. In light of an increasing shortage

clients’ requirements. Similarly, efficient and sustainable

of skilled workers in many sectors, automation will provide

robotic systems are of great importance to KUKA, but

useful solutions in certain industries such as automotive

rather than simply monitoring the robot in isolation, it

production. Particularly, the KUKA LBR iiwa paves the way

is also necessary to review the energy efficiency of the

for a completely new approach thanks to its sensitivity. This

entire system. Laser and adhesive bonding applications are

system can assist humans, and it can take over unpleasant,

particularly sought after in the automotive industry, and in

monotonous processes, so that humans can concentrate on

that area, KUKA Robots offers outstanding repeatability

more complex and demanding tasks.

| VIEW FROM THE TOP

BURGEONING PLASMA TECHNOLOGY CAN PROVIDE HUGE SAVINGS TAKESHI YAMAMOTO Country Manager of Hypertherm Mexico Q: What opportunities did Hypertherm detect in the

triggers to avoid any accidents. Similarly, our high-end

automotive industry that led to the company introducing

products include a cooling system for the consumables,

its products to the sector?

to make replacements much easier. However, welding

A: Hypertherm has been operating in Mexico for 13

is significantly more complicated than cutting, and we

years, but our opportunities in the automotive industry

have gauging applications that massively improve the

emerged recently. Our manual plasma units have been

accuracy of these processes. Gauging with a carbon rod

mainly marketed for maintenance purposes, but since

is one of the noisiest processes in any factory, whereas

2013, we have also detecting new opportunities in

plasma is significantly quieter.

the manufacturing segment. The automotive industry normally uses laser technology, but there has always been

Q: What would have to change to make plasma cutting

an interest in cutting the costs of this process. Therefore,

more popular in fabrication processes?

we approached the sector with more competitive

A: Our market has typically been divided into two segments.

technologies,

with

On one hand, we have been extremely popular with people

companies to develop a more feasible solution. The cost

that repair and restore cars. On the other hand, we have

of the equipment is so low that it truly raises eyebrows,

targeted our machines toward the manufacturers, but

and it obviously attracts the attention of manufacturers

rather than using them directly in the fabrication process,

who want to optimize their operations. A plasma unit can

these companies are using our units for small repairs and

be one tenth of the cost of a laser unit, so it is really a

maintenance operations. Laser has been the most widely-

dramatic difference. Furthermore, as plasma technology

used technology given its quality and the ability to integrate

improves and robots become more flexible, the quality

these solutions with automated processes, so our challenge

gap is narrowing impressively.

is to make sure that our products can be adapted to any

and

are

currently

working

robotic arm in the market. There is also a growing trend to Q: How does the plasma cutting process work, and how

program each component offline. Therefore, we have to

has Hypertherm worked to minimize the inherent risks of

design solutions that our clients can implement remotely,

this technology?

rather than programming directly on the robot. Plasma

A: Plasma is one of the five states of matter, and it is basically

technology has come a long way in terms of speed and

an ionized gas conducting electricity. In nature, this happens

precision, and combined with its attractive costs, it is a

when the electric potential difference between the clouds

strong alternative to other cutting technologies. Another

and the ground becomes so large, that it breaks through

huge advantage for plasma is that the material does not

the existing air gap producing lightning. This basic principle

require any heat treatment before the cutting process.

is similar to what happens inside a plasma torch, the only

Additionally, the heat affected area in the material is

difference being that we have developed technologies to

significantly reduced with plasma, drastically decreasing

control the plasma arc to make it tighter and more stable,

the mechanical effects on the component.

while giving it a higher current density. In terms of risks, the main challenge is probably eye safety, but we have

Hypertherm has different types of units depending on

a table to determine the right shade at which to operate

the application. We have our manual Powermax systems

any amperage. The other possible concern is that,

that can also be implemented with robotic solutions, our

depending on the system, the operator could be dealing

middle-end line of oxygen-plasma, and our top-of-the-

with a cylinder of compressed oxygen. Obviously, there

line HPR XD products. We have been working with all

is also a risk in terms of temperature, but our systems

these solutions to make them more flexible and adaptable

have several options to make the operations easier. The

toward robotic applications, and we have implemented

torch has a sensor to detect when the consumables are

several communication protocols to offer more options

not in place, and all our manual systems have safety

to our integrators.

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NEW SOLUTIONS FOR CNC MACHINING SUPPLY SERGIO ROBLES TREVIÑO Director General & Owner of ALTTEK

Q: What are ALTTEK’s ambitions for the Mexican market,

manufacturing around 1,400 CNC machines on a monthly

and how will the company achieve them?

basis. It has adequate industry experience and the right

A: We have been able to create a good mix of product and

products to fit the industry’s requirements. There are other

service, at an extremely competitive price. Identifying our

brands we work with in terms of the automotive industry,

customer’s problems through in-depth analyses has given

but they are not as heavy duty oriented as Doosan is.

us the opportunity to retain clients for over three decades.

Additionally, Doosan has a global presence, and with their

As an example, customers that initially purchased one

help we are able to provide our clients comprehensive,

machine, now have over 150, of which more than 90% have

turnkey solutions, meaning that customers are provided

been purchased from us. Correspondingly, we have created

with a one-stop-shop encompassing our machinery,

a strong loyalty bond with our customers due to our direct

tools, and processes. As such, in terms of the automotive

business relationship. It is extremely important for customers

industry, we can offer automatic loading, measuring,

to have the assurance that their suppliers will comply with

multi-pallet systems and other capacities. We are helping

their specifications, which is something that we continuously

our automotive customers produce front and rear axles,

focus on. At ALTTEK, we strive to ensure that every time

wheels, and brake components, as well as cylinder heads

a sale is closed, it becomes a success story. It is far more

and blocks. Doosan machines have a high manufacturing

powerful and influential for a potential customer to receive

quality and the brand responds quickly to requests for

feedback from their peers than to listen to the supplier.

spare parts. For a job shop environment, where parts to be machined may vary within the same day and an easy-to-

Q: Which brand has been the most successful for ALTTEK?

program control is needed, we offer Milltronics machines.

A: Doosan Infracore is our main collaborative partner. The

With unrivalled prices, this brand is the best option for a

company is one of the industry’s machine tool leaders,

smooth migration from conventional to CNC machining.

| TECHNOLOGY SPOTLIGHT: GRUPO HI-TEC - HAAS UMC-750SS Complex automotive parts require increasingly complex

can be programmed directly with its CNC control unit, and

manufacturing technologies that are no longer suited to a

can receive programs directly through a USB port or through

manual approach. However, automating a machine so it can

an optional Ethernet interface. Additionally, the UMC features

deliver adequate results in a cost-competitive time is no easy

a 1MB program memory that can be further extended to up

feat, requiring strong mechanical capabilities and control

to 750MB. This vertical machining center works with five

software to carefully manage the process. Nevertheless,

degrees of freedom, three in the spindle and two more on

computer numerical control (CNC) manufacturing has

its platter. It is equipped with a 15,000-rpm inline direct-

become a standard practice in the automotive industry, and

drive ISO 40 conic spindle powered by a 30hp vector drive

CNC equipment manufacturers are constantly innovating to

system, providing a torque of 122Nm at a rate of 2,000 rpm.

make machining processes simpler.

The spindle can travel 762mm on the X-axis, 508mm on Y, and 508mm on Z, with a maximum feed rate of 30.5m per

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Grupo Hi-Tec, official distributor of the Haas brand in Mexico, is

minute and 16.5m per minute when cutting. Additionally, the

now offering the new Haas UMC-750SS high-speed universal

high-speed roller-cam trunnion table allows the platter to tilt

machining center as a solution for most manufacturing

from 110° to -35°, and rotate 360° to provide an extended

challenges. This equipment uses ISO standard G-code that

part capacity and perfect tool clearance. The platter has a

Q: For those heavy-duty and complicated machines, how

new OEMs into the Mexican market, the demand for our

does ALTTEK help to train its clients’ workforces in order

products and services has intensified, which has a direct

to best operate them?

impact on ALTTEK’s business. Productivity is extremely

A: We include complementary workforce training with

important, and the way to obtain this is through a better

each machine that we sell in aspects such as the machine’s

integration of solutions.

operation, programming, and maintenance. We strive toward making our clients self-sufficient by training them how

Q: What new equipment have you imported into the

to identify the malfunctioning of a spare part, and how to

country to keep up with these demands?

read the machine’s manual. In terms of maintenance, we

A: Customers are becoming increasingly anxious about

have a well-trained service team. We want our team to be

streamlining maintenance time. They want to put the part in

extremely knowledgeable and capable in order for them to

the machine and have the machine produce the final product,

solve problems right away, hence the reason they receive

which is not always possible due to the complexity of the

training in countries like Korea or the US. We try to answer

part. Efficiency of manual labor is not currently a competitive

our customers’ problems within a 24-hour timespan, and we

advantage for the Mexican market because productivity

rely heavily on our team to do so. Additionally, our suppliers’

is achieved by highly technological machinery. We can set

level of customer service is an important tool that helps us

up monitoring systems on the machine that will allow our

provide the best possible service that we can. We offer our

customers to trace product specifications. Additionally, we

clients preventive maintenance for a fixed timespan, but

are selling a high volume of accessories for our machines that

most importantly, we also empower them to perform such

help measure the dimensions of parts, which in turn help our

maintenance themselves.

customers to become more productive. The aftermarket is also extremely important, although we do try to minimize

Q: Due to the industry’s large desire to increase efficiency

the post-ownership costs that our clients might face.

and productivity, how has the demand for CNC equipment

We teach our clients that their product is as a long-

increased?

term investment, helping them to understand that our

A: Even though machines continue to improve in terms

solutions can make them more profitable than those of our

of productivity, the demand has continued growing. In

competitors. For this reason, we try to sell machinery that

previous years, the main reasons behind this trend were

does not require much future investment in spare parts.

the development of the oil and gas industry, as well as the

The goal is to provide a machine that breaks down as little

aerospace industry. Currently, the automotive industry

as possible, which allows the customer to manufacture

is the main determining factor. With the introduction of

more and spend less.

length of 630mm, a width of 500mm, and it can support

high speeds. The UMC also provides a user-defined second

components of up to 300kg. Both of the table’s axles can

home position, dynamic work offsets, and coordinated

work at a maximum feed rate of 150° per second, even when

rotation and scaling. The center can work between 195V and

the machine is operating, offering high-quality standards at

260V with a 3-phase alternating current, and requires an air source of 4lpm at 690,000Pa. It has a coolant capacity of 284l and provides an optional through-spindle coolant system. Moreover, this machining center includes a highspeed side-mount SMTC tool changer with a capacity for 40+1 tools. It has a maximum diameter tolerance of 127mm when the adjacent slots are free, and 76mm when the magazine is full. The tool changer can support tools of 305mm and 5.4kg and it has an average tool-to-tool change time of 2.8 seconds and chip-to-chip of 3.2 seconds. This offers excellent flexibility for machining different materials and geometries.

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LEADING CNC DISTRIBUTOR ATTACKS THE INTERNATIONAL MARKET ANDREAS LE NOIR General Manager of Grupo Hi-Tec Q: How was Grupo Hi-Tec created, and what have been its

important country after the US and China for machine tool

most significant contributions to the Mexican automotive

sales, thanks to the huge demand in this country over the

industry?

last three years. Our sales have been increasing every year,

A: Hi-Tec was established in 1992 during a time when most

with 2015 expected to surpass last year’s total. Mexico is

companies offered conventional machinery. We decided to

continuously increasing its automotive production, which

take a different approach and entered with the objective

means that someone will have to supply all the necessary

of targeting the CNC market. In 1996, we took on the Haas

machines and equipment. Machine tools can be used to

line, which was a significant boost to the company. We

manufacture any types of components, whether they are

subsequently started to sell large amounts of machines

made of plastic or metal. We sell equipment to suppliers in

and, a few years later, Haas established its factory outlet,

the mold and die industry, which indirectly supports OEMs.

separating other machine tool suppliers from the Haas

The automotive industry is an important customer of the

products. We now have three different companies: Haas

wide range of solutions that we provide.

Machine Tools, Hi-Tec CNC, and Nexttec Machinery. Haas Machine Tools concentrates on the Haas product line,

Q: How are Hi-Tec’s automation products helping with this

Nexttec Machinery deals with the sheet metal industry,

transition, and how have they affected human capital in

and Hi-Tec CNC handles more automotive-focused brands,

the industry?

such as OKK, Nakamura-Tome, and Citizen. Three years

A: Hi-Tec has always been a leader in the machine tool

ago we also expanded into Europe when Haas offered

field. We are always on the lookout for state-of-the-art

us distributorship in Spain. As a result, we now have

technology that helps our customers to achieve their

A&G CNC Services in Germany and Hi-Tec Máquinas CNC

goals. The level of automation really depends on what the

targeting the Spanish market. The Haas Machine Tools

customer requires in terms of space and production. Our

line is targeted toward small workshops, medium-sized

engineers work directly with the manufacturing plant and

companies, and some bigger corporations that use the

we decide which solution is the best for each case. In terms

machines for secondary operations. Hi-Tec CNC, on the

of human capital, there is increasing demand for skilled

other hand, offers machines that are specialized in large

workers since the supply of engineers from the universities

volume and precision parts, and are focused toward Tier

is not enough, not to mention that the industry also needs

1 and Tier 2 companies. While these companies represent

technicians who can operate the machines. In order to

our bread and butter, we can still offer solutions to OEMs

assist with this, Hi-Tec offers lifetime training for the client

for their critical components and transfer lines.

with every purchase. This means that if the customer loses its engineer, they can send their new employee to train with

Q: As Grupo Hi-Tec already has such a strong foothold

us any time they want. We are thinking about starting our

in the Mexican market, how does the company generate

own school where we can offer the technical knowledge

new business?

the industry needs in a short period of time, such as the

A: There are new manufacturers and suppliers arriving in the

necessary skills for metal cutting and machine operation.

country, particularly the Japanese brands, which bring their

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machines directly from Japan. We are already partnering

Q: What led Grupo Hi-Tec to expand into Spain?

with them to offer support services for their machines

A: Haas offered us the Spanish market in 2011 and we thought

and to sell them the machines directly in Mexico. In 2014,

it was a great opportunity. Given the state of the economy in

Haas Automation built more than 14,000 machines and

those years, it was a good time to make the proper investment

now has more than 160,000 machines installed worldwide.

and associate with the right companies. Eventually, the

In Mexico, we have installed more than 6,000 machines

economy picked up, putting us in a position where we have

through the Haas Factory Outlet, which is operated by

a good reputation and infrastructure, effectively covering the

Haas Machine Tools. For Haas, Mexico is the third most

entire country with sales, application, and service personnel.

| VIEW FROM THE TOP

ENERGY-SAVING PHILOSOPHY DRIVING WELDING INNOVATION FIDEL GUAJARDO Managing Director of Fronius Mexico Q: What does Fronius offer to its Mexican customers,

focusing on electric motion with BMW and our knowledge

compared to other welding equipment providers?

in battery charging has been an important asset in this

A: Fronius established in Mexico in 2007, with an aim to

development. Our goal is to help maintain a world that

support Volkswagen. Afterwards, the company acquired

our children deserve. We are are a green company, we

more contracts with national and international Tier 1

are in the solar energy segment, and we always strive for

companies located in Mexico, like Metalsa in Puebla and

energy savings. For that reason, at an R&D level, we are

Magna in Saltillo. At the beginning, our most successful

contributing to the development of electric cars.

equipment was TPS, which is a high-productivity process that later evolved into the CMT system. This product is a

Q: How have relationships with international companies

Fronius patent that enables welding of high-strain steel

and CFE grown over the years, and how could these be

and high-quality aluminum, presenting a clear advantage

further developed?

for OEMs and Tier 1s. Volkswagen, Nissan, GM, and Chrysler

A: Ten years ago, every company made its decisions

all use CMT processes for all of their models, while Ford has

outside of Mexico, whether it was an investment, a new

declared it as its preferred welding process. Both TPS and

development or an R&D process. However, we have found

CMT are MIG technologies used by 90% of all automotive

that corporations finally understand the capability that

companies in Mexico, depending on the application and

Mexico has to make its own decisions. In terms of our

the materials. We are now releasing TPS/i, which is the

relationship with CFE, we have a difficult challenge ahead

new intelligent evolution from the TPS system. We know

of us. On the one hand we have a corporation that has

technology is improving day by day, which is why we

ruled the energy market for a really long time. On the other

needed to provide equipment capable of developing it.

hand, we have new reforms and legislations that have opened the energy market. There are those who want to

Q: How is Fronius positioning itself to attract new clients

hold on to their business, and there are others that want to

as new manufacturers are entering the country?

take advantage of these new changes. Mexico is learning

A: One of Froniusâ&#x20AC;&#x2122; strengths is that we offer direct sales

how to do business and federal entities are realizing that a

and service. Currently, we have one distributor and four

new kind of competition is emerging.

regional offices in Monterrey, Puebla, Mexico City, and San Luis Potosi. Furthermore, given that the welding

Q: How ingrained has that energy saving philosophy

process used by OEMs is different to what you would find

become with your partners and customers?

in any other shop, our technicians have received in-depth

A: There is an important green movement in Mexico,

training from us or from our headquarters in Austria. Our

especially with OEMs. They are applying these principles and

technology has been proven to be more efficient than

they are demanding that their suppliers use them as well.

that of Nissanâ&#x20AC;&#x2122;s Japanese suppliers, resulting in a return

Volkswagen, for example, makes an analysis on how much

on investment over a period of two years by reducing

energy the company is saving per month, and it also applies

energy consumption and decreasing re-work from 80% to

this with its suppliers. We have also noticed that Tier 2 and

5%, while maintaining the high quality and reliability of the

Tier 3 corporations that have invested in our equipment are

process. Fronius continuously strives to achieve the perfect

now reporting up to 90% energy reductions as a result. We

welding solution; we are passionate about arc welding and

have established relations with OEMs through our welding

studying the DNA of the arc is one of our philosophies.

equipment and, as a result, we are making new deals with our solar technology. We have agreements with Magna and

Q: Have you been involved in the promotion of electric

we have a project with Volkswagen to build a solar-powered

vehicles in the Mexican market?

system for its plant in Puebla. About 70% of our revenue

A: Fronius has a close relationship with European OEMs

comes from automotive and, internationally, the industry

like Audi, BMW, and Volkswagen in terms of R&D. We are

represents 30% of our total income.

355

| VIEW FROM THE TOP

TRAINING INTEGRATED INTO PRODUCT PROVISION JUAN CARLOS PADILLA Director General of Hexagon Metrology Mexico Q: What have been Hexagon’s major achievements in the

they have used one of our products, it is easy to migrate

automotive sector since its arrival in Mexico?

to other equipment without the delay of a learning curve.

A: Internationally, Hexagon has a positive relationship

The software is also compatible with equipment from

with the automotive industry and all the contracts that

other brands, which facilitates the use and integration of

we acquired in Mexico were based on that reputation. We

all different technologies.

have worked closely with US OEMs like Chrysler, Ford, and GM, and we have gained new business with companies

Q: What are the main challenges that you detect with

like Nissan. There is plenty of room for development in

CMM inspections for automotive clients?

the industry, thanks to new investments from companies

A: The major challenge that we face is cycle time. Our

like Mazda and KIA, offering us new opportunities to work

clients want to measure more in less time and that is where

locally and globally with them.

technology has to improve. CMM has been in the market for more than 30 years and CNC machines have been around

Q: What are the main solutions that Hexagon offers in

for 20-25 years. Both systems are much faster now, but

Mexico for the automotive industry?

