Alberto Sada
Vice President of Business Development
View from the Top

Biggest Aluminum Component Supplier Expands Worldwide

Mon, 09/01/2014 - 09:56

Q: What has anchored Nemak’s journey to becoming a leading supplier of aluminum engine heads and blocks to a diversity of OEMs?

A: Having started in 1979 as a subsidiary of Grupo Alfa accompanied by an investment from Ford, Nemak is today the world’s largest independent maker of high complexity aluminum components with revenue of US$4.4 billion in 2013. This success is largely due to Nemak having been able to capture a great part of the aluminum penetration in engine heads and blocks since the 1990s. The company has since built a strong relationship with the most important OEMs worldwide, including Ford, GM, Fiat Chrysler, Volkswagen, Renault Nissan, Daimler and BMW. This dominance in our areas of expertise and our tightly knit relations with major clients has allowed Nemak to grow above 20% per year on a compounded basis for the past 20 years due to both organic growth and acquisitions. Nemak has made selective acquisitions in the last years that have helped the company capture new customers and enter new business segments. The company has also leveraged its success on its technological leadership and on its 35 state-of-the-art facilities across 15 countries. Moreover, Nemak can rely on its Product Development Centers, all of which are strategically located to best serve its customers. Through this network, we have the capability to launch over 150 products per year.

Q: Although Nemak is a Mexican success story, how important is the country’s automotive industry for you now, given your 34 manufacturing plants in 14 countries?

A: Nemak supplies components to the North American market from all its plants in the region, including our facilities in Mexico. Our established history with our original country sees Nemak directly benefit from automotive industry expansions, both in Mexico and the rest of the region. In 2014, we are making a US$370 million investment to anchor our expansion in markets like China, Germany, Russia and India. US$80 million will go toward an expansion of our factory in Chongqing, China to produce heads, blocks and transmission parts for Ford, Volkswagen and Audi. US$61 million will also be invested in Germany for the installation of a new production line, which will make blocks and heads for Audi and Porsche.

Furthermore, given the expected automotive boom in Russia before 2020, Nemak is dedicating US$60 million to building a plant that will manufacture aluminum engine components for the Volkswagen brand.

Q: Which focus is Nemak currently giving its R&D efforts, particularly to enable further weight reduction in aluminum components and blocks?

A: Nemak invests close to 2% of its revenues on product development and R&D, and has a dedicated team of over 400 people working on product development and R&D. These investments are focused on producing the best products that support our customer’s initiatives to improve engine efficiencies and reduce fuel consumption. Nemak works hand-in-hand with its customers to improve its product design and specifications. Our more than 70 patents provide us with technology to deliver new lightweight solutions to our customers, such as aluminum diesel blocks and high complexity structural components. We will continue to offer products and solutions to the OEMs to help them improve fuel efficiency as automakers look to reduce vehicle weight to comply with regulations. On top of that, we also collaborate with our clients on using state-of-the-art technology to mitigate our environmental impact. 90% of all the aluminum now used by Nemak is obtained from recycling sources.

Q: What measures have you been implementing to develop your human resources to fuel growth in Mexico and what common challenges do you encounter?

A: Throughout Nemak’s history, our focus on talent development has been key to its success. We support the development of our people through robust training and specialization programs so our employees can not only reach their full potential but also put it in practice in the workplace. Another example is the partnership we have established with technological universities to co-design programs that generate highly prepared technicians in areas like industrial maintenance and metallurgy. This had the advantage of significantly shortening the learning curve these technicians must undergo when they enter the workforce, but also makes them more familiar with Nemak’s programs.