CLAUGTO: Addressing the Impact of the PandemicBy Alejandro Enríquez | Thu, 03/11/2021 - 05:00
Q: What have been the results of the world-class events organized by CLAUGTO going online?
A: Both Hannover Messe and Foro de Proveeduría Automotriz (Automotive Suppliers Forum) represent the automotive industry in the Bajio area. The latter served to capitalize on business opportunities resulting from USMCA, while boosting the expansion of automotive Tier 1s and OEMs following Toyota’s arrival at the end of 2019. This also supported activities related to supplier development, jobs, exports and economic growth. In addition to the traditional forum, as a cluster we brought high-level speakers to help companies to understand the reality we are living in. The topics varied from mental health to supply chain adaptability and remote work. Hannover Messe helps us to understand tech trends and Industry 4.0 while promoting a culture focused on manufacturing technologies.
Having said that, the most important result we had in 2020 was the close communication channels we built for the industry in the state. Close relationships are highly valued by our members. 2020 was a year in which a great deal of work needed to be done. Automotive clusters across the country became strategic partners for the government and academia to strengthen the sector and to drive economic recovery.
Q: What is the sector’s next step toward economic recovery?
A: Before going into the next steps, we first need to evaluate the impact of the pandemic. Up to November, Guanajuato faced job losses of around 50,000 while the country reported close to a million lost jobs. However, the automotive sector in Guanajuato, only lost 1,000 jobs. Companies did not lay off people. On the contrary, some of them are even reporting better financial results than in the previous years. Guanajuato’s strategic location has enabled a faster economic recovery for auto parts companies. There are other sectors that have not enjoyed a similar recovery and will not likely see it until after 2021.
Thanks to USMCA, automotive companies have also experienced greater levels of demand from their customers since August. Comparing 2020 to 2019 in cold numbers, the difference in demand is minimal in Guanajuato for vehicle exports and production, mainly due to Toyota’s operations ramping up.
Q: What role did the local government play in helping speed up the industry’s recovery?
A: Guanajuato’s state government has been a fundamental ally in addressing the sector and the cluster’s needs, especially regarding supplier development and promoting events that help businesses to thrive. SEDESU Head Mauricio Usabiaga has remained close to the sector and has been an active participant in the state’s economic recovery. The governor is also part of the cluster’s board.
Q: How is CLAUGTO fostering supplier development in the state?
A: When addressing the challenges and opportunities introduced by USMCA, the newest arrivals to the state are those in the most need of local suppliers, mainly Asian and German companies. Fortunately, the strong supplier network already in place in the country has helped to increase RVC levels. Even though USMCA requires up to 75 percent RVC, it is important to note that there will still be imports from specialized countries. The likelihood of sourcing all components from North America is pretty narrow.
Having said that, companies have remained agile. USMCA’s biggest challenge is not related to suppliers but rather the standardization process regarding labor affairs. This implies union freedom, retirement systems, NOM-035 and the new labor justice system, among other elements that go beyond regular reforms. The new standards introduce the challenge of changing the labor culture in Mexico, which is not easily done from one day to another. USMCA provides a three-year grace period. Government, companies and academia have a great challenge ahead to be proactive in promoting these changes.
Q: How are companies and CLAUGTO working to meet new labor standards?
A: In Guanajuato, we have a diverse profile of companies and investors. Guanajuato’s top investor is Japan with more than 130 companies in the state, followed by Germany with around 60 companies and the US with around 30 companies. The rest are Asian and European companies. Each company is adapting to these new standards, with the goal of incorporating more Mexican workers. As foreign companies, often they need to understand the cultural challenges this reform presents and its implication for the Mexican workforce. In partnership with the state government and Universidad La Salle, we have created seminars to elaborate a diagnosis and to draft action plans toward new labor affairs.
Q: How do you evaluate OEM efforts to reduce their supply chain’s carbon footprint?
A: European countries have embraced carbon footprint reduction strategies by 2030 or 2050. The US has not embraced climate change goals and consequently the sector has followed our main customer. As for EVs, they are expected to represent only 30 percent of the total vehicles sold in the US. Thus, ICE vehicles will not change overnight. That being said, suppliers have adapted accordingly to the electrification of vehicles.
Mexico offers an excellent and flexible platform to remain a US supplier. To assess correctly the influence of environmental goals throughout the supply chain, we should wait to see how the next US administration defines its priorities on the subject. We will see what role EVs play in these goals because even though they pollute less once they are delivered to the final customers, the environmental effects of battery production should also be taken into account. We should not fear it but see it as an opportunity for many to expand their business.
Q: How are companies in Guanajuato embracing smart manufacturing practices?
A: We have companies in the state with smart factories. Bosch is an example. Many Tier 1 suppliers have to some extent implemented smart manufacturing practices in different lines. As a country, there are still a variety of barriers for these practices to be fully embraced, from cultural barriers to technological capabilities. The pandemic has taught us to be reflective in the role of the industry in the development of the region and the country. It is not about displacing labor. Industry 4.0 and manual labor will coexist to create a better society. Guanajuato has been a leader in this regard but reaching the conceptual goal of Industry 4.0 remains a challenge.
The Guanajuato Automotive Cluster (CLAUGTO) was officially founded in 2012 as a civil association made up of six committees focused on preserving and promoting the development of the automotive industry in the state