CMM systems are still a slow measurement method, which

A: Hexagon is fully dedicated to measurements and we

is why new technologies have appeared to complement

strive to collect the data while being able to use and

them. The real development now is surface scanning,

analyze it. We want to develop tools that help companies

which allows you to instantly acquire the geometry of a

make decisions about how to control their production

surface and use it for inspection. With this technology, we

processes. The technologies that we use for this are

have created new equipment that combines the detection

portable measuring arms, laser trackers, white light

systems of surface scanning with the testing methods

scanning systems, and multi-sensor and optical systems.

of CMM. We can use vision systems, laser technology,

We also have a division that focuses on hand tools for which

and white light scanning technology that allows us to

we offer distribution services. We currently have two main

take pictures of the part’s many angles and break down

facilities, one in Queretaro and one in our headquarters in

the surface into millions of points. The advantage of this

Monterrey. We are developing a new facility in Puebla and

development is that you can obtain an enormous amount

we plan to open smaller offices mostly in the northern and

of data in minimal time and with minimal effort.

western parts of the country. The main purpose of these laboratories is to offer support and market the products to

Q: What experience does Hexagon have with developing

all the surrounding companies in the area. Our new facility

and retaining talent in the field of metrology?

in Puebla will have enough people and equipment to offer

A: While we have access to excellent human capital in

demonstrations and training to our customers.

Mexico, we have found that there is not enough talent in the technology business. Nobody can study metrology

356

Q: What are the main factors that differentiate Hexagon’s

because there is not yet a university in Mexico that offers

services from its competitors?

a degree in this area. Metrology is a truly special field and

A: One of our main advantages is that we have developed

should be established as a profession in the industry. There

a software platform that is common to all technologies.

is room for development in this area; we need specialized

Our competitors focus on just one technology and they

training and we need universities to develop these kinds of

build software for that particular product. Therefore,

programs. Here at Hexagon, we try to train people in the

when clients move from one product to another, they

use of our products, but in most cases we end up teaching

need to adapt to new software, which complicates data

them the basics of metrology. Most universities now offer

management. Our software is called PC-DMIS, which is

specializations in robotics and automation, but students

able to communicate and link to all our machines and

do not know how to interpret the information they are

equipment. That is useful for the customer because once

getting from the equipment.

| VIEW FROM THE TOP

IMPORTANCE OF INDUSTRY COLLABORATION WITH ACADEMIA JORGE ESCARCEGA General Manager or Mahr Corporation de México Q: What have been Mahr’s major achievements and

A: Mahr’s R&D centers are solely in Germany, boasting

challenges within the automotive industry in Mexico?

a team of approximately 100 people. They are carrying

A: We have had a presence in Mexico since 1996, and

forward the development of technologies, but they do not

the company’s headquarters are aware that Mexico is an

distribute any new technology into foreign markets until it

important market that should be significantly impacted.

is ready. Nevertheless, we have brought in new products

Excluding 2009, we have experienced double-digit growth

in 2015 that are mainly focused on optic technology,

over the past eight years. Although we are a subsidiary

which is one of the areas the company is most interested

of Mahr Germany, we do not have calibration laboratories

in. With this in mind, we are working with Mexican optic

or other important infrastructure within Mexico. Even so,

centers that have a relationship with universities, but we

by 2016 we expect to build the calibration laboratory,

are still in the early stages. Mahr has also been acquiring

which will probably be located in Monterrey in order to

companies that are focused on this technology, as well as

benefit from its close proximity to the US border, as well

on measuring automation technology. Mahr Germany also

as the OEMs near the territory. Eight years ago, resellers

works alongside the University of Göttingen on their R&D

and distributors did not trust the brand, despite being a

programs. Once the project reaches a certain level, it is

German, high-precision technology provider. However, this

pulled into the company’s centers for further development,

is no longer an issue, so my projection is that from now on

and thereafter it is launched onto the market.

we will grow at a faster pace. Q: What have been the main technological advancements Q: To what extent has Mahr been able to advance the

in the metrology side of the business?

establishment of metrology programs at universities such

A: While most of our equipment is contact based, we are

as ITESM and the University of Nuevo Leon?

now offering non-contact equipment that utilizes vision

A: We have been working with the University of Nuevo

cameras, lasers, and refraction technology. Through our

Leon’s Faculty of Electro Mechanic Engineering (FIME).

development processes, we are attempting to increase

Additionally, through one of our engineers who works

the accuracy of our products while reducing their cost. We

as a professor at ITESM, we are starting to develop a

know that Mahr is not the only company that is doing this,

relationship with the institute in order to sponsor and

but we are working toward being the best. The longevity of

provide some of Mahr’s tools. Finally, we have also been

Mahr’s market presence gives us an advantage since it infers

working with the Technological Institute of Nuevo Leon,

experience and stability, as well as generating domestic and

and although it is a small university, we consider it to be

global support. Although some of our competitors have

equally as important to establish these links. The Industry

been in the Mexican market longer than we have, companies

Chamber of Nuevo Leon (CAINTRA) is organizing

are starting to realize that the durability, reliability, usage,

networking

and

spare part availability, and support in our products

universities, where Mahr is going to have the opportunity

give us an edge, further developing trust in our brand.

to approach young students in order to be part of a

Some people within our industry believe that producing

potential internship. Right now we have six interns, mostly

machinery with such longevity is bad for business, but this

coming from the University of Nuevo Leon, and we look

approach has been beneficial for our customers, just as

forward to continuing to develop that program.

ZF Sachs, FAMOSA, and others can confirm. We have five

meetings

with

local

companies

main focuses on dimensional metrology, including length, Q: With Mahr’s headquarters in Germany working on

roughness, form, control and optics. Universities sometimes

new market trends, such as nanotechnology, green

offer technical symposiums through FIME, and Mahr gives

manufacturing, and intelligent materials, how much

brand and technical presentations. As a result, we can show

of this focus is then trickled down into your Mexican

them dimensional metrology’s current position and its

operations?

future development.

357

Its privileged position in North America and its extensive network of free-trade agreements have made Mexico the ultimate destination for any company looking to expand its international footprint. However, what once was an IMMEX destination, with cheap labor as its main attraction, has now evolved into an advanced manufacturing hub with a specialized workforce and massive potential for cost-efficient production. Mexico continues to ascend the ranks of the global automotive industry, competing on a worldwide level for foreign direct investment, which is also in part thanks to an overall improvement in the countryâ&#x20AC;&#x2122;s social, economic, and political environment. Even so, there are obstacles yet to overcome and companies are still adapting to the changes established by the latest reforms.

Within this chapter, the changing operating environment in Mexico is examined by legal and financing experts, in an effort to help new market entrants understand how to navigate Mexicoâ&#x20AC;&#x2122;s administrative processes. Alternative funding prospects are explored, as well as new ways of addressing the integration of companies into the country from specialists in shelter programs. Real estate experts and infrastructure specialists also outline current challenges faced when establishing operations in Mexico, as well as discussing promising recent developments, ultimately providing integrated solutions and analyzing new industry possibilities.

DOING BUSINESS IN MEXICO

360

CHAPTER 13: DOING BUSINESS IN MEXICO 362

VIEW FROM THE TOP: Paúl Alejandro de la Cruz Frías, Banco de México

364

VIEW FROM THE TOP: Herfried Wöss, Wöss & Partners

365

VIEW FROM THE TOP: Claus von Wobeser, Von Wobeser y Sierra

366

VIEW FROM THE TOP:

María Teresa Llantada Voigt, Gastélum Abogados Carla Gastélum Glender, Gastélum Abogados

Gonzalo Lourido, Banamex 366 INSIGHT: Antonio Muñoz Gómez, Banamex 368

VIEW FROM THE TOP: Alberto Terrazas, DESEC

369

VIEW FROM THE TOP: Salomón Noble, Intermex

370

VIEW FROM THE TOP: Ezequiel Rodríguez, Prudential Real Estate Investors

372

VIEW FROM THE TOP: Armando Soto, Kaso y Asociados

373

VIEW FROM THE TOP: Alejandro Rosas, CH2M

374 VIEW FROM THE TOP:

Eduardo Alejandro Castillo Sánchez Mejorada, UNIFIN Gerardo Tietzsch Rodríguez Peña, UNIFIN

375

VIEW FROM THE TOP: Ricardo Hoyo, Arrendadora Actinver

376

VIEW FROM THE TOP: Juan Marotta, HSBC Mexico

377

INSIGHT: José Eduardo Calzada Rovirosa, Governor of the State of Queretaro

378

VIEW FROM THE TOP: Rubén Castillo Silva, MEJORA Desarrollo Laboral

378

PLANT SPOTLIGHT: Goodyear – San Luis Potosi

380

INSIGHT: Nazareth Black, Car Fast

380

INSIGHT: Katja Dittmar, Kromberg and Schubert

381

VIEW FROM THE TOP: Roberto Cabrera, iVoy

Jan Fleischer, CAMEXA 382 VIEW FROM THE TOP: Johannes Hauser, CAMEXA 383

VIEW FROM THE TOP: José Navarro, E.J. Krause

361

| VIEW FROM THE TOP

PROMOTING A HEALTHY FINANCING COMPETITION PAÚL ALEJANDRO DE LA CRUZ FRÍAS* Assistant Director of Transparency and Financial Inclusion at Banco de México

Q: How has the country’s economic situation evolved

2014 and June 2015, inflation in vehicle acquisition was

since the 2008 crisis and what part has Banco de México

2.55%, lower than most other basic goods with an average

played in the success of the automotive industry?

of 2.87%, according to figures from INEGI. A risk factor for

A: As Mexico’s central bank, Banco de México does not

price stability is possible turbulence in financing markets,

regulate the automotive industry, although it does have

leading to drastic changes in general prices and the peso

some influence in certain activities. The central bank helps

exchange rate. However, the actions taken by Banco de

to safeguard the economy by maintaining price stability,

México allow for proper adjustment in an orderly manner.

promoting the sound development of the financial system, and fostering functional payment systems. Our monetary

Q: How have financial services developed in Mexico, and

policy rests on four pillars. The first one is the central bank’s

what challenges is the country still facing in this area?

full autonomy from the government. The second one is an

A: Banking and financial services reached 38.7% of the

inflation goal scheme, based on a systematic assessment

adult population in 2014, growing from 27.4% in 2011,

of the determinants of prices. Our third pillar is the search

which represents an increase of almost 10 million new

for an efficient convergence toward our inflation target

account users, some of whom were reached through social

at the lowest possible cost in terms of economic activity,

programs focused on fighting poverty. Nonetheless, there

while the fourth is a strict commitment to transparency

are still 48 million adults without access to formal financial

and accountability.

services. Part of this growth was due to an increased development in financial infrastructure that now includes

Mexico, similarly to other growing economies, has

around 13,000 branches, 43,000 ATMs, and 27,000

recovered from the last global financial crisis. However,

banking correspondents, distributed throughout 68%

in recent years there has been a deceleration in growth.

of the municipalities in the country, reaching 97% of the

The prosperity phase characterized by high prices in raw

population. Nevertheless, there are still opportunities to

materials, low interest rates, and a considerable liquidity in

expand the banking infrastructure and reach people with

international financial markets is now reverting to previously

low incomes, while promoting financial inclusion in rural

low growth rates, so it is crucial to migrate to productive

and semi-rural areas in terms of mobile banking.

activities in the secondary and tertiary segments where the automotive industry offers considerable potential to

Q: According to Banco de México’s Automotive Financing

the country. Mexico has a strong macroeconomic position

Basic Indicators, the volume of financing services

with a consistent fiscal and monetary policy, a moderate

decreased in 2014. How have these products evolved in

current account deficit, as well as an efficient and flexible

2015?

exchange rate. Furthermore, the international reserves are

A: The sector is growing, but sometimes these services are

close to a historic maximum, and we have a flexible credit

not offered by banking institutions. According to figures

line with the International Monetary Fund (IMF) for almost

from AMDA, from January to May 2015, 312,891 out of

US$70 billion. At the same time, the banking system is

502,935 vehicles were sold through financing, representing

well capitalized and the country’s financial regulations and

62.2% of the total. This number can be divided in three

supervision of such has been strengthened.

segments, 65.8% sold by financial institutions, 27.9% through banks, and the 6.3% corresponding to auto financing. The

Q: How is inflation affecting the automotive sector, and

goal of this study is to make credits comparable between

what are the major factors that could cause fluctuations

different institutions, so we can have a clear idea of how the

in this market?

market is evolving and which institution is offering the most

A: Inflation has remained stable over the past few years.

competitive rates. These reports encourage competition

Moreover, the automotive industry has lower inflation rates

and promote mobility among customers. A future strategy

than other economic sectors. For instance, between June

is to include financing branches dedicated to automotive

*All the opinions are the responsibility of the author, and do not necessarily reflect the views of Banco de México.

362

companies, and since Banco de México manages and

the financial system, and facilitate the correct functioning of

regulates information from all institutions that work with

payment systems, we have several campaigns to encourage

automotive loans, all these companies must include a

the correct use of banking products and efficient payment

standardized indicator in their products, such as the total

solutions. We must create confidence in the financial system,

annual cost rate (CAT). Automotive loans are long-term

we need to increase accessibility to financial services, and we

products that could not be offered without the stability

ought to help companies provide the necessary information

provided by Banco de México’s policies.

to allow consumers to use these products correctly. Finally, we must create an environment that protects customers,

Q: Does Banco de México have any control over the

and real education in terms of financial services, debt, and

interest rates that companies outside the banking sector

interest rates.

offer to their clients? A: Banco de México decided not to stipulate a maximum

Q: What are the reasons behind the increased volatility in

rate for any financial service because restricting interest

interest rates for 2014?

rates

and

A: This is true only for the most recent products and within

therefore damages financial stability. If we set a low

a close variation margin. If we look at the global interest

interest limit, there might be people that could not access

rate trend, we can conclude that there is a tendency for

these services given their risk profile. This could also create

stability at 12%. For 2015, we are expecting the same

inefficient competition, forcing companies to set the same

behavior and there is actually a trend to decrease these

rates for their products. Despite other countries using

rates even further. We have information regarding every

limits, evidence shows that it is not an effective measure.

credit, but until now there has been no major distinction

Our strategy has always been focused on transparency,

between brands. However, for our next analyses we are

offering all the necessary information to allow companies

planning to divide the information by the size of loan so

to compete freely. This was how we introduced our CAT

that we have a clearer idea of which segments are more

regulation, to force companies to communicate the real

attractive in terms of financing.

limits

market

freedom

and

competition,

costs of their financing products. What we do regulate is commissions charged for financial services. By law, every

Q: What are Banco de México’s expectations for the

bank has to send its commission plan to Banco de México,

automotive industry in the short term?

and we determine if it includes appropriate costs. However,

A: According to surveys conducted by Banco de México,

we cannot control companies outside the banking network,

directors in the automotive and other related sectors

but when clients personally compare CAT rates they can

expect an increase in demand for their products and

verify if these companies are charging more.

services over the next 12 months. Furthermore, there is still a possibility for a larger private investment influx.

Q: Has the Mexican public become more knowledgeable

In terms of the domestic demand, many automotive

about the best financial products on the market?

manufacturers will boost their exports thanks to the

A: Definitely, but there is a crucial problem in Mexico

growth of the US economy and the continued peso

related to financial inclusion and education, so we have

depreciation. Additionally, US gas prices are expected

included both of them as key factors of our strategy. For

to drop, hence promoting sales and vehicle exports. It is

example, people sometimes do not want an account or

important to consider that even though most emerging

a loan because they are not aware of the advantages of

economies will face challenging economic situations in the

using these properly, or how to calculate the costs of an

near future, this will not be a deterrent for Mexico given its

interest rate. As the central bank, we have focused part of

macroeconomic stability.

our efforts on protecting and educating the population on this subject, and we are developing an ambitious strategy to promote financial education and consumer protection. We participate in programs like the Financial Education Week, collaborating with the Interactive Museum of Economy to show people how our financial system operates. Additionally, we are working with the National Banking and Securities Commission and the Ministry of Finance and Public Credit on their financial inclusion and education plan. Given that Banco de México’s objective is to seek purchasing power stability of our currency, promote the sound development of

“Mexico has a strong macroeconomic

position

with

consistent fiscal and monetary policy, a moderate current account deficit, as well as an efficient and flexible exchange rate” 363

| VIEW FROM THE TOP

FREE TRADE AGREEMENTS BENEFICIAL FOR MEXICO AND THE US HERFRIED WÖSS Director General and Partner of Wöss & Partners Q: What have been the main highlights of Wöss & Partners’

reduce uncertainties in the legal environment in response.

involvement in the Mexican automotive industry?

In the automotive industry on the other hand, we know

A: As one of the pioneering law firms in the sector, we

how the process works and Mexico continues to help

have been supporting the Mexican automotive industry

companies to develop a strong industry.

for more than 20 years. The firm has made every effort, from setting up companies and getting them registered in

Q: What advice would you give state governments about

foreign trade programs, organizing their risk management

changes in their current regulations, in order to attract

process, to solving tax issues and major arbitrations.

further investment from foreign companies?

The automotive sector represents a significant part of

A: The OEMs are concentrating only on a couple of states,

our client base, covering companies from Tier 1 to Tier

so the real question is what these states do differently

3. Recently we intervened in a conflict regarding the

from others. Communication networks are vital, so any

distribution market of a major Mexican-Asian company in

state with transport facilities to the US has an advantage.

a Latin American country, and we have even defended the

These states have governments with fairly conservative

automotive industry against anti-dumping duties on hot

policies, and they have planned ahead. There are a

and cold rolled steel used by automotive companies.

couple of fundamental issues to resolve with respect to organization and political maturity on how to manage a

About 50% of our firm is dedicated to general corporate

state. However, these do not only relate to the automotive

law, which encapsulates everything related to business and

industry, since a well-managed state will always attract

company law, with an emphasis on international business.

major investments.

The other 50% is directed toward special areas in which we are international leaders, such as in arbitration, trade,

Q: Some NAFTA regulations boosted the industry, but

and infrastructure. Approximately 50% of our clients in the

others have been detrimental, particularly the entrance of

corporate segment are related to automotive.

used vehicles. How challenging would it be to close these loopholes created by NAFTA?

