Growing Investment in SonoraFri, 12/01/2017 - 11:04
Q: How have aerospace operations contributed to Sonora’s growth?
A: Sonora experienced strong economic growth of over 5 percent during 2016, which was fueled by several factors, including the aerospace industry. Even though this is a relatively new sector, it has propelled our manufacturing economy in recent years. Sonora’s aerospace strategy is focused on three main segments: engine components, aerostructures and MRO services. Our established aerospace companies continue to expand organically. Some have been the subject of mergers and acquisitions. As an example, in September 2016 in Guaymas, Cornerstone Capital Holdings acquired the blades and vanes division of Walbar Engine Components from United Technologies.
Hermosillo, as well, is seeing significant growth from aerospace. In November, an announcement was made of a US$200 million investment in the manufacturing of aeroengine components. In our opinion, this will be a paramount investment for the aerospace industry in Mexico, the likes of which have not been seen in the last decade. This project will increase the need for new suppliers in Sonora and improve the region’s technical capabilities.
Q: How has foreign direct investment benefited companies in the state?
A: We now have 65 aerospace companies in Sonora employing over 11,000 workers. These suppliers produce components and assemblies fitted on Boeing, Bombardier and Airbus aircraft and on engines from GE, Rolls-Royce, CFM or Pratt &Whitney. Suppliers most often surpass their customers’ expectations in terms of quality and delivery. For instance, in March 2017, Airbus recognized Latécoère’s Hermosillo operation for its outstanding performance in the production of harnesses for the A380, A350 and A330. Overall, OEMs recognize the world-class excellence of Sonora’s aerospace companies and consequently are increasingly bringing new business to our companies.
This flourishing business is creating new opportunities for other suppliers in the region. Figeac Aero, for example, became Latécoère’s partner in component machining and subassemblies for the doors of the Boeing 787. Figeac Aero has gone from construction to production in a record time of seven and a half months and is now receiving new contracts beyond their initial scope of implementation. The presence of Latécoère also helped to attract Shimtech Composites, a supplier of composite components and assemblies for OEMs such as Bombardier and Boeing.
Q: What advantages can Sonora offer over other aerospace destinations?
A: Asian, Eastern European and North African countries, such as Morocco and Tunisia, are strong candidates for new aerospace projects. These regions have displayed advantages in terms of production cost, but production cost is not the only driver leading to site selection. Factors such as logistics costs and convenience, human capital and training play favorably for Sonora. We offer advantageous logistics to support the North American market, a qualified talent pool capable of adapting to new technologies, universities, research centers and training centers.
Sonora also has the advantage of a dedicated aerospace vocational training center. In support of our aerospace companies, the state commits to the training of their new employees at the Sonora Institute for Aerospace and Advanced Manufacturing (SIAAM). We are proud to say that this year we will graduate Latécoère’s 17th generation of workers on structural assembly and the sixth generation of Figeac Aero’s and OTM’s employees on CNC machining.
Another important asset in favor of the state is the integration of the supply chain. For instance, we have worked jointly with Latécoère to allow the company to source all their metallic parts locally for the manufacture of doors for the Boeing 787. This effort led to the establishment of Figeac Aero. Another example was the establishment of Ellison Surface Technologies, a provider of critical coatings in support of our aeroengine segment.
Q: What effect do you expect NAFTA talks to have on Sonora’s operations?
A: All three countries are opening a discussion that has long been overdue, according to some government officials in the US. It is clear that negotiations have created uncertainty among companies. The proposed changes regarding potential border tax and tariffs have caused companies to deeply analyze their current operations and future projects. Companies with operations in the state came to the conclusion that their production in Sonora remains superior in quality and time-efficiency to the results coming from other international facilities. Despite the NAFTA talks, since the beginning of the year we have seen an appetite for growth. Rather than seeing projects stalling, we see business growing.
Companies also recognize Sonora for its increasing competitiveness in terms of location. In recent years, the state and federal governments have invested significantly to improve the state’s logistics infrastructure, investing in new roads, gas pipelines and other services.
Q: What best practices can you incorporate from international aerospace hubs?
A: We are in a constant learning process and our attendance at international events encourages us to determine how in line we are with the capabilities of other clusters in France, the UK, the US or Canada. Our foremost opportunities lie in developing human capital and SMEs in the industry. Those countries are references in these areas and we must align our infrastructure to them.
The state has set the goal of attracting strategic companies. However, we do not want to attract companies solely to justify “instant” growth, but rather are interested in developing an integrated supply chain that complies with OEM standards and needs, as this will result in substantially more benefits over the long run. By supporting Latécoère and Figeac Aero in their work on the doors for the Boeing 787, we make them more valuable suppliers to OEM, reinforcing Boeing’s appetite to source more from the state.
Q: What strategies has Sonora implemented regarding SME inclusion?
A: As we identify opportunities for more foreign Tier 1 companies to establish in the region, we anticipate an ever-increasing demand for the participation of local SMEs in the industry. We are developing plans to help local SMEs grow and become strong suppliers. We are focusing on companies that offer casting, as well as special processing and nondestructive testing services. Developing SMEs in aerospace is a rigid and costly process but we expect favorable results in the medium term. We have seen local machining shops supported by the state that are now supplying large corporations in Nogales and small tooling developers that are now working with Figeac Aero.
Q: What are your growth expectations for the state and what are your priorities for 2018?
A: First, we hope to consolidate key aerospace investment projects we have in the pipeline. We also need to begin operations of our new aerospace R&D center being built at the Hermosillo Institute of Technology (ITH). The R&D laboratories are scheduled to start their first phase of operations in November 2017. Regarding our aerospace vocational training center SIAAM, we have a new training program starting and a growing demand for the established courses.
In 2018, we plan to promote Sonora differently. Three years ago, aerospace in the state was faceless, composed largely of smaller Tier 2 companies all operating independently. Today, we have six world-class companies operating in Sonora with a more integrated supply chain. We have also increased our visibility with OEMs by aligning our strategies to their requirements.