Casting Giant Bolstering Mexico's Aluminum SupplyTue, 09/15/2015 - 13:38
Q: What new opportunities have you identified in the Mexican automotive industry, and how have they impacted your ambitions and growth strategies in Latin America?
A: Mexico is becoming a very attractive market for OEMs to set up their manufacturing facilities, so for companies like us, which represent the lead suppliers on aluminum castings for transmission housings, we see the opportunities that those OEMs are bringing with them. Our customers are taking advantage of the technology we provide, coupled with the experience that we have. We have been in the die castings business for over 60 years, so we are able to provide the right expertise, knowledge, and technology, as well as the state-of-the-art products that we produce. Ryobi also brings jobs to the local areas, we offer competitive prices and services, and we provide just- in-time delivery, which helps our OEM partners to reduce their costs and to be more competitive in their business.
Q: How did Ryobi form relationships with its clients in Mexico since the company entered the country?
A: The relationships began because OEMs needed a reliable supplier of die casting aluminum transmissions. Ryobi’s name is associated with manufacturing excellence and the company is known around the world as a leader in die casting. When our customers find out that there is a Ryobi plant in a nearby location, they will consider us as a potential supplier. That is a testament to the name, the quality, and the service we provide. After they first approach us, we start working with them to develop parts and design tools that will be required for those parts. During 2014, Ryobi had an outstanding year in terms of quality and of the relationship with our customers. The qualifications from our customers, as well as the performance of our facility, were excellent. We have just finished an expansion to generate more business in this facility, and the forecast for the next five years looks pretty aggressive in terms of growth. This facility will keep growing at the same pace that the automotive industry is growing in the area.
Q: As demand for lighter vehicles increases, how is Ryobi helping to create lighter parts to meet growing demand?
A: There is one called HV2®, which stands for high vacuum, high speed. This technology allows Ryobi to offer to the customer very high-resistance and high-strength parts to replace certain steel parts that were used in the past. Previously, there were some structural frames in the vehicles that needed to be made out of stamped steel, or welded steel, like shockers, engine supports, and frame supports. These are now being replaced with HV2® parts which are lighter, allow welding, and can replace three or four components with one. One large OEM manufacturer is already using this technology in the US. The technology represents a perfect way for OEMs to both reduce costs and produce lighter vehicles in one fell swoop.
Q: Ryobi uses aluminum as one of its primary materials for manufacture, so since Ryobi has arrived in Mexico, has the company increased its supplier base for the metal?
A: The die casting business is not new in Mexico; there are companies that have been operating here for a long time and it has grown over the past few years. 20 years ago there were very few suppliers with very limited capacity in terms of supplying aluminum ingots to die casters. Not only that, but the quality was also unreliable; we had to do a lot of our own in-house blending to ensure that the alloys met the required specifications. Now we are helping Mexican aluminum suppliers to grow alongside us. Ryobi has a partnership with a company in Mexico that started as an aluminum supplier before setting up their facility next door to our plant. This vendor can now send us molten metal directly to our machines thanks to the proximity of their facility, thus reducing smelting costs in our manufacturing process. We are also developing another supplier in Queretaro, which is going to provide us with even more molten metal. Tests of this metal have so far been successful, so we expect to be working with it more in the near future. Furthermore, our demand is sufficient enough to give business to both of these companies. This whole process of developing aluminum suppliers is now being mirrored in the US. Our supplier here has already built its facility in the US and will start providing molten metal to our nearby plant in that country. Ryobi in Mexico is proud to say that we are helping to grow these companies.
Q: How much of your aluminum is imported at this stage, and how would you like to see that change in the future?
A: At this stage we handle two different types of alloys: aluminum A380 and aluminum A383. Around 90% of our A380 is being imported from the US because it is much cheaper to buy there. As more aluminum die casting companies entered Mexico, the demand for A380 increased, so the availability was reduced and the price went up. It has been difficult to find enough support in Mexico to provide for the volume that we work with, so we were acquiring that metal from the US. Our A383, on the other hand, is 100% sourced from Mexico and we have found good quality with the suppliers that we are developing. However, they have not been able to fulfill the demand of aluminum and there are now foreign companies looking at Mexico as a potential investment location. One of the largest aluminum companies in the US is setting up a facility in Aguascalientes. The presence of the die casters coming into Mexico to serve the automotive industry is definitely helping the aluminum market to grow. We are helping to develop a company in Leon which will enable us to obtain good quality metals, locally, at a very reasonable price. So far, this company is the second largest supplier of A383 that we have, and we started this project from scratch in 2014.
Q: While die casting companies are helping to attract more aluminum suppliers into Mexico, how is the government either helping or hindering that progress?
A: Guanajuato has seen a boom in companies coming to the state to establish their businesses over the last few years. The state authorities have been helping us with different programs that offer fiscal or tax benefits, as well as support in terms of logistics, coaching, legal advice, and relationships with personnel. We are working with at least three different programs with the state government. For example, we have a scholarship program with the state university and with CONALEP, through which they supply 10-15 people to work at the plant. When the scholarship ends, we then provide them with a job in very specific and unique areas of work. Government support also facilitates our import and export processes. We bring in equipment from countries like Japan, China, the US, and we supply parts to Europe, South America, and the US, and the help from the government gives us the correct tools that we need to be legally sound when performing international business transactions.
Q: What goals and objectives does Ryobi have for 2015?
A: We want to be the number one supplier for automotive die casting. We will achieve this by expanding our facility, bringing in more equipment to increase our capacity, and by providing excellent quality. Our targets for 2015 are extremely high in terms of PPMs and internal returns, so we have implemented a strategic deployment to achieve those targets. This strategic deployment focuses on profit, customer satisfaction, community, and legal compliance.