Q: When certain policy changes are implemented, how do

A: These imports would happen with or without NAFTA,

you advise your automotive clients about preparing for

and they respond to a specific market need. These vehicles

them?

are targeted toward people who cannot afford new cars,

A: Normally, automotive clients are well-organized. With

especially for areas where public transportation is not

the trade cases we had in the 1990s with hot and cold

available. We saw a similar scenario in the pharmaceutical

rolled steel, we got exclusion for the automotive industry

industry. Once performance requirements were abolished,

because the domestic industry could not provide materials

at least two or three of the largest companies moved to

with sufficient quality. There were some issues, but they

Brazil for production. Instead of closing the border to used

were quickly solved, resulting in a mutually beneficial

car imports, it is essential to come up with solutions to

situation, because the more the industry grows, the more

produce good quality vehicles at affordable prices for the

Mexico expands in the international market.

local population, making sure that technical standards are being met. Import restrictions may only be a temporary

364

In oil and gas, you have the traditional factor of the industry’s

solution, but technical standards to ensure safety are likely

privatization. You need to consider how stringent the

to be the better solution. The harmonization standards

regulations will be and how well-adapted industry players

in the Comprehensive and Economic Trade Agreement

will be under new market conditions. There are many

between the European Union and Canada will hopefully

variables, from regulations to contract models. Previously,

also be adopted in the Trans-Pacific Partnership (TPP)

projects were based on administrative contracts, but now

and become the international standard which will lead to

we are seeing international contracts and the state has to

further growth of the Mexican automotive industry.

| VIEW FROM THE TOP

STREAMLINING LEGAL PROCESSES OF ESTABLISHING SUBSIDIARIES CLAUS VON WOBESER Founding Partner at Von Wobeser y Sierra Q: How has Von Wobeser y Sierra evolved after almost

The government has effectively created safe mechanisms

30 years and what have been your biggest achievements?

for opening the borders to imports and exports while

A: The firm was founded in 1986, and from the outset

still maintaining the integrity of our market. When BMW

we have been active in the automotive industry. Robert

first established operations in Mexico, the government

Bosch was our first client, paving the way for a sound

imposed a mandatory requirement that the company

business relationship with the automotive industry. Von

must purchase Mexican raw material and components

Wobeser is now one of the leading law firms in the truck,

for manufacture. BMW now purchases US$3 billion worth

car, and auto parts industries, serving more than 50 parts

of Mexican auto parts every year, and a considerable

manufacturers and four major light vehicle OEMs, as well

proportion of those volumes are exported for vehicles

as providing advisory services for others. Our partnership

produced in Germany. Mexican companies have proven

with BMW has spanned more than 20 years, and we have

their ability to manufacture products with the expected

also collaborated with Chrysler, Mercedes-Benz, and

levels of quality.

Volvo. In terms of the heavy vehicle industry, we represent companies such as Isuzu, MAN Truck & Bus, and Navistar,

Q: What is your involvement with shelter companies and

among others. Even though products and services differ

how do you help automotive clients settle in the country?

between segments, the industry experiences similar issues,

A: Due to process sophistication within our clientsâ&#x20AC;&#x2122;

which enables us to use the knowledge we gain solving

companies, there is typically a division designed to handle

one problem to resolve another efficiently.

the process internally, and shelter companies are only seldom used during the initial stages. Normally, a shelter

Q: What factors make these clients choose Von Wobeser

company is not necessary, since the companies can easily

y Sierra over your competitors?

purchase property or enter into a leasing agreement in order

A: As a fully integrated firm, our clients choose us because

to establish operations in the country, and these real estate

of our industry expertise and because we handle all

acquisitions are dealt with directly by Von Wobeser. Most of

corporate aspects relating to mergers and acquisitions

our clients are based outside of Mexico City, but 99% of their

(M&A). Specifically, in terms of the auto industry, we

legal work is conducted within the city, with the exception of

administer import-export, IMMEX and other special

litigation, which would be referred to a local lawyer.

foreign trade requisites, as well as each registration that car manufacturers require. We are well-versed in foreign

Our clients must comply with several environmental

trade, and this is especially beneficial for automotive

requirements, beginning with the plant construction,

clients who must work within those legal frameworks. Most

which requires several authorizations from the Ministry

of our clients are international, although we do retain some

of Environment and Natural Resources (SEMARNAT)

significant Mexican clients, such as Grupo Bocar.

in terms of environmental impact, water usage, and wells drilling. In addition, it is necessary to comply with

Q: What are the main trends that you have identified in

complex requirements in relation to waste disposal and

the automotive industry?

air emission regulations. The legal framework in terms of

A: The automotive industry is dependent on an extensive

environmental policy has been transformed completely in

and complex chain of job creation, and Mexico has been

the last 30 years, with important changes implemented

active in taking advantage of its potential, making it by

by the authorities that have increased sophistication

far the largest exporter in Latin America. As such, the

within the industry. SEMARNAT has greatly contributed

automotive industry has been crucial for the industrial

to a wider focus on environmental issues and, in my

development of the country, particularly in terms of

opinion, the regulations implemented by the organization

training

have been fair for both the automotive companies and

the

workforce,

increasing

competition

and

generating an influx of foreign investment in the country.

environmental sustainability.

365

| VIEW FROM THE TOP

UNDERSTANDING THE NUANCES OF MEXICAN BUSINESS LEFT: María Teresa Llantada Voigt, Founding Partner at Gastélum Abogados RIGHT: Carla Gastélum Glender, Lawyer at Gastélum Abogados

Q: Since its foundation in 1985, what have been Gastélum

Q: When did the firm decide to enter the automotive

Abogados’ main achievements, and how did the firm

industry, and what have been your defining projects in

acquire such national and international prestige?

this sector?

CG: Gastélum Abogados has been providing various

CG: At the beginning of the 1990s we were invited by a

advisory services for a wide range of national and

Mexican-German firm that specialized in elevators for

international law subjects over many years. In particular, the

the automotive sector, defending its interests against

firm has been advising global clients on the legal aspects of

Volkswagen and Audi for several contractual breaches. Later,

their interests in Mexico. Our lawyers specialize in several

we participated in assessing a corporation that specialized in

branches of the law, foreseeing and supporting needs

plating in several aspects of their operations, particularly in

related to the entrusted business. Our area of litigation

their association with a foreign investor. Given our experience,

has defended the interests of national and international

we were invited to participate as counselors to two of the

corporations in corporate and investment matters, as well

leading companies in the industry during the year 2000.

as contract compliance, collections for services rendered, and strategic fiscal planning for operations or products of

ML: Aside from having years of experience in this sector,

a corporation or group.

we offer a privileged and personalized service. Our team is available 24 hours a day, every day of the year, and

ML: Having started out as the representatives in litigation for

is equipped to oversee and study the different areas of

a major international equity fund, and due to the diversity

law applicable to the sector. Furthermore, the partners

of the investments of such a fund, we expanded our areas

are always deeply involved from the start, and interact

of expertise, positioning our company as strong advisors in

constantly with the rest of the lawyers, conducting mock

many sectors, such as construction and real estate, energy,

trials and discussions, bettering our services and giving

airports, finance, and manufacturing. As a consequence, our

our clients the necessary attention.

experience is not only in the Mexican market, but also at the international level, having consolidated strategic alliances

Q: Has Gastélum Abogados participated in the trend in

with more than five firms throughout the world, among them

M&A operations in the automotive industry, and what

Chavarri Abogados, based in Spain.

challenges has it presented to the firm?

BANK WITH AN AUTOMOTIVE FOCUS

366

Recent developments in Mexico’s automotive industry have

industry, and we are trying to reach all the Tier 1 and Tier

piqued the interest of many financial services companies,

2 companies that make sense for our coverage model in

one of which is adapting its approach to the industry.

Mexico.” The benefit that Banamex can provide to those

Banamex has specifically developed a global, regional, and

established OEMs and suppliers is in the existing global

local understanding of the automotive industry because

relationships it holds with them. “If we already have this

of the contribution that the sector has been providing

relationship, we would immediately approach them and

for Mexico’s economy. “Although we do not measure the

enable all credit and funding services, including the whole

business that individual industries provide, we are highly

array of products that Citibank and Banamex can provide,”

aware of the importance of our automotive clients,”

states Antonio Muñoz Gómez, Mexico Head of Global

states Gonzalo Lourido, Director of Automotive Industry

Subsidiaries Group. “When it comes to small- and medium-

Regional Account Manager at Banamex. “Banamex is

sized startup companies, that niche is not covered by our

already working hand in hand with the main players in the

corporate bank, but is still serviced under our business

ML: As a firm, we have had the opportunity to assist clients in M&A operations in several industries. Firms generally look for growing markets and stable conditions in order to consolidate their position. Today, that is the case for the automotive industry in Mexico, which is the second largest formal industry in the country, creating an attractive

NUESTROS SOCIOS

opportunity for foreign investors. CG: Gastélum Abogados has been researching the industry and monitoring rapid changes in order to advise our clients in a timely and informed manner. For example, we tailored a joint venture operation for one of our clients participating in the plating sector of the automotive industry, allowing for a foreign investor to enter the market under the most favorable conditions. For us, it is important that the M&A operation is tailored to fit the client’s individual profile.

Socios Fundadores Jorge Isaac Gastélum Miranda María Teresa Llantada Voigt Jorge Enrique Borbolla Gómez Llanos, Socio de Corporativo Alfonso Pasapera Mora, Socio Consultor Mauricio Zarza Carecer, Socio de Litigio

Q: What are your priorities for 2015 and how much

Nuestras Áreas

participation does the firm seek to have in the automotive industry over the next few years? CG: For many years, Gastélum Abogados has been known particularly for litigation in the aeronautics industry. However, we have also fortified other areas of expertise and are ready to expand to different areas of law and new industries to broaden our client base. We are investing our resources with a rigorous focus on those industries we know are continuing to grow at very fast rates, such as the energy, hotel and service industries, and of course, the automotive industry.

Litigio Civil y Mercantil

Fusiones y Adquisiciones

Concursos Mercantiles y Quiebras

Competencia Económica

•

• •

•

Contratos

•

Derecho Administrativo

Derecho Corporativo Reestructuras y Financiamiento •

Derecho Penal y Asesoría en la Prevención de Delitos

• •

Mercado de Capitales •

Comercio Exterior y Aduanas

ML: We are also considering opening offices in the Bajio region and the north of the country. Today, we have strategic alliances all around the world, but we also have collaborations in the main cities of different states throughout the country, such as Nuevo Leon and Baja California, showing that we are truly focused on the automotive industry.

banking sector.” The bank also has a global automotive industry head for Citigroup, who is always in coordination with the different countries that participate in the industry. “There are not many other banks that have a global industry head, so our structure allows us to service the industry on a greater level,” explains Muñoz. “We are in perfect coordination with our global team to access upcoming deals and stay ahead of the game.” Banamex now has the largest country coverage within the Americas, covering 23 countries in the region, which enables it to both capture funding opportunities and to help companies in Mexico access those markets. Now that automotive companies are exporting to the Americas and to Europe, Banamex is also keen to pursue that possibility with its services.

Condominio Arcos Oriente Bosque de Alisos 45-B Planta Baja Bosques de las Lomas 05120, México, D.F. Tel.: 33 00 19 00 Fax: 52 57 16 41

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PRODUCING DEDICATED R&D SPACES FOR MULTIPLE INDUSTRIES ALBERTO TERRAZAS Director General of Desarrollo Económico de la Ciudad de Chihuahua (DESEC) and Financial Director of Grupo Copachisa Q: What new projects has Grupo Copachisa brought to the

innovation park through meetings with multiple companies,

state of Chihuahua, especially now that Ford is increasing

including Ford and Visteon, as well as with the academic and

its investment?

public centers. We are confident that by the beginning of

A: Copachisa is producing the structure of Ford’s new plant,

2016 we will start the architectural development, and in terms

and is building Visteon’s plant with the aid of Grupo Bafar. We

of the aerospace park, we are building an aerial maintenance,

participate in various national projects within the automotive

repair, and operations (MRO) workshop. The project will add

industry, which represent 19% of Mexico’s manufacturing

value to the multiple industries that we are part of, ideally

GDP. Grupo Copachisa has been involved in the evolution

increasing the state’s GDP. Chihuahua generates on average

of the industry for the last five years, developing many

US$10,000 GDP per capita and our goal is to increase that

automotive ventures, such as projects with KIA, Nissan,

number to US$25,000 over the next ten years.

Honda, Mazda, and Audi. Furthermore, we are taking part in the electromechanical development for Goodyear’s

Q: What new projects has DESEC examined or initiated

plant, and we may expand that participation to other fields.

within the automotive industry?

Copachisa continues to be active in steel structure, and

A: The automotive cluster is a crucial job creator in Chihuahua

is now entering the machinery development sector with

so it is safe to say that it is one of the state’s main clusters. Not

a new company that will focus on special treatments

only are most Tier 1 and Tier 2 companies already settled in the

needed in both the automotive and aerospace industries.

state, we also have Ford, BRP, and some of the most important

In partnership with a local investment group, Copachisa

design centers nationwide, such as Delphi and Visteon, which

is developing thermal treatments specifically required in

means that most of the international engineering design

the aerospace industry. We have the AS9100 certification

takes place in Chihuahua. We have considered bringing an

that enables us to supply aerospace companies such as

automotive assembler into the state because the logistical

Honeywell and Global Aerospace. Within automotive, we

advantages, including proximity to the US, are significant

have supplied Tier 1 companies like TRW and Ford with our

for new businesses. We have also been working with the

machinery, yet we are aware of the continuing opportunities

state’s Ministry of Education to develop training institutes for

in both the automotive and aerospace industries.

automotive and aerospace technicians. DESEC has met with State Governor, César Duarte Jáquez, to define strategies to

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Q: What is the most ambitious project that DESEC has

attract these companies. The organizations are undoubtedly

recently developed in Chihuahua?

interested in Mexico and, given the right incentives, they

A: We are working on an innovation park in close collaboration

might be establishing facilities in Chihuahua by 2017. We

with the state’s Ministry of Economy, as well as with industry

want to integrate SMEs into the industry’s value chains, and

promoters, that will focus on R&D. The project is scheduled

DESEC have been working closely with the National Industry

to be finished by the third quarter of 2015, and the innovation

Chamber (CANACINTRA) and the Ministry of Economy to

park will be directly adjacent to the airport which also

stimulate SME investment. An intermodal transit center in

influenced the decision to create an additional aerospace

Las Cruces connects companies to the US, and DESEC is

innovation park beside it. Both projects will take place on a

currently working on a conceptual development that will

200 acre piece of land, out of which 50 will be assigned to

ease its access and connectivity. In addition, we can establish

the R&D center, and the remaining 150 will be used for the

ourselves in strategic economic zones, where tax payment

aerospace park. The automotive, aerospace, agroindustry,

is reduced in comparison with other geographical positions.

and biotechnology clusters will form part of the R&D facility.

Finally, the Topolobampo port has shown great progress in

The construction of innovation and manufacturing centers

its dredging stage and its infrastructure development. Many

for both the automotive and aerospace industries has been

states are working in conjunction to create an inclusive

proposed, but we maintain a primary focus on the automotive

Pacific-US corridor, including Chihuahua, Sinaloa, New

sector in Chihuahua. We have defined projects for this

Mexico, and Texas.

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SITE SELECTION FACILITATING NEW AUTOMOTIVE ARRIVALS SALOMÓN NOBLE Director General and CEO of INTERMEX

Q: How has INTERMEX evolved within the automotive

the shelter service’s intrinsic value prevails beyond the

sector and what new projects have been introduced as a

permanent establishment requirement, because the need

result of the company’s participation?

for human resources, accounting, international commerce,

A: The main concerns of companies when they enter a

environmental and quality of life services are inherent

new country are human capital training, strategic sourcing

to the customers’ operations, even years after installing

for manufacturing, and whether an effective technology

facilities in a new country. These services can eventually

transfer will be achievable. INTERMEX provides a soft

be rendered to the customer’s WFOE.

landing through mechanisms that guarantee compliance with Mexico’s legal framework, allowing the client to focus

Now that many companies are entering the country,

on its technology transfer process and training. The shelter

attracted by newly developing clusters and improved

program is an excellent tool for all companies that are

infrastructure in those areas, INTERMEX is approaching

new to Mexico, and are not familiar with the legislature or

these new players and the accompanying suppliers

how to attract talent. We have proven methods that help

with a strategy focused on the customer’s site selection

companies attract a qualified workforce, even in high-

process. It is important to define key variables to assemble

demand conditions. Through this program, INTERMEX

a sound list of potential locations for the customer. The

also addresses accounting, international commerce, and

most common criteria include qualified labor availability,

environmental requirements on the newcomer’s behalf.

proximity to the customer or source of supply, accessibility, and infrastructure. INTERMEX’s pro forma cost model

In 2014, INTERMEX implemented its shelter program to

allows the strategic sourcing candidate to evaluate various

ease the entry of Heil Trailer in Ciudad Juarez. Heil Trailer

locations and quantitatively evaluate each site.

established a sophisticated fabrication facility for heavy aluminum trailers designed for hauling fossil fuels, and

Q: How will the shelter program evolve in the next few

is now exporting trailers to Saudi Arabia via the port of

years, and what are your priorities for INTERMEX in the

Galveston, Houston. Typically the trailers are made from

automotive industry?

steel, but Heil’s innovative aluminum solution is superior

A: The current trend among suppliers is to move toward

in terms of reduced weight, resulting in lower operational

specialization, and our shelter services allow suppliers

expenses and improved safety. Their manufacture required

to focus on their core business. The INTERMEX team

more specialized labor in order to operate state-of-the-art

offers knowledge and expertise to complement the

processes such as aluminum plank cutting, cold forming,

manufacturing operations of our clients throughout their

and welding processes, boosting Mexico’s added value

companies’ life cycle but especially in the early stages, so

and competitiveness. Additionally, in May 2015, Oshkosh

demand for the program continues to grow. The shelter

began the operation of a world-class manufacturing plant

program’s evolution is intrinsically linked to the rate at which

in Colinas del Leon Industrial Park, Guanajuato, which

technology is developing. Collaborative environments are

produces access equipment such as scissor elevators.

growing in popularity, and there is an increasing need to take advantage of this virtual infrastructure to create more

Q: What impact will new regulations have on your clients,

user-friendly interfaces. The challenge of every shelter

now that the duration of the shelter program has been

provider is deciding how to employ the technology in

reduced to only four years?

order to generate faster and more effective collaborative

A: The fundamental change in the regulation for the shelter

services. Nevertheless, when a new investor comes to the

program is that international companies will have to deploy

country, the value of the shelter program goes beyond

a wholly foreign-owned enterprise (WFOE) through a

technology. INTERMEX provides the new investor with a

permanent establishment in Mexico after four years of

strategic ally, smoothing the transition into the unknown

working with the new shelter program. Nevertheless,

environment in terms of language, culture, and legislation.

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REAL ESTATE INVESTMENT FLOURISHING FOR AUTO INDUSTRY EZEQUIEL RODRĂ?GUEZ Head of Mexico at Prudential Real Estate Investors (PREI) Q: How did PREI enter the Mexican market and what have

grow. Additionally, one of our key successes has been the

been its most important policies in the country?

fact that we adhere to high standards as an international

A: Prudential Financial began operations more than

company, while remaining flexible at a grassroots level. We

135 years ago with insurance products, and over time

work with a select group of local partners who focus on

it evolved to include investment management services.

the day-to-day work, allowing us to ensure we deliver the

That is how Prudential Investment Management (PIM)

necessary results.

was created, and today we are one of the ten largest investment managers globally. PREI began investing

Q: In what ways does PREI help its partners grow?

in real estate in the US in 1970, where it was a pioneer

A: A good example is one of our Tier 1 tenants. This

with its open-end fund structures. As companies started

company first asked for a basic warehouse, and three

to grow internationally in the 90s, it became clear that

months later, it asked us to double the space due to a

PREI needed more international exposure. With this, PREI

contract it obtained with a different OEM. After nine

started to expand into Europe, Asia, and eventually Latin

months, the company had already doubled its space, and

America.

now it is looking to triple its facilities. We were able to offer great flexibility to that client throughout its entire

We arrived in Latin America in 2001, as one of the few

growth process and we formed a strong partnership.

institutional real estate players who came to Mexico and

These companies normally compete for eight-year

never left. PREI operates through a long-term strategy,

contracts, but they cannot commit to the space until they

and with that in mind, we started investing in Mexico.

sign. Therefore, once they get the business, they need

Today we are one of the largest international institutional

to find the right lot in a short period of time. Thanks to

real estate managers in the country. We have over US$4

its significant land bank, PREI can help these companies,

billion in our core business of real estate assets, and we

taking their requirements, relationships, and conditions

have become the largest manager of industrial property

into consideration.

in Mexico. We have more than 3.6 million square meters

370

of industrial property in North and Central Mexico, with a

There are tenants who want to be next door to their clients,

diverse portfolio across the entire country. Furthermore,

while others prefer to be slightly isolated. Our tenants

we currently manage a development capital certificate

include some of the most important logistic companies

(CKD) investment, and we serve as the advisor to FIBRA

in the country, as well as multinational companies in the

Terrafina, which is one of the first real estate investment

automotive and aerospace industries, so we constantly try

trusts in Mexico.

to detect the most active sectors and locations.

