Creating Synergy Between Mexican and Brazilian Plants

Q: Why did TUPY decide to enter the Mexican market, and what results has the company seen within the country?

A: As TUPY was originally based in Brazil, our location had distanced us from global value chains. This resulted in a need for competitiveness and efficiency, which our Mexico plants are now providing, alongside their considerable geographical advantage. In April 2012, the company acquired two factory units in Mexico, one located in Ramos Arizpe and one in Saltillo. We now have plans to open another plant this year with an estimated investment of US$10 million. This new plant will have the capacity to produce 200,000 engine blocks by April 2017. Our presence in Mexico helps our diversification strategy and makes manufacturing much more flexible, creating the further possibility of entering different markets, especially in North America, which represents more than 50% of the company’s revenue. In 2013, 83% of assembly production was sold outside the country, principally to the US. The majority of TUPY’s revenue comes from exports, and the plants in Mexico contribute to approximately one third of the sales volume of TUPY’s engine cylinder blocks and heads.

Q: How would you define the principal challenges that the company faced when entering the Mexican market?

A: Achieving the optimum process integration and best practices was difficult, even though we already had this in Brazil. We have now reached a point where we can export new best practices to Brazil from Mexico, and achieving maximum synergy is a crucial challenge that we face. Secondly, we believe we have now successfully assimilated all of our personnel into one team, in which both Mexicans and Brazilians share the same mission, vision, and values. The final challenge has been standardizing our operations, but we still see plenty of room for improvement.

Q: Have the industry’s global manufacturing changes and the investment boom affected TUPY’s supply strategy?

A: The automotive industry demands that suppliers use cutting-edge technology to produce top-quality products. Therefore, TUPY has adjusted its strategy to allocate resources to new product development. With two manufacturing plants in Mexico, TUPY has the capacity to meet different needs of various automotive manufacturers. The company’s knowledge of forged iron and complex product development is the reason we are considered a Tier 1 supplier. Moreover, in 2001 we mastered the mass production of vermicular graphite iron, internationally known as CGI (Compacted Graphite Iron). This alloy allows us to manufacture smaller, finer blocks and heads without losing their mechanical properties, guaranteeing lighter products and leading to lower fuel consumption. Now, we are the number one supplier of CGI, the demand of which increases every year. Another recent innovation, adapted to industry changes, is TUPY Alloy. This high-resistance union was developed by our engineering team in collaboration with investigation institutes, suppliers, and a Brazilian university. It facilitates the construction of a more powerful engine with cast iron, at a lower cost than that of CGI. For blocks, this also increases resistance, reduces size and weight, and maintains the thermic connectivity of the heads.

Q: What differentiates TUPY’s blocks and heads from the competition?

A: The principal distinction is our knowledge, which allows us to manufacture the most complex products in the smelting and metallurgic industry, creating blocks and heads with fine walls and alternative alloys that are vital for meeting legal performance requirements. These parts need to meet high standards of fuel consumption and emissions, which was only possible thanks to a considerable investment in R&D that TUPY has always maintained. Furthermore, we are the only independent foundry in the industry with a full planning and pre-assembly structure. This is already in place in Brazil and in the development stage in Mexico. Our production line in both countries is capable of catering to a range of projects in terms of volume, size, and geometrical specifications.

Q: What characterizes TUPY’s R&D strategy?

A: We reinvest around 1% of our liquid revenue into R&D and product development. In 2014, we created a vice president role to focus on projects that differentiate TUPY as a high- tech producer to be able to offer alloys of the highest quality designs. Our new vice president for Technology and R&D has been contacting various Mexican universities and technological institutes to identify existing skills in the population that could be applied to our projects.