Jesús Longares
Director of Industry and Energy
IDOM Mexico
/
Insight

Carrying OEM Growth Plans to Safe Harbor

Sat, 09/01/2018 - 13:10

As a greater number of large multinationals bring new projects to the country, they must be aware that the established infrastructure models they use at home might not work in Mexico. This can be an unexpected challenge for automakers who often underestimate their requirements, according to Jesús Longares, Director of Industry and Energy at IDOM Mexico, a Spain-based consulting, architecture and engineering company.
“When companies in the auto parts sector build a new plant in Mexico,” he says, “they try to replicate the same infrastructure model they use for their European or Asian facilities.” The standard process is a design-bid-build scheme in which the developer tenders all construction activities — an approach companies might use when developing a completely new project. Instead, suppliers in Mexico use a basic and already-tested plant model for their new project and bring in a general contractor supported by a supervising team that  often is not adequate in number or suited to the task.
“Auto parts companies work according to OEM orders,” says Longares. “This makes their delivery times short, so they must reduce plant construction times as much as possible.” However, according to Longares, European companies usually entrust supervising activities to a small team, something that is simply not possible in Mexico. “One of our main challenges is convincing companies, especially those from Europe, that the supervising team must be more robust than the one they expect.” IDOM has extensive experience in design and project management across various sectors. In Mexico, the company was initially focused on energy projects including the El Porvenir wind farm and the Tamazunchale combined cycle power plant, the largest one in Latin America at the time producing 1.2 GW. As projects became smaller and more localized after the Energy Reform, the company turned to the Mexican manufacturing sector. “Hyundai is considering a new plant in Mexico, Ford wants to bring its electric-vehicle production to the country and Tesla has inquired about land availability in Puebla” he says, showcasing IDOM’s positive expectations for the sector. “Automotive is a priority for IDOM,” says Longares. “In the last four years, our manufacturing division has grown 3.5 times in terms of both employees and invoicing and this industry has played a key role.”
IDOM has previous worldwide experience in the automotive sector, working on recent projects like the new Mercedes-Benz Vans plant in Charleston, South Carolina. Longares says the company has mainly focused on OEMs such as Daimler, GM, Renault, PSA and Nissan, but expects to collaborate with an auto part company shortly. “We should grow 40 percent in the automotive sector in 2018 in terms of both employees and invoicing,” he says. “My main objective for this year is to start working on small contracts with large OEMs while continuing to work with auto parts companies.”
Together with its design and project management operations, IDOM’s multidisciplinary consulting team enables the company to respond to clients’ needs while helping them make the transition into the Mexican market. The company advises client companies using feasibility studies, competitiveness proposals, logistics studies and layout optimizations. While this can help new companies establish their operations swiftly, Longares advises new investors to keep an open and unprejudiced mind about what they might find in the country. “Many think that even though it is a capable country, Mexico still lacks the necessary elements for a project to succeed, such as competent engineering,” he says. At the same time, Longares has found some potential clients are reluctant to invest in the required resources for consulting and engineering studies prior to the construction of a new plant. “Companies might choose a cheaper analysis but in the end that will result in bad engineering and further costs down the line.”
Longares maintains a positive outlook for 2018 while being aware of the impact that political uncertainty stemming from the 2018 federal elections and the NAFTA renegotiation can have. “IDOM has experienced the paralysis that uncertainty generates, as some projects that had already started have been put on hold,” he says. “Elections will worsen this effect because infrastructure projects stop around the middle of the year and start picking up after August or September. Several companies will take the foot off the throttle until the political storm passes.”