Q: What percentage does the automotive sector represent

Q: When companies look for a new plant in Mexico, at

for PREI in Mexico and in global operations?

what stage does PREI get involved in the process?

A: About 25% of our industrial portfolio is related to the

A: We might get involved at different stages. Sometimes

automotive sector. We are highly diversified, which means

a company arrives and identifies where it wants to be

that this is probably the largest segment within our

located. In those cases, we offer the company the solution

industrial assets. Part of the value we offer these companies

that best fits its requirements. In other cases, we detect

is that, whether they are OEMs or suppliers, their capital

the region with the most activity related to the industry,

and resources will be directed toward equipment, tools,

we build on a speculative basis, and we generally have

and R&D, instead of fixed real estate assets, which is not

a tenant waiting that wants the space before we finalize

their core business or main source of growth. We do not

construction. We analyze the entire country and we

just lease buildings, however. We see ourselves as partners

have specialized people on the ground that help us with

to our tenants, and it is in our best interest to help them

the process. A third scenario is when companies have

large pieces of land they do not need. They might need

location, request that we look for five different locations.

resources for their core business, so PREI takes care of

In terms of space, generally we try to build facilities

the repurchasing of their property and we manage the

with high standards that can adapt to a variety of uses.

lease-back process when needed. There are interesting

Another important factor is education and the availability

opportunities in the industry and, thanks to our large

of a trained workforce. Considering the percentage of

presence, we are able to manage all three project types

total graduates, Mexico is producing a larger proportion

at the same time. We look for possible locations and

of engineers than the US. There have been significant

we build new facilities all the time, but as investment

improvements in that area, although it is still a challenge

managers we have to consider the risk of every operation.

to find qualified people for the industry. Nonetheless,

A big part of our decision is influenced by what is

Mexico is extremely competitive; there are many areas

happening and where the activity is in the industry. When

where the country still needs to develop, but it is much

people found out that BMW was setting up operations

more advanced than comparable emerging economies,

in Mexico, everybody was trying to guess where, since

especially considering its relationship with the growing

it would create a surge in demand for Tier 1 and Tier 2

US economy. Car exports to the US have increased

suppliers. This is the same process with every new plant

significantly, and we have a market with similar conditions

in the country, and we also pay a lot of attention to road

to any developed country.

development, as well as communication and logistic channels. Access is one of the most important factors in

Another defining factor for Mexico is that it allows US

terms of logistics, so companies also need to consider

dollar-denominated contracts. Most of our portfolio

where they are going to find their talent and how these

is leased in dollars, which is a competitive advantage

people are going to commute to the plant.

considering real estate and workforce costs. The country still needs to continue developing its infrastructure, and the

Q: How do the automotive industryâ&#x20AC;&#x2122;s needs differ from

Energy Reform will be essential to making Mexico a more

any other sector?

competitive country in the long term for productivity and

A: Automotive tenants are particularly sensitive to

energy prices. Mexico is a highly export-oriented market,

location with respect to their clients and their suppliers.

and there is a large population and a growing middle class

There are companies that, instead of choosing just one

that will take on the next generation of demand.

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Lease to make your projects come true 371

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UNCOVERING THE SECRETS OF THE MEXICAN MARKET ARMANDO SOTO President and CEO of Kaso y Asociados

Q: How does the information that you provide differ from

which states have the highest expenditure, the number

what AMDA and AMIA offer, and what advantages does

of cars per family, and how much they spend on spare

this provide for your clients?

parts and vehicle maintenance. We start with a true

A: The difference between what we offer and what these

microanalysis, and then we start to make inferences and

organizations provide is that they usually focus on past

analysis about the whole region and the country. That way,

information. Instead, we take that information and make

we have found that Jalisco, Sonora, Puebla, and Mexico

an educated prediction of what will happen in the future,

City are the cities with the highest expenditure on spare

through our econometric models and predictive analytics

parts, representing 43% of the national expenditure, with

techniques. For example, we have analyzed the impact of

an average vehicle age of 12 to 20 years.

used vehicle imports on the Mexican market and how these will shape the automotive sector in the next ten years. We

Q: Is your information being used by the government

have also conducted research at a microeconomic level,

to determine its infrastructure budget and policies to

analyzing the possibility of opening a dealership in a

manage faulty cars?

specific location based on the anticipated market size and

A: This should be one of the priorities for the government.

customer profile.

At the beginning of President Enrique PeĂąa Nietoâ&#x20AC;&#x2122;s government, we collaborated with INA, AMDA, AMIA, and

Q: Most large companies already have their own methods

ANPACT, to create a strategic document that showed

for selecting locations. How does Kaso y Asociados

the current environment of the automotive industry

gather and analyze data in a unique way?

and various development scenarios for the 2012-2018

A: The advantage we have is that we use different

period. In Mexico, the average age of the motor vehicle

disciplines and tools to predict market opportunities. We

population is 17 years, while the average age in the US is

make an analysis at a regional level, and we determine

11 years. Generally speaking, older cars have high social

which factors have a significant impact on vehicle demand,

and economic costs, but there are not enough statistics to

population trends, income levels, consumer habits, and

support this statement in Mexico. We conducted research in

expenses. We also have consultants who specialize in

this area, for which we had to use international information

econometrics and geo-marketing, who translate the

and adapt it to the Mexican situation, and we found out

acquired information into maps that show the potential

that the impact on health problems was substantial as a

of each market. Other studies that we have conducted

result of polluting emissions like CO2.

were focused on brands that had already decided where to establish their operations. They came to us and asked

We have been working to develop car fleet data, but it

how much impact their company would have within the

would be better to obtain it directly from REPUVE, so

state infrastructure in order to negotiate better conditions

we could develop a more complete analysis. In 2012, we

with the state government. In those cases, we analyze

carried out a study to estimate the economic and social

investment, production, employment, and other data to

impact of importing used heavy trucks and buses on

determine the relevant company impact.

the Mexican economy. We looked at the available heavy commercial vehicles in Mexico and the US, the average

372

Q: What part could Kaso y Asociados play in making more

age of the vehicles, and the size of both markets. Based

statistics available about the aftermarket in Mexico?

on this data, we started to derive statistics related to

A: We are currently working with INA to determine what

accidents and polluting emissions, and finally we made

kind of base information we could have available before

projections on how these emissions would affect the

we start to prospect. In order to separate the aftermarket

population. In the end, we concluded that the costs of

figures, we first analyze household behavior and how

importing these vehicles outweighed the immediate

people manage their expenses. Afterwards, we establish

benefits.

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INCREASING PROJECT MANAGEMENT DEMAND IN MEXICO ALEJANDRO ROSAS Business Development Director, Industrial & Advanced Facilities Latin-American of CH2M Q: What is CH2M’s current presence in Mexico, and what

concepts of quality, health, and safety into the design.

types of projects do you normally undertake?

Furthermore, CH2M always includes energy efficiency, as

A: With a strong presence in Latin America, CH2M has been

well as construction practices that represent cost and time

operating in Mexico since 1992, employing almost 600

savings for our clients.

engineers who work on projects related to various markets and sectors. We service clients within different sectors

Q: Considering the ever changing nature of the industry

including industrial, energy, transportation, urban programs,

and the core of CH2M’s business, what new practices have

environment, and water markets. Mexico is the main office

you incorporated in your portfolio?

in the Latin American Region, but we have also established

A: One of the most recently built and largest OEM plants in

regional offices in Argentina, Brazil, Panama, Trinidad and

Mexico was entirely designed by CH2M. Having worked on

Tobago, and Peru. In 2015, TÜV Rheinland Mexico recertified

an US$800 million automotive plant, we are familiar with

our company’s quality management system under ISO

the industry requirements, local challenges, and resources

9001:2008, and our environmental management system

needed for complex projects. Additionally, CH2M has a

under ISO 14001: 2004 and HSE OHSAS 18001:2007.

long history in advanced facilities such as laboratories

Regarding the automotive industry, we have delivered

and data centers, with extremely complex and demanding

projects for OEMs, Tier 1 companies and other automotive

design and operation requirements.

suppliers over the last 20 years. Furthermore, we have a strong engineering team with enough knowledge and

Over the last decade, CH2M has participated in some of

expertise to manage the needs of future automotive

the most important infrastructure projects in Mexico. One

investments. For example, we have provided engineering

of these includes the provision of external management

services for the GM Corporate Building in Mexico City and

for the Atotonilco Wastewater Treatment Plant, the

Construction Management Services for the GM plant in

largest in Latin America, with two treatment processes

San Luis Potosi. As one of the main OEMs in Mexico, this

that produce 35,000l of clean water per second. Once

is a significant contract for us. We have also designed

the plant begins operations, it will treat 60% of all the

several

providing

wastewater generated by the Valley of Mexico, produced

master planning, environmental and engineering services.

by 12 million habitants. Among other projects, CH2M has

Normally, these projects entail build-to-suit facilities, which

completed the Front-End Engineering Design (FEED) for

require a sophisticated engineering process to adapt the

the natural gas transportation system from Los Ramones

infrastructure and utilities to the client’s production.

to Aguascalientes, with a capacity of 1.5 billion cubic feet

industrial

parks

Latin

America,

per day. The pipeline measures 946km with a diameter of Q: In which main areas of expertise are your services for

24-36in, including compressor, measuring, and regulating

automotive clients concentrated?

stations, as well as control and isolation valves.

A: We have significant experience working with OEMs and Tier 1 companies such as Honda, PACCAR, Freightliner,

One of the main motivators for OEMs and Tier 1 companies

GM, Caterpillar, and Mercedes-Benz in Mexico. Our main

contacting CH2M is our expertise in environmental services.

service is Engineering, Procurement and Construction

Over the last five years, we have helped many companies

Management (EPCM), collaborating with clients throughout

with these processes, as well as site investigation and

the entire lifecycle of a given project. Furthermore, we

remediation, waste management and decontamination,

can provide additional services such as due diligence

demolition, and other permit filing operations that have

and environmental checks. CH2M is a market leader in

allowed them to confirm their site location. We expect to

Mexico, and we have unique 3D modelling and building

continue increasing our participation with OEMs in Mexico

information modelling capabilities. We constantly promote

and Latin America, which will constitute our main target

our quality standards in all disciplines, incorporating the

over the next few years.

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PROMISING FUTURE FOR FINANCIAL PRODUCTS IN MEXICO LEFT: Eduardo Alejandro Castillo Sánchez Mejorada, Regional Deputy Director General of UNIFIN RIGHT: Gerardo Tietzsch Rodríguez Peña, Business Director General of UNIFIN

Q: How does UNIFIN manage its operations throughout

EAC: Leasing is a financing alternative that offers many

the country?

advantages, especially to legal entities. Apart from its

GTR: UNIFIN has 22 years of history in Mexico and until May

many other benefits, this program generates fiscal perks

2015 we were a 100% Mexican company. After our initial

that make it an interesting option for companies. However,

public offering on the Mexican stock exchange, we received

it has largely failed to develop among private users, unless

an enormous injection of capital, allowing us to acquire

they work for a corporation that uses this service. That is

the proper tools to continue growing. UNIFIN is divided

why we prefer to focus on automotive loans with private

into regional branches, but we have operations across

clients. Mexico is a truly underbanked country, which

the country. In terms of our services, leasing represents

means that any financial product has a promising future.

78% of our current business, factoring has a 10% share,

There are many opportunities, and we hope to be able to

while the remainder is dedicated to automotive loans.

obtain a share of this market.

According to Alta Group, we are the largest independent leasing company in Latin America, and we have served the

Q: Given that Mexico still does not have a mandatory

automotive and transportation industries for many years.

insurance regulation, how large is the market for UNIFIN?

Our main advantage is our multi-product and multi-client

EAC: The government has already made some changes in

approach. We do not only focus on vehicles, but also on

this area with the implementation of mandatory insurance

machinery and equipment, which altogether comprise

for vehicles that use federal highways. As equipment owners,

close to 50% of our client portfolio.

we have to make sure that vehicles remain functional after any accident, which makes insurance a vital part of our

EAC: UNIFIN is a completely client-oriented company, with

operations. We do not have exclusivity with any company,

no standardized products. Instead we analyze our clients

so we can adapt to client requirements. Being associated

and construct our products based on their financial needs.

with an insurance broker allows us to offer attractive

We see UNIFIN as a consultant for our clients, helping them

conditions to our customers, meaning we can insure our

throughout every collection process, while prioritizing their

units and our clients with comfortable fees. On top of

needs. We adapt our process to their projection strategies

that, UNIFIN can insure the equipment and assets of any

and help them construct the best product according to

given company. Our association with this broker generates

their capacities.

extremely competitive prices, and our wide portfolio allows us to provide the best advice to our clients.

Q: Given that leasing still lacks popularity in Mexico, how

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has UNIFIN promoted the advantages of this service?

Q: Now that KIA will establish a plant in Nuevo Leon and

GTR: We focus on SMEs, which is a relatively uncharted

several other companies will set up operations in the

sector. According to data from the World Bank, operative

Bajio region, what are your strategies to attract potential

leasing contracts represent close to 8% of the national

suppliers to these regions?

GDP. If we compare this to other counties such as

GTR: One of UNIFIN’s strongest regional sales offices

Colombia and Chile, this percentage is five or six times

is in Monterrey, and our most important strategy is to

lower. Therefore, there is an enormous opportunity for

build close relationships with our clients, especially with

new business in the local market. We have detected

the people that know the business and how it is going to

several openings, and one of our current priorities is to

develop. We want to target these companies with people

close the gap for the leasing services. The most important

that know the industry. Once these players become proper

factor is that we are a Mexican company, focused on the

suppliers of these new investments, we will offer them our

Mexican market. We have a commitment to the Mexican

factoring solutions, and subsequently we will propose our

economy, and we build our strategy according to the

leasing products as an option to help them develop the

needs of our local clients.

proper assets for their operations.

| VIEW FROM THE TOP

EXPANDING MEXICO’S KNOWLEDGE OF FINANCING ALTERNATIVES RICARDO HOYO Commercial Director of Arrendadora Actinver Q: Which developments of the leasing market preceded

Q: What financial products does Actinver offer that are

the entry of Actinver into this business?

specifically focused for SMEs?

A: Actinver began its leasing operations four years ago after

A: We provide credit and leasing products as primary drivers

acquiring a family business dedicated to these transactions.

for these companies. Unfortunately, regular banks give their

We have been expanding our capacities ever since, making

financial advisors monthly targets that they must reach,

it one of the most important business units in the group.

which creates a disparity between customer needs and

Leasing companies in Mexico were mainly independent

the bank’s own personal interests. Conversely, our clients

companies that did not belong to any financial institution.

are extremely appreciative that Actinver takes the time to

Over the last 20 years, US companies like GE Capital, CIT,

properly assess their financial capabilities and necessities.

CHG, and CSI Leasing, were powerhouses for these types

Furthermore, we do not call our establishments ‘branches’,

of solutions; they created them, and they were the most

instead opting to call them business units, since clients can

capable leasing service providers. Meanwhile, banks had

evaluate any financial product they need, including stock

problems getting accustomed to the business, but that

market investments, credits, and leasing services.

began to change a couple of years back. In 2010, the Mexican public lease portfolio had an annual worth of MX$20 billion

Q: What are the biggest financial concerns in the

(US$1.33 billion). By 2015, that number almost reached

automotive industry?

MX$60 billion (US$4 billion). This exponential growth has

A: In terms of light vehicles, tax deduction has been the

not been seen with any other financial product in Mexico.

biggest restraint. Leasing used to be 100% tax deductible, but

That made banks start to get interested in that segment and

now that is only the case for vehicles of under MX$150,000

although we have not seen the same growth as in the US,

(US$10,000. Due to the low price range, it is no longer

the market has developed quite interestingly.

attractive enough and people lose interest. Perhaps if those numbers were to rise to MX$300,000 (US$20,000), the

Q: How has the leasing market matured since the

whole industry could benefit. Implementing a credit product

introduction of your leasing products?

with competitive rates becomes a prolific sales strategy for

A: The leasing market in Mexico could currently be considered

any OEM. That is precisely why so many of them have active

semi-mature, but it will reach its full potential within the

participation, such as Volkswagen Leasing, Ford Credit,

next ten years. Culture has been the biggest barrier that has

and Chrysler Financial. Running credits in the US costs the

hindered our growth, since both businesspeople and the

financial institution between 2-4% of the credit’s value in

overall population still see leasing as an expense. There is

recuperation fees, while that rate can be up to 30% in Mexico.

a Mexican idiosyncrasy that goods need to be owned, but

Given the high risks in repayment, banks do not lend money

the country is finally beginning to understand that cars, for

regularly and prefer to keep their credit card structures.

example, are not assets that create wealth. Companies have also taken this approach, as they used to evaluate leasing

Q: What are your priorities for 2015, and how do you see

based on the infrastructure investments they had previously

the leasing market growing in Mexico?

made, instead of the company’s capacity to generate

A: One of our main priorities is strengthening our leasing unit

revenue. However, the crisis has helped to shift this way of

with the necessary infrastructure, workforce, and expertise.

thinking into a more efficient cash flow approach. Leasing

Actinver’s leasing growth has been 35% over this last year,

can be a useful tool to accelerate growth, but Mexico

and we want to continue that expansion rhythm. If we want

regretfully lacks that financial sophistication. Therefore, we

to develop the Mexican market at the same speed as the US

must focus our efforts on SMEs, since they are the driving

market, then interest rates must drop significantly. In addition,

force of the country. If we can turn those companies into

taxes that are now applied to new cars are unaffordable, so

big ones, there will be more job creation and the pace of the

there are still many things that can be done on a macro level

economy’s growth will accelerate.

that could stimulate the automotive market.

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| VIEW FROM THE TOP

BANKING ON AUTOMOTIVE INDUSTRY GROWTH JUAN MAROTTA Head of Commercial Banking at HSBC Mexico

Q: How attractive have HSBC’s services been in the

and customized products and services at affordable

Mexican market, and how has the bank been approaching

prices. HSBC links supply chain members through our own

potential automotive clients?

automotive events as well as by participating in independent

A: Due to HSBC’s global footprint, automotive companies

automotive events. We are also members of the American

have been contacting our offices in Mexico to request

Chamber of Commerce and the German Chamber of

financial advice about the market before making the

Commerce, and are working closely with the National Auto

decision to invest in facilities. Usually, these contacts are

Parts Industry (INA) to provide insights into the automotive

established via HSBC’s main offices, but also arise from

market. HSBC also participates in the Nacional Financiera

recommendations from other companies in the industry.

