A Dual Transformation for the Aerospace Industry in Mexico
In this article, I would like to present a more realistic view of the Mexican aerospace industry but also share some thoughts around how to transform our sector to capture higher value-added opportunities.
A lot has been said around the challenges that we face in our supply chain and the great opportunities ahead if we manage to effectively leverage our capabilities and privileged conditions.
Without a doubt we are a manufacturing country par excellence. Our workforce is highly skilled, our labor costs are competitive, we have an enviable geographical location, and we are part of one of the greatest trade agreements of all time. Yet, despite all this, the aerospace sector has not taken off as we all had expected.
In previous articles, I have talked about the structural issues that are preventing the aerospace industry in Mexico from greater, accelerated growth. Our supply chain is not well integrated, we struggle to access raw materials at a competitive cost, and our growing supplier base finds it very difficult to get financial resources at competitive interest rates. On top of that, the political landscape is also discouraging local and foreign direct investment. All these elements impact our industry’s ability to grow and catch up with other best-cost regions in the world.
If we look at South Asia, Eastern Europe, and North Africa, we notice that the competition is fierce. Just to mention one example, several aerospace OEM and Tier 1 companies have heavily invested in Morocco, setting up state-of-the-art manufacturing facilities to boost their competitiveness.
Finally, the health crisis and the world’s ongoing conflicts today are creating an even more difficult scenario to thrive.
I do not want to be pessimistic but I think it is imperative to recognize our reality so we can take determined and objective actions.
I truly believe it is time to change our mindset. We need to continue making a strategic effort to close the gaps and increase our competitiveness but we need to raise our awareness that the world is changing increasingly faster. The challenges of today are not necessarily the challenges or opportunities of tomorrow and we need to be able to manage today’s business while, at the same time, creating the new growth engines for tomorrow. This is called a Dual Transformation.
First things first. The aerospace industry is going through a dynamic transformation. There are several emerging technologies, such as additive manufacturing and electrification, that are disrupting and reconfiguring global value chains.
In my opinion, Mexico should go beyond traditional manufacturing and position itself as a technology innovator. This is where the Dual Transformation comes into play. Let’s be honest, we will not become a technology innovator right away but we can start setting the foundations to participate in higher value-added activities and in the development of emerging technologies, while we continue capturing value from our current core capabilities.
The Dual Transformation starts by continuing to consolidate and advancing what we do today but in a more strategic way. The focus should be on those niches of opportunity that represent the highest value and that better align with our current capabilities so we can generate additional resources to invest in new technologies that allow our sector to start getting involved in higher value-added activities. In other words, it is all about getting the right balance between what we currently do but keeping an eye on what’s next to better capture the opportunities of the future.
New megatrends are coming our way but new opportunities are also going away and our country is not always capturing value. If we continue focusing only on the technologies of the past and the present, we will lose sight of the future and when the time comes, we will not be ready. An example of this is what we are seeing in the automotive industry. A big number of companies are destined to disappear due to the electrification of automobiles. Many mechanical components and complete systems will no longer be required in the new electromobility industry. Only those companies that were able to see the future several years ago are positioned to win in a completely disrupted industry.
As new technologies emerge, we will continue to see disruptions in all sectors of the industry, aerospace included. Business owners and CEOs need to be more aware that leadership is no longer a steady state. Change is constant and change management and dual transformations will be the key to capturing the great opportunities of the future.