Ambitions and Priorities of Mexico’s Light Vehicle OEMs

The next and perhaps most highly anticipated panel was Ambitions and Priorities of Mexico’s Light Vehicle OEMs, with AMIA’s executive president, Eduardo Solís, acting as moderator of the discussion. Solís started the panel by stating that the automotive industry’s current focus is on the supply chain and the development of human capital. The moderator recalled that Mexico became the first car manufacturer in Latin America in 2014 and the seventh in the world producing more than 3.4 million vehicles. However, the challenge is to manufacture up to 5.2 million units by 2020 and to export 4 million of those light vehicles. The opportunity is humongous and local SMEs want to be part of this development, yet they usually do not know where and how to start.

Leo Torres, Purchasing Director and STA of Ford de México replied to this issue by explaining that the first step for any company that wants to become a supplier is that they should have clear objectives such as defining themselves as Tier 1 or Tier 2, as well as establishing which segment will they focus on. “Of the 100% of suppliers that have failed in the industry, 90% of them did so because they did not plan or foresee changes,” Torres said.

Panelist Emmanuel Domínguez, Powertrain Supplier Development Director of General Motors de México, intervened and said that half of Mexico’s produced cars have 50% of local raw materials, but that for 2020 he expects that each car will have 90% of local materials. The main risk for suppliers, according to Domínguez, is that automotive suppliers often want to do more than their capacity allows. “If smaller companies want to be part of the automotive industry they should clearly specify their advantages such as quality, capacity, and delivery time,” he suggested.

The moderator moved forward to the subject of human capital flow and specifically appointed to Edgar Zambrano, Human Resources and Labor Sr. Manager of KIA Motors México, to elaborate on this issue. Zambrano explained that the first challenge for KIA is to acquire the right personnel since they are establishing in a region with no OEMs but with lots of experience in the manufacturing and industrial sector. “I’ve discovered that I am purchaser myself, but for the most important asset of the company: its people,” he pointed out. Torres completed his idea by saying that the most relevant asset of any business is not just the people, but the qualified people.

Eduardo Solís then emphasized the importance of the triple helix cooperation between the educational system, the government and the automotive industry. Domínguez suggested that the next trend in Mexico’s industry will be automotive design and specific engineering, hence school cooperation is a cornerstone for development.

The final topic was centered in the alleged low cost labor that Mexico offers to OEMs. AMIA’s president had a cutting answer: “if the investments in Mexico depended only on cheap labor there would be new plants opening in Nicaragua or Guatemala, the country’s success comes from a robust supply chain and qualified workforce.” Edgar Zambrano completed the idea with other factors such as Mexico’s strategic position. “Mexico has a qualified workforce, which is not cheap but allows companies to be competitive.”
A revolutionary idea arose during the final stages of the panel concerning all automotive players. Large OEMs and Tier 1 suppliers have an urge to develop a more cooperative environment to get strong public and private investments in raw materials plants and factories, as Germany did several years ago. Torres said that car buyers do not usually care what kind of steel their car is made of, so if all OEMs could organize to have the commodity nearby instead of importing it then they would make manufacturers more efficient.