(NAFINSA) Cadenas Productivas program.

We have seen significant interest among German, US, and Asian companies in establishing manufacturing facilities in

Q: How have your factoring and funding solutions been

this privileged location.

received among your Mexican clients? A: During 2015, we have been investing in a new system to

In Mexico, HSBC has dedicated auto specialists with a

provide an enhanced factoring platform to our customers

profound understanding of the market’s requirement for

for their receivables finance needs. Additionally, with

financing structures. Additionally, the bank can offer both

reference to reverse factoring, commonly known as

US dollar and Mexican peso financing at competitive rates

supplier finance, HSBC has developed an in-house

for the auto industry, giving us a competitive edge. It is

platform that allows for robust invoice management,

important to work directly with our customers to find the

in real time, and in both US and Mexican currencies for

most suitable financing structure, and we are happy to

suppliers located anywhere within the Mexico-US-Canada

provide custom-made solutions to achieve this. Alongside

corridor. This truly sets us apart from our competitors.

our understanding and collaboration with the industry,

In terms of funding, the market is heavily biased toward

HSBC’s ability to provide financing to Greenfield projects in

the US dollar, while Mexican peso loans represent a small

Mexico, as well as newly established subsidiaries, indicates

portion of those provided by HSBC to the automotive

how unique our dedicated automotive banking services are.

sector. In recent years, more companies are looking at bank financing as a source of funding for their newly created

Q: How involved is HSBC in the automotive industry, and

subsidiaries in Mexico. This is due to low US dollar funding

how has HSBC helped SMEs develop in this sector, as well

rates rather than only intercompany or equity funding.

as connect them with large suppliers and OEMs?

Most companies are opting for a combination of equity,

A: The involvement of HSBC in the automotive industry is

intercompany loans, and bank funding.

significant and is demonstrated by a number of factors.

376

Firstly, the bank has auto specialists as relationship

Q: How does import and export factoring help companies

managers in every segment, both at the OEM level as

with their international operations?

well as the Tier 1 and Tier 2 levels. Secondly, our specific

A: Receivables finance solutions are financing alternatives

strategic initiatives are dedicated toward the industry in

with attractive features for international operations.

the Mexico-US-Canada corridor. Thirdly, we have the credit

For instance, in a reverse factoring or supplier finance

appetite and product knowledge required to provide the

transaction, the supplier, located in Mexico for exports or

correct value to the industry participants. And finally, the

abroad for imports, will receive financing in the form of

bank has the global connectivity and footprint required

anticipated payments without any requirement to use or

to support companies on a local and international level,

establish credit facilities with a bank. Therefore, receivable

covering the aforementioned Mexico-US-Canada corridor,

finance structures in the automotive industry help

Germany, Japan, India, South Korea, and China. This has

companies to engage in international operations, even if

been achieved through initiatives that provide financing

they do not have traditional access to credit.

Q: In terms of financing for machinery and equipment,

just arrived in Mexico, HSBC can offer a competitive

which of your two products has had more success in the

advantage by utilizing the bank’s vast international network

market?

to support them. Additionally, HSBC has a network of

A: Firstly, HSBC Mexico offers financing solutions related

correspondent banks, wherein another HSBC entity or a

to international trade products, whereby the importer

foreign correspondent bank could extend a guarantee to

could choose traditional trade financing by utilizing a

HSBC Mexico, allowing us to establish a credit facility to

letter of credit from its foreign supplier. This would require

the new company local to their new location.

compliance with all the terms and conditions of the underlying operation, and subsequently the letter of credit

Q: What are your priorities for 2015 and targets for the

could be re-financed for ensuing periods. Alternatively, if

expansion of HSBC in the automotive sector?

there is a solid relationship and trust between the importer

A: HSBC’s main priority for 2015 is to have double-

and the foreign supplier, an open trade financing account

digit growth within our existing portfolio of automotive

could be the best alternative, whereby the supplier will

customers. We have analyzed and identified the entire

be paid on sight and the importer will be granted an

supply chain and are proactively contacting customers to

attractive financing period by HSBC in order to purchase

offer support using our products and services. In response

the machinery or equipment.

to the recent growth in the automotive industry in the Bajio region, we appointed a relationship manager in the

Trade and receivables finance solutions, including supplier

Queretaro area in addition to existing relationship managers

finance operations, are offered by HSBC Mexico to both

in Monterrey and Guadalajara, all of whom are specifically

local and international companies, ranging from SMEs to

focused on the automotive industry. We will also continue

large local companies, as well as international enterprises

to participate in and sponsor automotive events in order to

and multinational corporations. For companies that have

share our expertise with companies that will benefit from it.

AUTOMOTIVE TAKING A PAGE OUT OF AERONAUTICS BOOK The automotive industry continues to be crucial to the

focusing on finishes, design, material resistance, comfort,

Mexican economy, contributing considerably to the

and other specialties required by the industry. The courses

balance of trade. Private companies and public authorities

will be implemented according to demand for labor and

alike are responding to this reality, realizing that the

to the interests of prospective students, but with the

investment buck should not stop at manufacturing and

flexibility to adjust them as required. The Automotive

assembly facilities, infrastructure, and automation, but

Cluster in Queretaro and the Ministry of Education (SEP)

should also be directed toward human capital, which is

has been working to develop programs for each discipline,

crucial for retaining the growth of these segments. From

to attract students from an earlier stage by displaying

technicians to truck drivers, plant managers to engineers,

the benefits of working in the automotive industry. The

all of those working within the sector require specific

cluster has launched an information campaign explaining

training courses for their trade, but not all of these

the various academic disciplines and programs currently

courses are readily available, nor directed specifically

demanded in the labor market.

toward the needs of the industry. The state of Queretaro is responding to this call to action with the country’s

The university will have the capacity to teach 1,000

first automotive university, set to begin operating in

students at a time and will be located on approximately

September 2015.

one acre of land in the municipality of El Marques, which neighbors the capital city of Queretaro. Designed with

The governor of the state of Queretaro, Jose Eduardo

eight laboratories and 16 classrooms, the university

Calzada Rovirosa, has mentioned in recent interviews

will open with an inaugural class of between 30 and 50

that the polytechnic university will adapt to the industry’s

students during its first phase, at a cost of MX$30 million

needs once classes begin, following in the footsteps of

(US$2 million). As a result of this exciting development,

the Aeronautics University of Queretaro (UNAQ). The

new businesses arising from the institute should contribute

automotive university will cover a range of specialties

positively to local employment possibilities.

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| VIEW FROM THE TOP

PROFESSIONALLY MANAGING SAVINGS ACCOUNTS FOR AUTOMOTIVE WORKERS RUBÉN CASTILLO SILVA CCO of MEJORA Desarrollo Laboral Q: What are MEJORA’s strategies to create a stronger

primary focus was union workers, but the results obtained

financial culture among Mexican blue-collar workers?

from this group have allowed the company to expand

A: Mexico’s history of constant financial crises and the

its reach and assist senior managers with their savings

slow increase in wages makes it extremely difficult for

accounts, as well as to collaborate with several companies

the population to amass savings, especially for blue-collar

in the management of their savings and loans.

workers. Saving services have not yet been developed to their full potential, and most companies do not completely

Q: What motivates companies to use MEJORA’s services,

understand the benefits of them. Therefore, we saw

and how can they get involved with their workers’ financial

an opportunity to create a proper financial culture by

education?

professionalizing the management of savings accounts.

A: Traditionally, savings accounts are managed by

By providing a unique, friendly, safe, and profitable

unions or the companies’ human resources departments.

environment,

services

However, nobody in these categories dedicates enough

with the help of unions and employers through a simple

time to finding the best ways to generate revenue for

payroll-discount system. Our goal is to provide an internal

the account holders. Most of them have neither the

alternative to employees, with a well-managed savings and

necessary experience, nor the strong financial background

loans association (S&L). This way, workers can avoid using

or time to set their primary job responsibilities aside

micro financing services, or at least obtain full knowledge of

and focus on these accounts. Furthermore, they lack the

the product they are acquiring before doing so. MEJORA’s

infrastructure or the professional team to manage these

MEJORA

promotes

financing

| PLANT SPOTLIGHT: GOODYEAR - SAN LUIS POTOSI Goodyear chose San Luis Potosi as the location for its new

2015 and tire production and commercialization is planned

plant in Mexico because it could best serve both the Latin

to start mid-2017. The new plant will have an initial capacity

American and North American markets, including Mexico, from

of about six million tires per year, and capacity will be

this location. San Luis Potosi has the infrastructure and skilled

increased in line with demand. In light of the high standards

workforce necessary to provide customers with high-quality

of productivity and efficiency in the automotive industry, the

tires in a timely manner. Goodyear’s revolutionary US$550

plant was designed from scratch as a zero-waste-to-landfill

million HVA tire plant is designed to be environmentally

and zero-solvent facility, using natural gas, energy efficient

friendly and will help fortify the growing supply chain in San

LED lighting and state-of-the-art dust collection equipment.

Luis Potosi, as well as leading to both short- and long-term job

Goodyear operates a select level of automation, similar to

creation. Goodyear’s market research lead to the decision to

other Goodyear facilities in North America, demonstrating

produce Goodyear’s high value added (HVA) consumer tires

that Goodyear remains committed to Mexico. The company

at this facility. The demand for HVA tires is growing at such

intends to generate 1,000 new direct jobs and 5,000 indirect

a rate that producing enough to satisfy demand has been

positions through domestic suppliers. Needless to say,

a trial. This line of tires combines superior engineering with

the distributors will continue expanding, which will allow

state-of-the-art manufacturing, innovative product design,

Goodyear to establish new locations and new customers.

and advanced compound science for enhanced performance

Goodyear also plans to approach universities and technical

and exceptional driver experience. The construction of the

colleges to identify opportunities for collaboration, to find

plant, to be located in the World Trade Center Industrial

talent for operations, and to prepare future generations for

Park in San Luis Potosi, with an area of 444,000m , began in

the medium-term needs of the industry.

378

products. MEJORA’s strategy is to communicate simple

by a non-profit organization, which would not be possible

financial messages through its sales force and advertising

in case of a bank or a different institution.

campaigns, educating clients about the benefits of investing in their company’s S&L, as well as explaining

Q: What impact has MEJORA had on San Luis Potosi’s

the reasons for borrowing from this association, and the

automotive

importance of making timely repayments.

companies are your main partners?

and

manufacturing

sector,

and

which

A: At the moment, we are working with over 50 companies As a proper S&L with more than ten years of experience,

in the automotive industry such as GM, Dräxlmaier, Faurecia,

MEJORA can reduce workload for human resources and

Eaton, and Valeo. These companies represent approximately

finance departments, positively impacting the employee

20% of the state’s union workers, who now have their savings

without any tax burden for the employer. Our board

accounts managed by MEJORA. Moreover, our exceptional

of directors has a strong educational and professional

results have encouraged more companies to request our

background, and has broad experience in microcredits,

services, resulting in a growing presence for MEJORA

finance, corporate finance, labor law, and unions, while

outside of San Luis Potosi. Nowadays, the company manages

our specialized team dedicates the entirety of its time to

accounts in Guanajuato, Campeche, Aguascalientes, and

continuously improving our model.

Jalisco, and we are working on an expansion strategy based on four points. Firstly, we want to focus on the accounts

Q: What advantages does MEJORA offer compared to

we are already managing, with an emphasis on listening

banks or other financial institutions?

to our clients, understanding them, and offering them the

A: Our main advantage is that we manage workers’ savings

best solution. Secondly, we are placing huge importance on

and loans accounts with the sole purpose of creating a social

human capital, since it is the basis for our growth. Thirdly,

benefit, encouraging our affiliates to save even more. S&L

we always strive for innovation and are constantly in search

is not part of any financial institutions’ core business and

of new creative ideas, implementing new technology and

our operating costs are relatively low compared to these

functional processes, and offering unique alternatives in our

players, which means that the benefits our clients receive

services. Finally, we try to promote sustainable development,

are much more substantial. Furthermore, our affiliates are

improving the lives of the people around us and contributing

eligible for tax benefits by having their accounts managed

to the overall development of our society.

◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊ ◊

379

TAKING CAR SALES TO A CONNECTED FUTURE While working as a car salesman in 2004, Nazareth Black,

has faced strong competition, which Black sees as an asset

the founder and Director General of Car Fast, noticed a gap

rather than a challenge. When the latest update for the

in the market in the provision of honest, comprehensive

site was released in 2014, the founder noticed that one of

information for potential car buyers. With that in mind,

the biggest-selling brands in the country had copied the

she designed a platform that could provide a collection

platform and implemented it on its site. “When you see big

of independent information managed by the same

industry players doing as you do, it definitely means that

organization, containing advice on vehicles and financial

you are doing things right,” states Black.

solutions. Nowadays, Car Fast is capable of filtering vehicles on offer by specifications, segment, price, and

The entire purchasing process can be carried out on the

even personality, according to the specific interests the

website, with flexibility in terms of delivery times and

client presents. Once a vehicle is chosen, the site displays

locations. Moreover, the platform assumes control of

a detailed description of the car, providing the opportunity

administrative aspects such as finance and insurance,

to compare it with four additional products. In terms of

dealing directly with car agencies and banks through

financial services, listings display up to 77 options, including

its Agencias Amigas and Bancos Amigos networks. The

insurance and license plate costs. Furthermore, if none of

platform itself, however, does not receive any money

the listed choices suits the client’s needs, there is an option

directly from the user in line with its goal of offering

to request a payment plan with precise requirements. The

complete transparency. Instead, the payment is transferred

service also integrates chat rooms where customers can

to the individual account of each dealership. The web

speak with advisors to request support.

development is growing in such a way that Black and her associates are currently looking to become one of the

The company released its first platform in 2007, and the

most important automotive search engines in the market.

public began to respond to the business concept. Given

The company is now expanding into used vehicles and

that the site provided information of over 2,000 vehicles

automotive components, while also designing a brand new

from 40 different brands, it was necessary to create a

platform. With plans to expand to Brazil, the release of a

webpage for customers to browse freely. Once the final site

digital automotive magazine, as well as the launch of Car

was established, the platform began to gather loyal clients,

Fast TV, the company is well on its way to achieving its

and it has grown exponentially ever since. The company

goal of shifting the automotive market to the online world.

LABOR CHALLENGES IN GUANAJUATO Kromberg and Schubert, a manufacturer of wire harnesses

that it was quite a challenge to overcome a culture of short-

ranging from small components for headlamps to 20m

term planning in the region. German OEMs are continuously

harnesses for buses, opened a facility in Irapuato, Guanajuato

looking for ways to expand their business with local

in 2005. After subsequent plant expansions in 2012 and

suppliers. However, there is still room for improvement and

2014, the company is now evaluating potential locations

a new way of thinking is required to promote competence,

for a second plant in Mexico to strengthen its presence in

quality, commitment, and efficiency. “This is one of the

the NAFTA market. At the moment, Kromberg & Schubert

most important aspects on which companies, unions, and

has more than 30,000 employees in over 30 locations

governments have to focus over the next years, and only

worldwide, 700 of whom are located in Irapuato. In addition

through cooperation will we see a true change,” claims

to its core business, Kromberg and Schubert also aspires to

Dittmar. She explains that the company has made efforts

use Mexico as a prime location to supply Canada and the

to adapt to the local culture and that having a strong

US with the other applications in its portfolio, ranging from

human resources department is the key to success, not

air conditioning, to transmission, engine, chassis and battery

to mention discipline, responsibility, and reliability. “We

cables for light and heavy-duty vehicles.

wanted to convince our workforce that the automotive industry provides the perfect opportunity to make plans

380

The company has implemented a long-term vision,

for the future,” says Dittmar. “Kromberg and Schubert

providing its employees with a clear overview of the

is now considering the possibility of creating a special

available career opportunities. However, Katja Dittmar,

training program to transmit our values and mindset not

Commercial Director of Kromberg and Schubert, states

only to the workforce, but also to their families.”

| VIEW FROM THE TOP

90-MINUTE DELIVERY SOLUTIONS FOR BUSY EXECUTIVES ROBERTO CABRERA Founding Partner of iVoy Q: What market opportunity resulted in the creation of an

relevant experience, and we operate quality delivery control.

app for express delivery of packages?

The best indicator that we have is feedback from customers

A: iVoy initiated operations in 2011 as a 90-minute delivery

regarding our operator’s service.

company, having identified a need across all types of companies and self-employed people operating in the

Q: How do you make sure that your fleet stays well

hectic capital of Mexico. Delivery and distribution issues

maintained in order to keep availability?

are changing around the globe, so e-commerce will soon

A: We have a mixture of vehicles, some are owned and

be the main way of doing business. Countries are already

some are leased, depending on our needs and expansion.

investing heavily in creating the ideal environment for

iVoy has its own service facility where we perform

managing successful online commerce. This tendency may

ongoing maintenance on the vehicles we own. In terms

eradicate all other levels of the commercial chain, but not

of the independent vehicles that we run with our phone

distribution. Ultimately, goods that are sold electronically

application, each operator is responsible for his or her

still have to reach a destination and the savings generated

own car. We audit these specific types of vehicles on a

by using e-commerce can ultimately be invested in logistics

regular basis to make sure that everything is in order. We

and distribution. ClickOnero helped us develop our network

can respond swiftly to growth because of the way we hire

as we are part of the same group. They allowed us to run

operators, and because we plan our service based on each

trials with them, and perfect our logistics and distribution

month’s closing results and reprogram for the forthcoming

dynamics before we offered our services to other

month. Our delivery drivers have their own motorcycles

companies. We provide solutions for large e-commerce

and they are relatively autonomous, which means that we

companies, smaller enterprises and entrepreneurs who do

only need to focus on advancing our technologies and

not have the resources to build a distribution network, or

systems in order to offer the best possible service.

do not want to invest in logistics to avoid taking the focus from their core business. We offer low costs and efficient

Q: What innovations do you have planned for 2015?

channels of distribution, coupled with brand and image

A: The existing application is receiving favorable user

security. Today, we are working with Fedex and DHL, as well

ratings and over 95% of our deliveries reach the recipient

as Ingram Micro, Brightstar, Iusacell, and Samsung, all of

in less than 90 minutes, as promised. We recently launched

which inspire us to expand our logistics knowledge.

our website, which is more powerful than the application. The application allows a user to move a package from point

Q: What have been the main challenges of introducing

A to point B, but the website lets them trace a route with

this service in the Mexican market?

different checkpoints. Our prices are more competitive and

A: The challenges that we have faced largely involve improving

our delivery times are better with iVoy’s online platform,

the efficiency of our systems to increase our operators’

which also allows clients to request an invoice online.

speed, company safety, and coverage. Realistically, more

Our express service can be offered either via the phone

traffic plays in our favor because it creates inconveniences

application or our customer service call center, through

for our clients. This has pushed us to consider other cities,

which the customer’s location can automatically be defined,

such as Guadalajara. By the end of 2015, we will also start

along with time projections, cost, and the operator that

operations in Monterrey in line with our plan to operate a

will deliver, before the user’s credit card is automatically

runway from Mexico City to Monterrey. It has been difficult to

charged. iVoy is also working on expanding its e-commerce

keep our 90-minute promise due to the way in which Mexico

customer base while improving logistics and operations.

City is structured, but the solution that we implemented

The small package market is increasing every day, and we

was to create partnerships with companies that are experts

plan to expand in line with market trends. In the long term,

on the city layout, and to train operators for specific areas.

we also intend to deliver large merchandise involving small

When recruiting staff, we choose responsible people with

truck owners who can offer these services.

