Diversify to Brave the DownturnBy Alejandro Enríquez | Tue, 03/31/2020 - 17:43
There may be a few optimists who trust the sector will soon recover from its strength, but others are choosing to diversify within the same market to brave the challenging times ahead. “Factors such as the delay in the ratification of USMCA impacted the industry,” says President of the Automotive Cluster of the Center Region Puebla-Tlaxcala (CLAUZ) and Director General of Industrias Norm Ulrich Thoma.
In December 2019, the auto parts chapter of the National Chamber of the Transformation Industry (CANACINTRA) reported a drop of 30 percent in the jobs generated by companies in the automotive sector in the year and warned that in 2020, layoffs would continue. Similarly, consulting firm Deloitte expects 2020 to end with figures similar to those of 2019 in terms of manufacturing volumes in Mexico. It does not expect the country to reach the 5-million-unit mark yet.
Thoma highlights the lack of a robust local supply chain as another challenge that is hindering the industry’s development. “In Mexico, there is a huge need for Tier 2 companies. The lack of those companies hampers Mexico’s ability to support Tier 1 companies,” he says. Uneven support causes a chain reaction that impacts both clients and suppliers, according to Thoma.
However, companies cannot sit idly by. In the face of uncertainty and hardship, Thoma says the key is to diversify. “We have worked on making auto parts for Volkswagen but we have also shifted our focus to spare parts. We need to have the flexibility to take advantage of investments in different areas.” Thoma also underlines the importance of being an established company, with the necessary certifications, healthy finances and skilled human capital to brave whatever the market throws at it.
Although he acknowledges the need to also embrace Industry 4.0, Thoma says that due to international circumstances, the Mexican company is pausing its effort in this regard. "Industry 4.0 is a positive trend but we are hitting the brakes on it in favor of traditional manufacturing."
The company is not closed to change, however. Although there may be uncertainty now, Industrias Norm remains flexible regarding what the future may bring. "The investments of companies change depending on the government in power, but if we can get ahead of certain events, we have the ability to move wherever the water takes us," Ulrich said.