Automotive Investment in Aguascalientes Heats UpMon, 09/01/2014 - 17:37
Q: What were the main factors that led to Aguascalientes’ transition into an automotive industry hub?
A: Before Aguascalientes became an automotive hub, it played an important role in the railroad industry. The maintenance and repairs of trains took place here. This was the strongest and most important sector in the state, but this industry closed 30 years ago, leaving many people unemployed. It was during that time that Nissan appeared and employed many of the people that had lost their jobs. Nissan became a lifeline for Aguascalientes and the cyclical history of its projects here is interesting. 32 years ago, the current Governor Carlos Lozano de la Torre was the Secretary of Economic Development tasked with coordinating Nissan’s investment in Aguascalientes. Over three decades later, as governor, Lozano promoted the investment of their second facility here. One of the reasons the state has grown so much and performed so well is because of the strong relationships it has established with the business community, and our relationship with Nissan has played a crucial role in developing the local economy. Nissan has had a lot of influence on many related sectors such as logistics and transportation as well, and we are seeing this trend coming about again with the opening of its second facility.
Q: What are the key factors that made Nissan choose Aguascalientes once again as the destination for a major investment?
A: In the last 30 years, the Nissan Aguascalientes plant has become one of the company’s most productive plants worldwide and holds the number one position for several processes. Over this time, Nissan has developed, trained, and educated people to become highly skilled professionals oriented in the Nissan way. We also have a strong communication bridge with Japan, and the presence of Nissan has an impact on Japanese inward investment in the entire automotive industry. I was based in Japan as a trade commissioner in the Mexican embassy during the Fukushima earthquake and tsunami. This natural disaster had a strong impact on the way of doing business in Japan, the country learned that diversification is important in order to minimize risk. During the tsunami, production lines stopped for several weeks, or even months, as certain parts were only being produced in that part of the country. After this experience, Nissan took the decision to reinvest in other places where it already had a presence. Nissan evaluated several states in Mexico, but it already had a welldeveloped support chain in Aguascalientes comprised of education facilities, suppliers, and training schools. Also Aguascalientes is a very safe place with a good business climate. We have not had a strike for over 40 years. The small size of the state is advantageous in the sense that security can be controlled far more easily. For example, we have introduced checkpoints and we have access to the Plataforma Mexico and the American database where we can obtain information on car plates. We are working very strongly with the neighboring states to improve the roads and the security.
Q: Are you concerned that your reliance on one OEM could create vulnerabilities?
A: Dependency on just one OEM is a concern for us, which is why we are diversifying into other productive sectors. We are working on electronics, clean energy, and IT projects. A lot was learned during the crisis, when both Nissan and its suppliers had a hard time surviving. During that time, the government and the companies worked together to find ways to continue production without cutting jobs or restructuring entire organizations. From that point forward, our strategy has been to liaise closely with Nissan and identify any problems and concerns before these arise. Currently, its only problem is that it does not have enough production capacity to meet demand.
Q: Do you have ambitions to attract another large OEM to Aguascalientes?
A: We currently do not have any plans to aggressively chase another OEM as we want to focus on making the Nissan project very successful. We do not want to have competition between two companies at this time. We recently received a German OEM that conducted a physical study of Aguascalientes, and it concluded that it was interested in establishing here. We told the German firm that we would focus on Nissan, as we felt we were not able to receive it properly at this time. It would have been unfair on them, on Nissan, and on us. This was a professional approach, as we were essentially saying that we did not have the current capacity to provide the best operating conditions. Once the Nissan project is consolidated, we may consider a new project. Another benefit of only working with Nissan and its suppliers is that the working environment in Aguascalientes is very friendly in terms of communication between companies. A group of Japanese companies in Aguascalientes, named GIA, meets every month to share information on salaries, best practices, and many other things. They also have gentleman’s agreements in place, where they ensure that staff will not jump from one company to another. All of this cooperation has helped secure the establishment of other Japanese companies in the state.
Q: In what ways are you ensuring and supporting the growth of automotive SMEs in Aguascalientes?
A: The main concern for suppliers is being close to their clients and to have the best logistics. A trend right now is that many smaller suppliers are starting to work for more than one company. For example, a supplier of Nissan that comes to Aguascalientes can also act as a supplier for Mazda, VW, Audi, and other companies that are already here. This is due to our good roads, highways, airports and railroads, enabling easy access to the Bajio region. Suppliers are also exporting to the US by taking advantage of Mexico’s FTAs. We have to help local companies to develop and reach the next level. In most cases, they do not have the quality requirements for the automotive industry, the certificates, the volumes that big companies need, or the pricing they demand. We work alongside Nissan to identify the services and products it needs and then work with suppliers so they can also contribute to the automotive sector. Every year, the Expo Partes event sees Nissan and other major companies present their needs in terms of volume and quality. We are working with universities and technical schools to ensure the employability of students and create a skilled and knowledgeable workforce. The automotive industry has specific requirements so the new campus of the Autonomous University of Aguascalientes is focusing on engineering, robotics, and other careers needed by the sector. The universities are focusing on what the companies need, making sure that people graduate with a high skill set and are ready to form part of the sector.
Q: How important is it for the state government to contribute to more high technology bases?
A: This is one of our main goals, and we are focusing on promoting R&D and developing a highly skilled force, which is already happening. For example, Nissan is developing a regional training center where people from across the Americas will come to train. We also have the biggest site server for Nissan, so all production and information will be controlled from this new facility. This shift in technology has been happening in Aguascalientes as we continue to focus on helping companies with R&D in order to have better paid jobs and more qualified people.
Q: How do incentives in Aguascalientes differ to surroundng states?
A: Some states are very aggressive in what they offer in terms of land donations and tax reductions. We are not as aggressive, since we focus our resources on creating secure long-term business plans, besides only attracting the companies. We want both the needs of the companies and the communities to be addressed for the long-term. Education is a major focus point and we are assigning specific funds for that as we want the companies to have people with the right capabilities and skills to fuel growth. Another focus is creating a stable business climate. To do so, we have good relationships with the unions, which is one of the reasons we have not had a strike for many years. We have also invested in infrastructure to improve the logistical capabilities of the state. Although we do not offer land incentives or tax reductions, in some cases, municipalities will offer incentives on permits and licenses. Another incentive we offer companies that come here consists of a scholarship that we grant for new people they hire. The government pays up to two minimum wages for up to three months per company. This is an ongoing program, and even existing companies that are adding more production lines can apply for this scholarship. These things are intangible but have a long-term impact. Incentives like land or tax reduction may have some impact at the beginning but tend to fade after a while.
Q: What is the outlook for Aguascalientes’ automotive industry development for 2014?
A: We are currently seeing very strong growth in the automotive industry. However, we still do not know exactly how much the Nissan plant will produce once it is at full capacity. Some of Nissan’s suppliers have also not yet started production here, and they are still importing parts while they finish their construction. Once they begin operating and manufacturing here, we will see growth in terms of employment and economic development. We will continue to see connected growth in areas like hospitality, retail, and food. Although such links to Nissan are not visible, they are clearly present. However, we are also focusing on other sectors such as clean energy projects, and we are also expanding our natural gas connection because many industries require it, especially those that use heat for their processes. Moreover, we want Aguascalientes to become a sustainable state, and we plan on increasing our fleet of taxis using the electric Nissan Leaf.