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PAVING THE ROAD FOR GERMANY IN MEXICO LEFT: Jan Fleischer, Trade and Investment Consultant for the Automotive and Aeronautic Industry at CAMEXA RIGHT: Johannes Hauser, Director General and Official Delegate of German Industry and Commerce in Mexico at CAMEXA

Q: Given that CAMEXA functions as a support for German

factors like client and supplier location, import and export

companies coming to Mexico, how does the Chamber

operations, and other necessities regarding logistics, just-

make this process more comfortable for its members?

in-sequence, and just-in-time solutions.

JF: The German Chambers of Industry and Commerce (AHKs) are the most important partners of Germany’s

Q: What are CAMEXA Plus’ strategies relating to the dual

Federal Ministry for Economic Affairs and Energy in terms

education system in Mexico?

of the promotion of German business in other countries.

JH: The next step toward improving Mexican competitiveness

Together with Germany’s embassies and consulates,

is to assure the existence of highly qualified technical

the AHKs officially represent the interests of Germany’s

workers. A huge amount of engineers are leaving universities

industry and commerce with political and administrative

every year, but automotive companies mostly need skilled

authorities in their host countries.

specialists. Normally, young graduates do not have any experience with working on production lines, while German

Under the service brand DEinternational, the AHKs provide

companies are used to recruiting highly skilled technicians

globally harmonized services, and other solutions depending

with the relevant qualifications to participate actively in the

on special requirements from each location. Within the scope

manufacturing process. This is why German technicians

of the DEinternational portfolio, some of our services include

are usually trained on the job with German dual-vocational

address research and a supplier search, among others. We

education systems, which guarantee the highest level of

have representatives in the most important automotive

performance with every worker. To date, the two academic

regions that support our members, an extensive network of

institutions that have been actively participating in this

real estate companies, and a strong relationship and direct

program are the National College of Technical Vocational

access to the most relevant governmental institutions.

Education (CONALEP) and the College of Science and

Through our various platforms, we are able to offer our

Technology Studies of the State of Sonora (CECyTEs).

members an opportunity to expand their business network.

Nevertheless, since a ministerial agreement was published

We cooperate closely with German OEMs and Tier 1, Tier

recognizing dual-vocational training in Mexico as a legal

2, and Tier 3 suppliers, and we also work closely with the

way of completing high school, any public institution can

relevant industry associations such as AMIA, INA, and the

participate under the established rules. German companies

regional automotive clusters. As a result, we can inform

help CAMEXA to elaborate labor skills standards within

German companies about the existing needs in the supply

the Mexican Council for Labor Skills Standardization and

chain, creating synergies among the enterprises that are

Certification (CONOCER), and certain companies even

already established, as well as with new players. It is part of

open their doors to provide basic training or specialized

our mission to improve the commercial relationships between

courses to future technicians.

Mexico and Germany. Therefore, we focus a large part of our activities on promoting the business relationships between

Q: How will the year of Germany in Mexico help Mexican

these companies and their German counterparts.

and German companies alike to develop new business opportunities?

382

The German-Mexican Chamber of Commerce (CAMEXA)

JH: CAMEXA is currently preparing a sizable exhibition

collaborates with legal experts and consultants, to help

called Hecho en Alemania (Made in Germany). This will be

our members in areas such as customs, as well as import

the first and most important event for the German economy

and export operations. Given the current focus on the

during the year of Germany in Mexico in 2016. All major

Bajio region and Puebla with Daimler, BMW, and Audi,

car manufacturers will present their innovations during

there is a great opportunity for new German companies

the event, and there will also be other announcements

to expand their business with OEMs. Additionally, we can

regarding scientific discoveries with a relevant impact to

help companies choose their best location considering

the automotive industry.

| VIEW FROM THE TOP

TRADE SHOW GIANT SUPPORTING RISE IN AUTOMATION JOSĂ&#x2030; NAVARRO Director General of E.J. Krause Q: What specific trends has E.J. Krause seen in Mexicoâ&#x20AC;&#x2122;s

understand this technology is to come to the exhibition.

automotive industry, and how have those trends affected

In terms of communication, all show organizers have to

your expos?

deal with the challenge of improving broadband capacity.

A: In order to meet environmental standards, the

Nowadays, everything needs to be connected, so venues

automotive industry needs to reduce the weight of cars,

need to be able to provide fast and reliable internet so that

and the only way to do so is by using lighter materials. As

exhibitors can correctly display their offerings.

an example of the innovation that is possible, we have seen a plastic gas exhaust system that does not melt or warp,

Q: It is fairly expensive for European companies to come

even if it is heated to approximately 300Â°C. Due to the

and exhibit in Mexico, so what are the main benefits for

large number of companies that attend Expo Manufactura

them doing so?

which are focused on making plastic parts, we decided

A: We have found that our shows are growing between

to start Plastimagen Norte, which carries the same brand

5-10% in terms of exhibitors and size. The European market

name as the large show we hold in Mexico City, but is more

is not experiencing its finest moment and the economy is

targeted toward manufacturing in the northern states.

not as dynamic as the Mexican or US economy. Mexico, however, is in a prime position to manufacture, provide, and

Expo Manufactura started as a broad, linear manufacturing

sell products to the US. Foreign companies must understand

exhibition, but it evolved to include machine tools, as

that Mexico will become a manufacturing hub for a lot of

well as any technology that aids manufacturing and its

products, as well as those already produced in the country,

many processes. One of the things we have found is that

so it is beneficial for them to come to this market and

products normally have a printing stage at the end where

present their solutions. We see a lot of companies coming

textures have to be applied, or they are tagged and coded,

from Europe in order to establish alliances, distributors, and

so we also included printing products in the expo this

representatives in Mexico, and maybe finalizing agreements

year. Finally, we have also had many companies presenting

with new or existing companies in the market. In light of

robots and automation solutions, so we decided to create

this, Expo Manufactura has become the first step that

an international exhibition on industrial automation,

companies use to measure whether or not they should

called Automation Mexico. Many industries are becoming

enter the Mexican manufacturing market.

automated, further increasing reliability and efficiency. As a result, visitors have been requesting permission to

Q: What is E.J. Krause planning as the company looks

accommodate more automation machinery at our shows,

ahead to the future?

helping us target new clients and invite new visitors

A: We are looking to expand our conference division and

and exhibitors. We also created specialized, segmented

the programs within it because the academic part of the

marketing to reach companies and engineers that are

business is extremely important. At trade shows content is

looking for automation solutions.

king, so we are working with an advisory board to create a more professional program that is developed by experts

Q: What reception has Expo Manufactura received since

from different parts of the industry. They all help us to

opening the doors to such machinery?

understand which topics are prevalent in Mexico, as well

A: By visiting Expo Manufactura, companies have been

as which people are most knowledgeable about them. For

able to get an idea of how useful these advances are

2016, we would like to have a full production line set up at

in reality. It is difficult to get an accurate idea of the

the expo. This would simulate the processes used within

performance of a machine on the internet or from a

automotive production. Many exhibitors have a single part

video, so engineers enjoy seeing the quality in person. We

of the production line, so by positioning them next to each

also have some applications for additive manufacturing,

other we can show visitors how the process works as a

which is becoming more of a reality. The only way to truly

whole, and even produce a finished product at the end.

383

384

Following closely behind oil and gas, the automotive industry is one of the most important contributors to the development of the Mexican economy. With more than US$24 billion received in foreign direct investment during the current administration of President Enrique PeĂąa Nieto, companies and associations within the industry are outlining ambitious strategies to continue the unstoppable rise of automotive. Forecasts now predict a 70% growth in production by the end of 2020, pushing Mexico to evolve in all segments. New trends and technologies are filtering into the market, creating more optimistic predictions for the sector in terms of mobility and transportation for the entire country. However, obstacles such as a shortage of human capital and a lack of infrastructure have generated the need for intensive programs to be developed in order to build a stronger supply chain and support the countryâ&#x20AC;&#x2122;s global presence as an automotive powerhouse.

This final chapter analyzes the countryâ&#x20AC;&#x2122;s current situation, before integrating the insights of industry leaders with a forward-looking response to the local and global automotive industry. Opinions of industry leaders are laid out, with respected analysts and auditors providing insights regarding the best practices that Mexico and the industry could adopt in order to boost its exponential expansion. Lastly, innovative future projects are explored, generating substantial confidence in a promising future for the industry.

FUTURE OUTLOOK

THE MEXICAN AUTOMOTIVE INDUSTRY FITS IN ONE BOOK

CONGRATULATIONS, YOU HAVE A COPY! BUT CAN YOUR COLLEAGUES AND CLIENTS AFFORD TO NOT HAVE A COPY? Mexico Automotive Review 2015 is now available, order additional copies at: www.mexicoautomotivereview.com

For more information please contact our team at: Laurens Schรถningh +52 55 5263 0213 ls@mexicobusinesspublishing.com Luis ร guila +52 55 5263 0212 la@mexicobusinesspublishing.com

386

CHAPTER 14: FUTURE OUTLOOK 388

INSIGHT: Guido Vildozo, IHS

390

VIEW FROM THE TOP: Andrés Lerch, Ernst & Young Mexico

391

VIEW FROM THE TOP: Albrecht Zu Ysenburg, KPMG

392

PLANT SPOTLIGHT: Audi San Jose Chiapa

394

VIEW FROM THE TOP: Federico González Compeán, Formula 1

396

VEHICLE SPOTLIGHT: Renault Twizy Z.E.

398

Industry Expert’s Future Outlook

398

PLANT SPOTLIGHT: BMW San Luis Potosi

387

FORECASTS PREDICT FAVORABLE AUTOMOTIVE INDUSTRY TRENDS MEXICO PRODUCTION FORECAST (THOUSAND UNITS) Mexico Production Forecast (Thousand Units) Fuente: IHS

5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

The fall of oil prices in 2015 had a significant impact on

outweighed production by 27%, or 3.7 million units. However,

the country, but although this has been a negative trend

the regionâ&#x20AC;&#x2122;s efforts to attract OEM manufacturing plants is

for oil exporters, it has proven to be relatively beneficial

predicted to pay off, with an increase in production meaning

for the automotive industry. The global sales forecast for

that the gap between sales numbers and manufacturing will

light vehicles in 2015 is predicted to reach 87.85 million

decrease to less than 7%, under one million units, from 2017-

units, which is a 1.7% increase on the previous year. Until

2021. After a peak in 2017, a strong trajectory is set to taper

the end of 2021, light vehicle sales around the world are

and long-term output is expected to reach 18.5 million units,

predicted to increase at a compound annual growth rate

far outweighing the 16 million previous to 2009. The North

(CAGR) of 2.7%, reaching 104 million units. However, this

American light vehicle export market share is predicted to

will be entirely contingent on global oil prices, according

remain stable, with around 80% of global exports set to

to Guido Vildozo, Manager of Latin America Light Vehicle

come from the NAFTA region by 2017. This is the result of a

Sales Forecasts at IHS. Optimistically speaking, with low

number of factors, such as a greater use of global platforms

oil prices, increasing consumer confidence and higher

and the expansion of the luxury segment capabilities into

spending, sales could exceed 110 million by 2021. However,

Mexico, with Audi and BMW both having established plants

should the European crisis be exacerbated, and if oil prices

in the country the last year.

recover quickly, 45 million vehicle sales could be wiped off the baseline estimates.

Sourcing patterns tend to favor North America as a favorable atmosphere, with a currency hedge and greater

In the NAFTA region, there is an increased focus on

export prospects. This reputation has largely been created

manufacturing and innovation in order to maintain pace

by the many free trade agreements that Mexico holds

with level of sales. Between 2001 and 2009, regional sales

across the Pacific Alliance and Mercosur. Significantly,

MEXICO SALES FORECAST (THOUSAND UNITS)

Mexico Sales Forecast (Thousand Units) Fuente: IHS

1,400

35%

1,300

25%

1,200

15%

1,100

1,000 -5%

900

-15%

800

-25%

700

-35%

600 1998 Source: IHS

388

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

TOP SELLING MASS MARKET OEMS (GLOBALLY) Top Selling Mass Market OEMs (Globally) Fuente: KPMG 1

Volkswagen Group

Toyota Group

Renault-Nissan Alliance

General Motors Group

Hyundai Group

Ford Group

FCA Group

Honda Group

PSA Group

10 2011

Suzuki Group 2012

2013

2014

2015

2016

2017

2018

with year-on-year change of the NAFTA market to remain

Finally, the largest growth was seen by Daimler at 19.4%,

largely stagnant from 2014-2021, Mexico is predicted

a company which recently entered into an alliance with

to experience a CAGR of 7.1%, by far the highest in the

Renault-Nissan to spend US$1.36 billion on a Mexican plant

North American market, with the US reaching just 1.2%

to produce 300,000 compact Infiniti and Mercedes-Benz

and Canada floundering with -4.3%. Since a significant

units each year.

drop in 2009, light vehicle sales in Mexico has increased year-on-year, and this trend is expected to continue,

Despite further predicted growth for the North American

with constant growth between now and 2021. According

exporter, the country’s expansion may be at risk depending

to IHS, increased competition and enhanced access will

on production capacity in Brazil, which is also expected

result in steady sales growth of almost 150,000 units by

to experience year-on-year growth. The outcome will

the end of 2021.

be dependent on the extent to which OEMs find the country’s conditions conducive to cost-effective, quality

Localization, expansion and exports are three factors that

manufacturing. At the moment, global growth is dictated

are considerably favoring the production climate in Mexico.

by the TRIAD countries (the US, China, and India), rather

Between 2014 and 2015, Ford increased North American

than emerging nations. However, strong sales from Mexico

light vehicle production by 7.1% with the introduction of

in the first quarter of 2015 could herald the beginning of

its new F-150. The OEM also announced plans in April to

Mexico taking over as a global production site. NAFTA

spend US$2.5 billion to build a new generation of fuel-

production will certainly see more investment, but one

efficient engines and transmissions in Mexico, as well

potential setback is the country’s reliance on imports of

as creating 3,800 jobs. Similarly, Honda experienced a

raw materials and heavy dependence on the US. “The

significant growth rate of 6.5% after its US$800 million

momentum held by used car imports should continue to

Celaya plant began manufacturing in Mexico in late 2014.

grow strong, but there must be an increased focus on the

For BMW, growth was 9.9% and has invested US$1 billion

luxury car segment in order to maintain the steady growth

in a plant in San Luis Potosi scheduled to open in 2019.

of the industry,” concludes Vildozo.

TOP SELLING PREMIUM MARKET OEMS (GLOBALLY)

Top Selling Premium Market OEMs (Globally) Fuente: KPMG 1

BMW Group

Volkswagen Group

Daimler Group

Geely Group

Tata Group

Toyota Group

General Motors Group

Renault-Nissan Alliance

FCA Group

10 2011

Honda Group 2012

2013

2014

2015

2016

2017

2018

Ford Group

Source: KPMG

389

| VIEW FROM THE TOP

PROJECTING IMMENSE DEMAND FOR AUTOMOTIVE PROFESSIONALS ANDRÉS LERCH Partner, Advisory Services / Performance Improvement at Ernst & Young Mexico Q: What projections does Ernst & Young have for the

costs, and having a considerably low overhead that opens

coming years?

up business. In addition, government incentives play a

A: Taking into consideration all of the information that we

considerable role in an OEM’s decision to enter the country.

have gathered and analyzed, we believe that local production

These incentives are now structured in a much better way;

can reach 4.1 million units for 2020. Of that, we expect that

competition among states is no longer an all-out war, but

1.3 million will end up in the Mexican local market. The annual

rather a structured and organized rivalry. In the end, Mexico

growth rate of the Mexican automotive industry will reach 8%

has developed two production clusters in the Bajio and in

between 2010 and 2018, and even though this is significant

the North Region, which largely ensures the participation of

and steady growth, we would like to see our local sales reach

new OEMs within those areas. This is another incentive that

higher levels. I believe that good times are soon to come as

companies will consider when looking at the country.

the credit loan market is becoming more flexible, whereas it used to be one of the most severe barriers for the growth

Q: Mexico’s exports are destined to expand to new

of local business. This flexibility and evolution will open

markets, although the US will remain the country’s main

up access to more domestic sales. There is an argument

market. What opportunities will this create?

that continuously arises regarding the gap between sales

A: We expect the US market to continue its growth tendencies.

and production, which is the county’s macroeconomics

It is the most important market for Mexico and it will continue

stability. While Mexico does have stability, that stability

to be in the future. I believe that there are opportunities for

has not necessarily trickled down to the microeconomics.

Mexico in the Latin American market, but we will not see many

Wealth distribution inequalities are pronounced fact, and

variations in that regard. I see a great deal of opportunities

although middle-class growth is a phenomenon around the

in Europe and Asia, but they will be hindered by the long

globe, Mexico’s middle class does not have the rnecessary

distances. Logistics and distribution costs will come into play,

purchasing power or adequate access to credit to purchase

potentially affecting Mexico’s market expansion efforts. For

a vehicle. If credit schemes were better in terms of rates and

example, if you add high shipping costs to a luxury vehicle, it

longevity, sales would rise significantly. The number of local

will not make much of a difference to the consumer. However,

units sold grows at the same rate as the Mexican middle

if you do so for a compact car, consumers will be less likely

class; it is directly proportional.

to make the purchase. I am confident that there will be a formula that can be applied to the issue and will allow us to

Q: What advantages do you expect Mexico to gain from

expand in a favorable way.

the continuous arrival of new manufacturing companies?

390

A: Job creation is the most important advantage that there

Q: Given that NAFTA’s regulations state that any used

is. It is quite interesting to see the immense demand for

vehicle will be able to enter the country by 2018, how will

professionals. There will be an interesting cash flow entering

the local used market be able to compete with this?

the economy as well. In addition, we will see a manufacturing

A: There are various ways to import vehicles with certain

growth that will be sustained for many years to come, unless

requisites into Mexico. One is temporary import, paying

a world crisis hits, which is impossible to predict. With the

around US$50 as the only tax for the operation. This is truly

way in which the global economic landscape is currently set

attractive for the customers, since they can bring any vehicle

up, the automotive industry projects the highest stability

they want for a ten-year period for practically nothing.

in any industrial manufacturing sector over the coming

However, this form of import does not allow property

years. This will open up many manufacturing opportunities

transfer, which means that the clients have to inevitably

for different industries, such as aerospace. Companies that

return the vehicle, unless they want to renovate its import

are entering the market are not only looking for a favorable

rights. The other process is permanent, but that operation

geographical position. They are also looking to ensure the

implies a trade tariff that practically equates the value of the

quality of their vehicles, while having the lowest distribution

imported vehicle with the price in the local market.

| VIEW FROM THE TOP

REALITIES OF A GROWING INDUSTRY IN A FREE TRADE ENVIRONMENT ALBRECHT ZU YSENBURG Partner, Industrial Markets and Audit at KPMG Q: The Mexican automotive industry is highly dependent

Q: Many new OEMs have announced their arrival in the

on the US market. How do you see this dependence

country. What does this mean for the Mexican supplier base?

evolving as companies in Mexico look to other markets?

