Safran to Open New Plant in Mexico: EbrardBy Alicia Arizpe | Mon, 07/13/2020 - 12:17
Mexico’s Foreign Minister Marcelo Ebrard announced that French aircraft engine giant Safran will build a new plant in the north of Mexico. Safran has a 25-year old history in Mexico, with numerous manufacturing plants spread throughout the country that produce, among other components, critical parts for the CFM56, LEAP and SaM146 engines. The new plant, which will be located in Chihuahua and generate 800 jobs, will join the largest aircraft wiring plant in the world also located in the northern state.
While Safran consistently ranks among the Top 10 aerospace manufacturers in the world, the company has also been hurt by the sharp losses the sector is facing in the wake of the COVID-19 crisis. As aviation sees its lowest demand in history, demand for new aircraft has plummeted with major OEMs Airbus and Boeing reporting few new orders and numerous deferrals and cancellations that have hurt the entire aerospace supply chain. In March, Safran reported less demand for aircraft interiors retrofitting caused by cash-saving policies from airlines and less demand for new engines.
In its 1Q20 report, Safran indicated that it had seen a 6.9 percent drop in revenue for a total of €5.4 billion (US$5.91 billion). The company also indicated that airplane deferrals caused by the COVID-19 crisis could have substantial impact in the company’s finances. "The situation we are facing today is of a different order of magnitude, although it remains difficult, at this point, to measure precisely its far-reaching consequences,” said Philippe Petitcolin, CEO if Safran. Among the many cost saving measures undertaken by Safran were cutting 3,000 jobs at its plants Mexico during April.
The COVID-19 outbreak has had a severe impact on Mexico’s aerospace industry, which has seen its production shrink by 40 percent according to the Mexican Federation of the Aerospace Industry (FEMIA). Xavier Hurtado, Supply Chain Director at FEMIA, told El Economista that the northwest of the country had been severely impacted by the outbreak, with some companies reporting 95 percent less manufacturing volume than in 2019. Mexico’s aerospace industry was briefly paralyzed as the government suspended all non-essential activities to reduce the spread of COVID-19. The sector was initially deemed non-essential but was reclassified and allowed to reopen in June. However, the industry still has to grapple with disrupted supply chains and widespread lower demand.