Brake Pads Leader Eyes Up Tougher Competition

Q: What are the main drivers of your business with OEMs in Mexico?

A: The main drivers of our company are engine components as well as chassis and friction sectors. Federal-Mogul is a leader in friction so there is a very high possibility that any new vehicles will contain our brake pads. Beyond this, our aftermarket sector and original equipment (OE) sector are operating in two completely different environments. The OE market involves the large volume shipping of a few products. This can easily amount to a one-piece flow of 1,000 or 10,000 units per day. In the case of the aftermarket, we find the complete opposite: many orders from many separate customers who all want a different product in relatively small volumes. This creates a very complex business.

Q: OEM investment is shifting from northern to central states. Are you feeling pushed to move to stay closer to them?

A: We are already relatively close to the clusters that have been created in Guanajuato, which are no more than a three-hour drive from our facility in the State of Mexico. We are already shipping products to GM’s plant in Silao from one of our plants in Puebla, which is even further. We feel comfortable in our relative proximity to potential projects in the central region and we are prepared for them. Nevertheless, Federal-Mogul is preparing itself in different geographic areas that would more easily allow us to become a supplier to OEMs developing new plants.

Q: What recent improvements in your manufacturing processes have allowed you to stay ahead of the competition?

A: Globalization has changed the footprint of every company worldwide. Most corporations have become very aggressive in defining the best locations to maximize results, known as best cost countries. The idea is to begin bringing multiple projects to such countries. Mexico is one of the best countries in which to make a variety of moves. In Mexico, Federal-Mogul has achieved a lot of projects, including groundbreaking technology. This success is due to a stable labor force and a solid economic environment, which have helped us to achieve consistent results at our different facilities in Mexico. 

Q: How does the cooperation between Federal-Mogul and the OEMs work to create market trends rather than respond to them?

A: Federal-Mogul has an organizational system in place to work together with OEMs. Take the example of GM starting an engine facility in Silao, Guanajuato. Federal-Mogul’s office in Detroit defined all the details such as the cost, design, and other aspects needed to obtain the project. That work stemmed from the assumption that GM’s next project would be installed near to one of Federal-Mogul’s current locations. We have a communication team in our corporate offices, coupled with others at each of the manufacturing plants, who communicate on an internal business level. This allows us to take full advantage of the development of technologies, products, and materials that are primarily developed for the OE market, but can also be used in the aftermarket.

Q: What is the best way in which Mexico can tap local expertise to become a global engineering hub?

A: Approaches from different corporations have been powering this change. For example, Chrysler has created an engineering center in Mexico. Around 500 engineers do a lot of design work locally, which has reduced Chrysler’s overall cost of design due to lower labor costs here. We are seeing more companies following suit, and this trend will only increase in the near future. We have started developing an engineering center for chassis. This evolution remains a sensitive area as companies might fear losing control of their design and technology processes but it marks an important step for the growth of Mexico as an engineering location.

Q: How are you dealing with the influx of competitors arriving in Mexico?

A: The automotive industry is the most dynamic and open industry in Mexico. Every year brings more competition among OEMs, but this competition exists on a much larger scale among suppliers. We are world leaders in the brake pads sector, but there are now 85 different brands competing in the Mexican brake pads market. Not too long ago, there were just five. This demonstrates the ease of entering the Mexican automotive market. That makes this industry challenging for any supplier as it is the new land of opportunity.