A: All the OEMs are concerned about finding more local

A: The Mexican automotive industry has always been

sourcing. They are still importing too many materials and

dependent on the US market, as have many other industries

they want this capacity to be built up in Mexico. Despite

in the country. In times of economic boom in the US, the

these demands over the last couple of years, the supplier

Mexican economy thrives and vice versa. This dependency

base has not caught up. While the Audi plant in Puebla will

will carry on for the foreseeable future, especially since

ask a number of foreign suppliers to set up a base nearby,

the US automotive market is flourishing. However, the next

the real Mexican supplier base has not yet truly increased.

time car sales dip in the US, Mexico will be affected, and

The automotive industry is not easy to enter as it is capital

given the sheer capacity that is being installed here to

intensive and volatile. The quality standards expected

cater to the US market, any drop will hit the country hard.

by the likes of Ford and Volkswagen are immense, so if

As for other markets, Mexico has progressed greatly,

suppliers cannot meet them, they will fail to enter these

now having the most free-trade agreements (FTAs) in

OEMsâ&#x20AC;&#x2122; supply chains. Mexican companies have to invest

the world. It has continued to make important strides

time, money, and capabilities to reach that level.

in its automotive sector, such as finalizing a deal with Brazil to increase exports there. This will also depend

Q: The market for alternative forms of fuel is slowly

on the strategies of individual OEMs in terms of plant

growing in Mexico. What have been the opportunities for

specialization for a particular model, which leads to

these technologies to take hold in the Mexican market?

manufacturing plants being established according to

A: The opportunities for alternative fuels are the same in

production, investment, and logistical benefits before

Mexico as in the US. The only difference is that the Mexican

cars are eventually exported. Most other OEMs maintain a

public has not yet accepted electric or hybrid cars. The

geographical approach, which sees their strategies being

Mexican market is still not ready for alternative fuel vehicles,

tailored regionally. Therefore, they might feel it does not

which I do not anticipate to change in the short term. In the

make much sense to export cars from Mexico to Germany

next five years, the sale of electric or hybrid cars will reach

or Asia when the US is much closer.

a maximum of 3%. The fact that gasoline prices are now higher in Mexico than in the US will help somewhat but, in

Q: While certain solutions are now beginning to help, the

the past, prices were too low for such products to enter the

influx of used vehicles has continued to be a problem in

Mexican market. Another challenge is that the infrastructure

Mexico. How do you see this evolving?

for electric cars is not in place. However, once real demand

A: Mexico cannot expect to continuously sell new cars

is in place, infrastructure will naturally follow.

to the US without importing old ones. This is one of the consequences of having FTAs. The solution must come

Q: What are KPMGâ&#x20AC;&#x2122;s strategies to increase its presence

from within the Mexican economy and as people earn

within the automotive industry?

more money, they will naturally prefer to buy new cars

A: When companies enter Mexico, their needs can range

than used cars. Another major issue is human capital in

from anything such as tax and legal advice, M&A advice,

areas where competition is fierce, particularly in the Bajio

audits, creating business plans, or setting up operations.

region. There is large staff turnaround due to competition

Approximately 50% of our business remains based on audits.

based on salary. The scarcity of talent must be readily

We service more than 30% of the OEMs present in Mexico,

addressed and automotive companies have to work hard

with many of the new ones entering the country already

to create a sense of loyalty among their workforce. The

featuring among our clients. We are experienced in helping

future solutions to this problem lie with the employers, not

OEMs and suppliers alike set up their operations in Mexico

the employees.

and guiding them through whatever needs they have.

391

| PLANT SPOTLIGHT: AUDI SAN JOSE CHIAPA

392

At the beginning of 2016, Audi will begin manufacturing

Board Member for Production, is to provide employees

its Audi Q5 in the new San Jose Chiapa plant. The facility,

with specialized knowledge of the Audi Production

which measures 4.6km2 and required an investment of

System (APS) in order to ingrain detailed precision into

US$1.3 million, is expected to create 3,800 jobs directly

the manufacturing process. The training center is being

and an additional 20,000 indirect positions in the area.

opened in collaboration with the State of Puebla and

Additionally, it will be implementing an internship program

the Technological University of Puebla (UTP), which will

with an initial 216 apprenticeships, to which 80 more will

assume the operations of the plant under Audi guidance.

be added on an annual basis. The employees are currently

As a result, personnel selection, development, and further

being trained in the integrated 20,000m2 training center

training are carried out in a cohesive way, with the support

in preparation for the beginning of production. The site

of the university trainers and fresh engineering talent.

is designed to have an annual capacity of 150,000 Q5

More than 1,500 courses will be given per year, in the face

models, with local content reaching 65% by the beginning

of increasing demand, since over 70,000 applications have

of 2016, but eventually increasing to 90%. The aim of

been received to date. Included in the training center is

the training center, according to Dr. Hubert Waltl, Audi

a medical department for emergency care and modern

training rooms and workshops equipped with the latest

implement measures to promote responsible water usage,

diagnostic technology. The company also plans to offer IT

recycling and treatment of waste water. The equipment

and language courses, with a focus on key areas such as the

in the plant is designed to reduce the use of heavy

APS, in order to provide employees with a comprehensive

chemicals as far as possible, and a biological sewage

education on Audi practice.

plant will be constructed in order to remove organic materials from waste water. In fact, the company intends

With an increased focus on sustainability, an integrated

to avoid wasting water within manufacturing processes

part of Audi’s business plan, preservation of resources

with the employment of cascading flushing systems and

will be prioritized, with a water project simultaneously

pretreatment painting processes that negate the need for

implemented to improve biodiversity in the area. Audi

water after spraying. Additionally, a reservoir on the site

México, in conjunction with the State of Puebla, is to

will collect approximately 175,000m3 of rainwater, which

invest US$22 million in the project, which involves planting

will then be reused for manufacturing processes, going a

100,000 trees to replenish aquifers and balance out the

long way to achieving Audi’s strategy of optimization of

carbon footprint of the plant. Moreover, the plant will

water resources in the manufacturing process.

393

| VIEW FROM THE TOP

THE TRIUMPHANT RETURN OF FORMULA 1 TO MEXICO FEDERICO GONZÁLEZ COMPEÁN Director General Formula 1 Gran Premio 2015

Q: After more than 20 years, Formula 1 is finally returning

new curbed area, as well as a total renovation of the drain

to Mexico. What made the International Automobile

and sewage system. Tilke was in charge of implementing

Federation (FIA) decide Mexico was once again ready to

all of these changes to the renewed Hermanos Rodríguez

host a Grand Prix, and what made 2015 the right time for

circuit, which now complies with all the safety specifications

its return?

and standardization. This new circuit of 4.305km will be a

A: While Mexico’s financial stability over recent years has

fast track, with a 1.302km front straight, which is one of the

been a decisive element, the key factor that led to this

longest straight stretches in the series. It will be a circuit

moment was undoubtedly the decisive, responsible, and

with slow curves, and a technical layout that is sure to give

committed collaboration from the Ministry of Tourism and

the audience an exciting and unique show.

the Mexico City government, through the Mexican Council for Touristic Promotion, and the Sports Institute. Their joint

Q: Given that there have been some major changes to the

efforts were aligned with the common goal to promote

original track, including the elimination of La Peraltada,

Mexico at an international level. The private sector also

what has been the reaction from the local residents?

played a major role, with its support resulting in two

A: The Autódromo Hermanos Rodríguez was inaugurated in

Mexican drivers being involved with the Grand Prix; one

1959 as the Autódromo de la Ciudad Deportiva. Since then,

driving, and one in reserve for a top-level team.

it has witnessed the achievements of great figures within the racing world, such as Pedro and Ricardo Rodríguez,

Q: Other than Tilke and CIE, which other companies

Héctor Rebaque, Mario Domínguez, Adrián Fernández, and

collaborated on the renovation project of the Autódromo

Michel Jourdain, not to mention other international stars

Hermanos Rodríguez, and what did they bring to this

like Jim Clark, John Surtees, Graham Hill, Fittipaldi, Piquet,

project?

Prost, Senna, Mansell, and Schumacher. Thus, one of Tilke’s

A: Tilke is only one of the 20 companies that were

main challenges was to preserve the essence of the track,

involved in the Autódromo’s renovation. Nineteen Mexican

while making it a legendary first-class track. The historic

companies were in charge of designing and remodeling the

sloped curve La Peraltada caused many accidents, as well

facilities and the track, and they did an extraordinary job

as the death of the Mexican driver Ricardo Rodríguez. This

that was acknowledged by the FIA authorities supervising

part of the track was cut in half in 2002 for the Cart series,

the project. Each of these companies played a key role that

just before entering the Foro Sol. The design inside the

required amazing coordination, as well as professionalism

baseball field, which was previously a 90° left curve, has

and commitment to working on all the different fronts

now become two curves to give Formula 1 vehicles more

required. Their work included all aspects related to the

time inside the spectacular stage that will host over 28,000

image and logistics objectives of the new Grand Prix,

people. This is a unique feature of the circuit, offered by

enabling us to receive our local visitors, as well as national

no other racetrack in the world. When it comes to safety,

and international tourists.

the evolution of this sport has made promoters and fans realize that it is impossible to keep the sloped curve, but it

Q: What were the Formula 1 committee’s main concerns

has been traded in favor of a greater audience and prestige.

about the Autódromo Hermanos Rodríguez before the

394

renovations began?

Q: How will these changes affect the cars’ performance on

A: FIA was mainly worried about safety, since the Autódromo

the track, and how are the teams preparing for this?

did not meet the standards that Formula 1 establishes for

A: Specifically, none of the changes will affect vehicle

all its races. From the first inspection, Charlie Whiting,

performance. The Autódromo Hermanos Rodríguez will be

Race Director and Safety Delegate of FIA, pointed out the

a great challenge, since it is a new circuit for both drivers

requirements for run-offs, the ring segments, the FIA fence,

and teams. Furthermore, adapting to Mexico City’s altitude

the use of security materials such as Tecpro, the need for a

will be another challenge for the engine. This track has

fast stretches, slow sections, and it will be really technical.

Ticket sales have been a success and demand exceeded

According to simulations, the maximum achievable speed

our expectations. Firstly, we had a pre-sale with Banamex

is 203.80mph (327.98km/h) in the main straight, including

and Superventa Santander, which received an excellent

also dramatic braking and speeding parts that will make

response from fans. We later opened ticket sales to the

this track a delight for drivers and spectators.

general public, helping to reach an initial attendance figure of 90,000. That led CIE to hire NUSSLI, a Swiss company

Q: What will be the expected media coverage for the

specialized in grandstands for stadiums and stages,

event, and what are FIA and OCESA planning to make the

enabling us to increase the original seating capacity by

return of Formula 1 to Mexico extra special?

10% from 100,000 to 110,000.

A: There are great expectations after 23 years of absence. The media coverage will definitely be one of the most

Q: What do you still need to work on before the end of

intense compared to any other events hosted in Mexico.

October, and what opportunities do you see for next

More than 280 international journalists will join the national

year’s Grand Prix?

press to cover the race, and CIE, in its promoter’s role,

A: Formula 1’s Mexican Grand Prix will generate one of the

will provide its 25 years of experience organizing world-

highest incomes in terms of foreign currency, in addition

class events, as well as its more than 15 years’ experience

to creating a massive number of jobs. There are different

with sporting races. Attendees of the Formula 1 Mexico

crews working on different fronts, with on-track and off-

Grand Prix will have an unforgettable experience from

track operations, grandstands, and accesses. Furthermore,

the moment they step into the renovated Autódromo

the government and federal offices are working to make

Hermanos Rodríguez, and they will be truly astounded

this a successful event that will rank our country among

with the new entertainment areas, food and beverage

the best in the world. The priceless experience of this first

courts, official merchandise stores, and all other services

year will give us useful insights for the following years, and

that will turn their attendance into a unique experience.

we will certainly have more challenges to overcome.

395

| VEHICLE SPOTLIGHT: RENAULT TWIZY Z.E. As mobility changes and people accept new forms of

offers two versions to meets to the needs of each driver. The

transportation, cars also start to evolve and adapt to new

Techno version is a two-seater with one seat in the front,

requirements. There are already many hybrid vehicles

the other in the back, and a small 5.5-liter carrier behind

circulating on the streets and fully electric cars are slowly

the backseat, while the Cargo version is a one-seater with a

making their way into the market, but after ten years of

load capacity of 180l. With only 1.2m of width and 2.3m of

research conducted by Renault Sport Technologies we can

length, the Twizy can get into tight parking spots. Its 80-

finally see a glimpse of what the future may hold.

100km range makes it a perfect for urban use, while the Twizyâ&#x20AC;&#x2122;s 3CG synchronous electric motor can supply 20hp

396

Currently being built in Renaultâ&#x20AC;&#x2122;s plant in Valladolid, Spain,

transmitted through a direct automatic transmission for a

the Renault Twizy Z.E. offers something unique to the

maximum speed of 80km/h, which is more than enough for

Mexican market. This fully electric vehicle has a radical

a city drive. In terms of charging, Renault also pushes its

design with lines that are clean and simple, and attractive

technology boundaries. Apart from regenerative braking

scissor doors that add to its futuristic approach. Renault

kicking in when the foot is lifted from the accelerator, the

Twizy is the first and only vehicle that does not require a

player. Safety is also a priority for the Twizy, with disc

special electric charger. The car can be connected directly

brakes on all four wheels, a sturdy tubular structure, and an

to any electric outlet, and it can be charged in only seven

airbag for the front passenger. Furthermore, Renault offers

hours with a 110V supply, although it would only take three

a full fabrication warranty for the vehicle, its engine, and

and a half hours with a 220V 3-phase source.

transmission for two years or up to 50,000km.

The interior is equally unique, as it has been designed to

Renault has produced more than 11,500 units of the

offer comfort and functionality without sacrificing the

Twizy Z.E., making it a perfect example of the brandâ&#x20AC;&#x2122;s

autonomy of the car. The dashboard has a minimalistic

commitment to the environment. With Renault Eco2

design that only offers the necessary information to the

strategy, the company set the objective of offering

driver. Given the small space of the cabin, the sound

economic and environmentally friendly vehicles to the

system features only 2 micro speakers that can be

market, and now Mexican clients can capitalize on this with

connected via Bluetooth or cable to a phone or an MP3

a car costing MX$280,000 (US$18,000).

397

| INDUSTRY EXPERTS’ FUTURE OUTLOOK

“

Mexico is definitely going to continue its rise as a high roller in the world of vehicle manufacturing and exporting. Even so, given the extensive volume of Mexico’s exports, entering into new trade

”

agreements is a vital part of the country’s DNA, so expanding preferential access to other countries will remain key.

Eduardo Solís, Executive President of AMIA

“

In order to double car sales in Mexico, the country would need at least four more manufacturing plants, as well as 50-60% more dealers than it has today. This kind of

”

development would have an economic impact by boosting construction, architecture, law ﬁrms, and many other businesses, including those in the Tier 3 supply chain.”

Airton Cousseau, President and Director General of Nissan Mexicana

“

The prosperity phase characterized by high prices in raw materials, low interest rates, and a considerable liquidity in international financial markets is now reverting to previously low growth rates, so it is crucial to migrate to productive activities in the secondary and tertiary segments where the automotive industry offers considerable potential to the country.” Paúl Alejandro De La Cruz Frías, Assistant Director of Transparency and Financial Inclusion at Banco de México

“

”

We anticipate that KIA and its in-house suppliers will generate 9,000 jobs, while the rest of the

”

supply chain will create an estimated 22,000 indirect jobs. It is an important number that may lead to Nuevo Leon becoming the prime state in the creation of new jobs.”

Celina Villarreal, Secretary of Economic Development for Nuevo Leon

| PLANT SPOTLIGHT: BMW SAN LUIS POTOSI

398

Present in Mexico since 1994, BMW has recently celebrated

Luis Potosi, and will require a US$1 billion investment from

the 20th anniversary of its operations in the country, and

the company, with production expected to begin in 2019

will next year celebrate 100 years of global operations. After

with an initial staff of 1,500. Although the company has not

selling 13,992 vehicles in the country in 2013, representing an

yet announced which model will be manufactured at the

increase of almost 19% from the previous year, the company

plant, production is expected to reach a capacity of around

announced in 2014 its plans to construct a new plant in

150,000 units annually. This move solidifies the American

the state of San Luis Potosi, becoming the newest German

market’s position as “one of the most important markets for

manufacturer to establish operations in Mexico. Although

growth in Mexico,” according to Harald Krüger, member of the

the company currently works with 35 distributors within the

BMW AG executive board responsible for the construction of

country, this step represents its second production plant in

the plant. The location was chosen mainly due to Mexico’s

North America and first in Mexico. The construction of the

plethora of free trade agreements, including NAFTA and

plant was announced on July 3rd, 2014 in a ceremony with

several treaties with the EU and Mercosur, although other

the President of Mexico and the Governor of the state of San

considerations were taken into account. These include the

“

The scarcity of talent must be readily addressed and automotive companies have to work hard to create a sense of loyalty among their workforce. Mexican companies have to invest

”

time, money, and capabilities to reach the immense quality standards expected by the big international OEMs operating in the country.”

Albrecht Zu Ysenburg, Partner, Industrial Markets, and Audit at KPMG

“

Our ultimate goal is to invert the mobility pyramid that is currently in place, making pedestrians and cyclists a priority, followed by public transport, and motorcycles, leaving

”

cars as the last priority.” Rufino León Tovar, Former Minister of Mobility at Semovi

“

”

The age of the vehicle will not matter if there are no incentives to buy new trucks;

people will continue to import old trucks and buses from abroad, making competition contingent on cost.”

Miguel Elizalde Lizárraga, Executive President of ANPACT

“

It is expected that between 2013 and 2020, the automotive industry will grow by 50%, with auto parts production increasing by 30-35%. However, there needs to be an entity that can motivate the government to focus on the need for roads, ports, security, and education, making Mexico a more attractive place for foreign investment.”

Oscar Albín, Executive President of INA

”

availability of skilled workers in the region, the presence of a

in conjunction with local authorities, in order to preserve

strong supplier network, and an efficient infrastructure.

the ecological integrity of the surrounding area. As well as local human resources contracts being signed and online

The

project

recruitment portals being established, BMW has set up three

management of the plant’s construction was awarded to

contract

for

the

master

planning

and

offices, charged exclusively with recruitment, in the city of

Boston-based architectural firm AECOM. The company

San Luis Potosi. In the industrial area of the city, a temporary

will also provide construction management and start-up

training center was installed for staff training, while a

services for BMW in San Luis Potosi. The facility is proposed

management office building was placed nearby. At the

to measure 370,000m2 and in February 2015 ground was

beginning of 2015, around 30,000 employment applications

broken on the project, with the first priorities being the

had already been received for sought-after positions at

preparation of roads, electrical installations, and other

the plant. This not only shows BMW’s commitment to start

infrastructural requirements. The flora and fauna from the

operations, but also a huge interest from Mexican engineers

plant’s new location was responsibly removed and relocated

to participate in the project.

399

INDEX A-C

INDEX C-G

ABB México 269, 349

CIMAV 268-269

Actinver 375

Centur Security Services 118-119

Aisin Mexicana 191

Chihuahua Automotive Cluster 286, 304

ALTTEK 352-353

CIDESI 21, 268-269, 270, 285, 291

AMDA 15, 16, 362

CIMA 267, 268-269, 287, 308

American Industries 305

CLAUT 300-301

AMIA 6-9, 12-13, 15, 18, 45, 48, 58-59, 83, 98-99, 334, 382, 398

Colliers International 306

AMTI 319

Commercial Vehicle Group (CVG) 154

ANPACT 6, 8, 15, 17, 150, 162-163, 398

CONALEP 9, 165, 201, 279, 281, 311, 382

ANTP 17, 318

Continental Automotive 208, 261, 268

Arbomex 174, 193

Continental Tire 209

Argo Industrial Group 315

Corporación Zapata 22, 100, 135

Atlas Copco Mexicana 224

Corporativo Shernand 197

Atotech 229

CTS Embarq 145, 146

Audi de México 19, 32-33, 39, 43, 45, 59, 61, 68, 71, 84, 118,

Cummins 152, 171, 172, 198-199, 256

140, 143, 147, 192, 197, 202, 209, 210, 219, 234, 237, 247, 251,

Dacomsa 335

253, 254, 257, 282, 318, 326, 338, 355, 366, 368, 382, 388,

Daimler 8, 32-33, 34, 85, 135, 164-165, 174, 175, 181, 214, 215,

391, 392-393, 395.

219, 233, 279, 313, 324-325, 382, 389

Autobuses Troncales Lomas (ATROLSA) 134, 137

DC Gaskets 347

Auto Safe 112

DESEC 368

Autoliv Mexico 211, 225, 235, 289

DHL Supply Chain 323, 229, 281

Automotive Cluster of the State of Mexico 308

DSV Air & Sea Mexico 328-329

Autotransportes de Carga Tresguerras 328-329

Ernst & Young Mexico 21, 98, 390, 394

AVL Ibérica 245

E.J. Krause 383

AXA Seguros México 124, 139, 145, 215

Epicor Software Corporation 207, 258

Balluff de México 257

EXEDY Mexico 338

Banamex 30, 366-367

FCA Group 7, 32-33, 58-59, 81, 104, 156-157, 174, 192, 269,

Banco BASE 49

282, 389

Banco de México 16, 362-363

FedEx 322, 381

Bancomext 8, 11, 48, 49

Ferrari 51, 60, 99, 113, 126, 194, 210

Beccar 183

FINSA 303

Bend-All México 228

Former Minister of Mobility for Distrito Federal 23, 134

Blackhawk 198-199

Fronius Mexico 355

BMW de México 8, 14, 32-33, 36, 45, 51, 59, 63, 78-79, 84,

Fruehauf de México 155

99, 105, 147, 192, 193, 210, 219, 225, 235, 247, 257, 263, 264-

FUMEC 269, 271

265, 308, 315, 316, 317, 326, 355, 365, 371, 382, 388-389,

Ford de México 7-8, 32-33, 45, 46, 47, 58-59, 64-65, 100,

398-399

101, 115, 124, 182, 192, 193, 197, 210, 213, 214, 215, 219, 234, 237,

BNP Paribas 89, 124, 127

239, 247, 267, 268-269, 271, 272-273, 283, 285, 287, 289,

BOS Automotive 213

304, 308, 310, 338, 355, 356, 368, 375, 389, 391, 395

BPI Distribution 342

Gastelum Abogados 366-367

Cadena Automotriz 339

GESTAMP Mexico 202

CAMEXA 382

GiPA 336-337

Car Fast 380

General Motors 6, 7, 8, 32, 33, 36, 42, 43, 45, 58, 59, 66-67,

Carl Zeiss 252-253

101, 112, 147, 174, 182, 192, 197, 198, 219, 227, 228, 233, 239,

Carrot 142-143

247, 256, 268, 269, 270, 282, 289, 303, 308, 310, 315, 316,

Castro del Rio 47, 281, 311

317, 338, 345, 346, 355, 356, 373, 379, 389

Chrysler México 104, 106-107, 140, 145, 156-157, 193, 197, 214,

Goodyear 168, 206-207, 368, 378

215, 219, 220, 227, 234, 239, 319, 338, 346, 355, 356, 365

Grupo Copachisa 368

Chrysler Financial 375

Gobierno de Aguascalientes 30, 60, 279

INDEX G-M

INDEX M-R

Google 128-129, 145, 260-261, 262-263, 340

MAHLE Componentes de Motor de México 192, 218-219

Grupo Alden 101

Mahr Corporation de Mexico 357

Grupo Amaya 215

MAN Truck & Bus México 136, 150, 152, 172-173, 181, 183,

Grupo Avante 247, 307

235, 365

Grupo Desmex 225

Mann+Hummel Mexico 216

Grupo Hi-Tec 352, 354

Marsh 122, 123

HAYS 292-293

Mazda de México 6-7, 12, 14, 32-33, 45, 47, 58-59, 74-75, 90,

Hellmann Worldwide Logistics 320-321

100, 101, 124, 140, 174, 192, 193, 219, 237, 316, 345, 356, 368

Henkel Mexicana 90, 250-251, 289

McLaren and Lotus 52, 60, 99, 114, 194, 210

Hexagon Metrology 356

MercadoLibre México 115

Honda de México 6-7, 12, 14, 32-33, 45, 47, 58-59, 73, 92-93,

Mercedes-Benz México 8, 14, 19, 33, 34, 59, 60, 76, 84, 109,

101, 140-141, 192, 193, 197, 215, 233, 237, 239, 251, 316, 368,

183, 194, 210, 235, 308, 316, 324, 338, 365, 373, 389

373, 389

Metrobús 23, 134, 135, 136, 137, 146

Hypertherm 351

Mexican Association of Industrial Parks (AMPIP) 42-43, 314

Hyundai Motor Mexico 8, 58-59, 82-83, 101, 237, 254, 289,

Mikel’s 308, 343, 344

315, 389

Ministry of Economy 9, 10-11, 14, 16, 39, 43, 48, 163, 271, 368

IHS 18-19, 98, 388-389, 399

INA 7, 14-15, 45, 48, 334, 376, 382, 398

Mubea de México 237

Inferno 126-127

National Chamber of Passenger & Tourism Transportation

Infiniti Mexico and Latin America 8, 33, 34, 59, 84-85, 101,

(CANAPAT) 148-149

116, 214, 279, 308, 389

Navistar Mexico 166-167, 198, 219, 301, 365

INTERMEX 302, 369

Nelson Global Products Monterrey 198-199

ISUZU Motors de México 59, 178, 183, 342, 365

NHK Springs Mexico 47

Itaro 340-341

Nissan Mexicana 7-8, 14, 19, 24-25, 30-31, 32-33, 34, 35, 43,

ITESM 13, 21, 37, 127, 225, 268-269, 286-287, 290-291, 301,

45, 47, 58-59, 60, 62-63, 73, 85, 86-87, 98-99, 101, 116, 128-

309, 357

129, 140, 143, 155, 165, 171, 192, 193, 194, 195, 197, 214, 234,

iVoy 381

256, 257, 263, 268-269, 279, 281, 282-283, 284, 289, 308,

Ixe Fleet 138

312-313, 316, 317, 326, 338, 346, 355, 356, 368, 372, 389

J.D. Power de México 79, 83, 128-129

Nissan Renault Finance México (NR Finance) 116-117

Jatco México 25, 194, 195

Novacapre 182

JATO Dynamics 120-121

IMS Buhrke-Olson de Monterrey 239

Jáuregui y Del Valle 50, 290

Omnitracs 153

Kaso y Asociados 372

Oracle Mexico 259, 289

Kautex Textron de México 212

Parque de Innovación y Transferencia Tecnológica (PITT)

Kelly Services México 310

286-287

KEM Design de México 235

PFI de México 345

Kern-Liebers Mexico 232

Pirelli Mexico 210, 225

Korcut 345

Polomex 181, 184

Korn Ferry 282-283

Porsche de México 59, 83, 105, 110-111, 197

KPMG 389, 391, 395

Preh de México 247

Kromberg & Schubert Mexico 380

Proquipa 227

Kronos Latinoamérica 288-289

Prudential Real Estate Investors 370

KUKA de México 255, 257, 350

Queretaro Automotive Cluster 290, 309

Lamborghini & Aston Martin México 99, 108-109, 114, 126,

Reacciona por la vida 125, 145, 147

127, 210

REHAU Mexico 214

Laureate Education 282-283

Relats México 238

Leaders Trust International 294-295

Renault 7-8, 19, 30, 32-33, 34, 35, 45, 59, 60, 85, 86-87, 99,

LeasePlan México 101, 138-139

112, 116, 165, 289, 313, 389, 396-397

Maserati 99, 113, 210

Renishaw México 254

Ildefonso Guajardo Villarreal 15, 36, 46

INDEX R_Z

VEHICLE SPOTLIGHTS INDEX

Robert Bosch México 145, 190, 227, 261, 268-269, 280, 289,

76-77

365

106-107 2016 Chrysler 300

Rolls-Royce Mexico 105

150-151

Roxtec de México 234

184-185 Polomex Paradiso DD

Russell Bedford México 39

204-205 Volvo XC90

Russell Reynolds Associates 290-291

264-265 BMW i3

Ryobi (RDCM) 200-201

324-325 Freightliner Inspiration Truck

Sahara Force India 52

396-397 Renault Twizy Z.E.

Mercedes-Benz GLE Coupe Volksbus 15.190 OD

SAP México 266, 289 Scania Mexico 149, 176-177, 181, 183, 235 Schneider Electric Mexico 262-263, 265, 269 SEAT México 59, 72, 338

PLANT SPOTLIGHT INDEX

Secretary of Economic Development for San Luis Potosi 36 Secretary of Economic Development for Nuevo Leon 37, 301

23-24

Nissan Aguascalientes A2

Senator International 326

Daimler and Renault-Nissan Alliance JV

SIL Logistics 317

41-42

KIA Motors Nuevo Leon

Spencer Stuart Mexico 294-295

70-71

Volkswagen Puebla

Subaru de México 59, 90-91

92-93

Honda Celaya

Tekfor Mexico 236

156-157 FCA Toluca Complex

Ternium México 203, 230-231, 292-293, 301

174

Tierra Tech de México 256

218-219 Mahle Ramos Arizpe & Celaya

TIP México 140-141

230-231 Ternium Nuevo Leon

Toyota México 8, 32-33, 45, 46, 47, 58-59, 90-91, 99, 101,

272

Ford Chihuahua & Guanajuato

112, 143, 145, 182, 192, 219, 237, 239, 245, 260-261, 269, 315,

378

Goodyear San Luis Potosi

327, 389

392-393 Audi México

Toyota Material Handling Capital (TMHC) 327

398-399 BMW San Luis Potosi

Arbomex

Transportes LIPU 152 TREMEC 168, 194 Tupy Mexico 217 Undersecretary of Industry and Commerce 9, 10, 399

TECHNOLOGY SPOTLIGHT INDEX

UNIFIN 374 UVM 9, 282-283, 284

90-91

Henkel Material Treatments

Visteon Technical Center Mexico 246, 268, 287, 368

139

AXA Drive

Volkswagen de México 6, 8-9, 33, 39, 45, 46-47, 58-59, 63,

149

Scania Fleet Management Services and Scania

68-69, 70-71, 72, 101, 102-103, 110-111, 172-173, 174, 181, 183,

Watch

192, 197, 202, 209, 210, 213, 214, 225, 227, 234, 235, 237, 254,

180

Volvo Group – Emergency Braking System

256, 269, 282, 289, 291, 303, 326, 338, 355, 366, 375, 389,

207

Epicor Mattec MES

391, 395

248

BASF Adhesives and Sound Damping

Volkswagen Financial Services Mexico 110, 118-119

252

Carl Zeiss X-Ray Technology

Volvo Auto de México 59, 88-89, 124, 181, 183, 204-205,

288-289 Kronos InTouch

210, 211, 219, 235, 365 Volvo Group Trucks 136, 168-169, 180, 329 Von Wobeser y Sierra 365 Whitehall Industries 233

PROJECT SPOTLIGHT INDEX

Williams Scotsman 313 Wöss & Partners 364 WTC Industrial 316 Yaxi 144 ZF Services Mexico 334, 357

312

Nissan A2 Vehicle Distribution Center

ADVERTISING INDEX

Goodyear

196

American Textil

Grupo Alden

201

Ryobi Die Casting

Intermex

212

Kronos

Ternium

222

MANN+HUMMEL

Mazda

226

Ecoplating

Renault

228

Atotech

Government of the state of Aguascalientes

232

White Hall Industries

Auto Safe International

234

Kem-Design

Continental Tire

242

Carl Zeiss

FCA

251

Henkel

Grupo Hi-Tec

255

Renishaw

109

LeasePlan

261

Cidesi

111

Volkswagen Financial Services

278

Mejora

117

NR Finance

298

Hellmann Worldwide Logistics

124-125 Marsh

304

American Industries

132

Femsa Logística

314

Argo Grupo Industrial

141

Haldex

332

143

Carrot

340-341 Itaro

147

CTS Embarq

344

Mikel’s

160

Cummins

346

DC Gaskets

167

Transportes Lipu

348

ABB

169

Nelson Global Products

360

COFOCE

170

Arbomex

367

Gastélum Abogados

171

MAN Truck & Bus

371

Unifin

177

Scania

379

JATO

188

Mahle

386

MBP

CREDITS

EDITOR-IN-CHIEF: Jeroen Posma

COMMERCIAL DIRECTOR: Laurens Schöningh

SENIOR EDITOR: Matt Kendall

PUBLICATION COORDINATOR: Luis Águila

JOURNALIST & INDUSTRY ANALYST: Alejandro Salas

DESIGN DIRECTOR: Vanessa Rocha

EDITOR: Bernardo Flores

DESIGN ASSISTANT: Marcos González

JUNIOR EDITOR: Luis Vargas

WEB DEVELOPMENT: Arturo Madrazo

ASSOCIATE EDITOR: Nadine Heir ASSOCIATE EDITOR: Sara Warden

PUBLICATION ADMINISTRATOR: Alena Lipková

JOURNALIST: Chris Dalby

ADMINISTRATIVE ASSISTANT: Rebeca Garduño

JOURNALIST: Michelle Adams

CIRCULATION MANAGER: Ana Cristina Garantón

JOURNALIST: Mariana Palacios

PRINTED BY Foli, Negra Modelo # 4 Bodega A Fracc. Cervecería Modelo, Naucalpan Estado de México T:. 9159 2100

PHOTO CREDITS

Volkswagen de México

MBP

76-77

Mercedes-Benz Mexico (For illustrative use only)

MBP

BMW de México

MBP

BMW de México

MBP

FCA México

MBP

Hyundai Motor Mexico

MBP

KIA Motors México

MBP

Audi

Infiniti

MBP

Renault México

Ernst & Young México

Renault México

Corporación Zapata

MBP

Ministry of Mobility for Distrito Federal

Volvo Auto De México

24-25

Nissan Mexicana

MBP

KIA Motors México

92-93

Honda de México

Government of Aguascalientes

Rolls-Royce

Nissan Mexicana

100

Corporación Zapata

Mercedes-Benz Mexico (For illustrative use only)

101

MBP

102

MBP

104

MBP

105

MBP

106-107 FCA México

40-41

KIA Motors México

108

MBP

VESTA

109

Lamborghini and Aston Martin México

MBP

110

Porsche de México

MBP

112

MBP

113

Ferrari & Maserati México

MBP

114

MBP

115

MercadoLibre México

Esteban Gutiérrez - Ferrari

116

MBP

Esteban Gutiérrez - Ferrari

118

Volkswagen de México

Sergio Pérez - Sahara Force India

120

MBP

Sergio Pérez - Sahara Force India

122

Marsh, Brockman y Schuh

Volkswagen de México

124

BNP Paribas|Personal Finance México

MBP

125

AXA Seguros

MBP

126

INFERNO EXOTIC CAR

Audi México

127

INFERNO EXOTIC CAR

Audi México

128

MBP

Nissan Mexicana

130

MARSH

MBP

134

Ministry of Mobility for Distrito Federal

MBP

135

Corporación Zapata

General Motors de México

136

MBP

Volkswagen de México

137

MBP

Volkswagen de México

138

MBP

70-71

Volkswagen de México

140

TIP México

MBP

142

Carrot

144

MBP

208

MBP

145

MBP

209

MBP

146

MBP

210

Pirelli México

148

MBP

211

MBP

150- 151 MAN Truck & Bus

212

MBP

152 MBP

213

MBP

153

Omnitracs

214

MBP

154

MBP

215

Grupo Amaya Telleria

155

Fruehauf

216

MBP

156-157 FCA México

217

TUPY

158

Scania

218-219 Mahle

162

MBP

220

Eisenmann

163

Daimler Trucks Mexico

224

Atlas Copco

164

Daimler Trucks Mexico

225

Grupo Desmex

165

Daimler Trucks Mexico

227

MBP

166

MBP

228

MBP

168

MBP

229

MBP

171

MBP

230–231 Ternium

172

MAN Truck & Bus México

233

Whitehall Industries

173

MAN Truck & Bus México

235

Kem-Design de México

174

Arbomex

236

MBP

175

Daimler Buses México

237

MBP

176

Scania Mexico

238

MBP

178

MBP

239

IMS Buhrke-Olson de Monterrey

179

DINA

240

Rolls-Royce

180

Volvo Buses

244

Delphi México

181

MBP

245

MBP

182

MBP

246

MBP

183

Beccar

247

MBP

184-185 Marcopolo

248

BASF

186

Factoria

248

BASF

190

Robert Bosch México

249

BASF

191

MBP

250

MBP

192

MBP

250

Henkel

193

MBP

252

MBP

194

MBP

254

MBP

195

JATCO

255

KUKA de México

197

MBP

256

MBP

198

MBP

257

MBP

198

MBP

258

Epicor Software Corporation

200

MBP

259

MBP

202

Gestamp México

261

Google

203

MBP

262

MBP

204-205 Volvo

264-265 BMW

206

Goodyear México

266

MBP

206

Goodyear México

267

MBP

PHOTO CREDITS

270

CIDESI

328

MBP

271

BMP

330

The Timken Company

272

Ford de México

334

ZF Services Mexico

273

BMP

335

MBP

274

BASF

336

MBP

278

Baker & McKenzie

338

MBP

279

Government of Aguascalientes

339

MBP

280

Robert Bosch México

340

MBP

281

CONALEP

341

Itaro

282

Laureate International Universities México

343

MBP

282

MBP

345

MBP

284

UVM

347

MBP

285

CIDESI

349

MBP

286

MBP

350

KUKA de México

289

Kronos

351

MBP

290

MBP

352

MBP

292

Hays

353

Grupo Hi-Tec

294

MBP

354

MBP

296

Nissan Mexicana

355

MBP

300

MBP

356

MBP

301

KIA Motors México

357

MBP

302

INTERMEX

358

Minister of Tourism Distrito Federal

303

FINSA

362

MBP

304

Chihuahua Automotive Cluster

364

Wöss & Partners

305

American Industries

365

MBP

306

MBP

366

Gastélum Abogados

307

MBP

368

MBP

308

Automotive Cluster of the State of México

369

MBP

309

MBP

370

MBP

310

Kelly Services Mexico

372

MBP

311

Castro del Rio

373

MBP

312

Nissan Mexicana

374

MBP

313

Williams Scotsman

375

MBP

315

MBP

376

HSBC México

316

WTC Industrial

378

MEJORA Desarrollo Laboral

317

SIL Logistics

381

MBP

318

MBP

382

CAMEXA

319

MBP

383

MBP

320

MBP

384

Rolls-Royce

322

MBP

390

Ernst & Young México

323

MBP

391

KPMG

323

DHL Supply Chain

392-393 Audi

324-325 Daimler Trucks

394

CIE

326

MBP

395

CIE

327

MBP

396-397 Renault