Alejandro Veraza
Managing Country Director
TI Fluid Systems
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Location, Quality, Innovation: Recipe for Competitiveness

By Alejandro Salas | Thu, 04/30/2020 - 21:13

“Location, location, location” is more than just a catchphrase used by realtors to sell spaces in industrial parks. While remaining close to OEMs is important to keep logistics costs at bay, when this is coupled with quality and product innovation, it is easier to compete as a world-class Tier 1. “A good plant location offers versatility, which is key to remaining competitive and to cater to client demands,” says Alejandro Veraza, Managing Country Director for TI Fluid Systems.

UK-US supplier of fuel, brake and powertrain components, TI Fluid Systems has a two-pronged localization strategy. The company is present in the most important automotive hubs worldwide, which according to Veraza allows it to take advantage of the new advances in each market. “Our operations are more or less equally divided between North America, Asia and Europe, so new advances in each market benefit the company at a global level,” he says. At the same time, the location of TI Fluid Systems’ 10 Mexico plants plays a key role in the company’s strategy to differentiate from its competitors. “Our manufacturing facilities produce components for fluid-carrying systems in Ciudad Reynosa, right next to the US border, as well as in automotive hubs Monterrey, Puebla, San Luis Potosi and Tultitlan,” he says.

TI Fluid Systems’ plants in Mexico support local and international demand for fluid-carrying systems and components. The company ships part of its production for exports and has started supplying BMW’s and Daimler’s new facilities in San Luis Potosi and Aguascalientes, respectively. Eventually, it plans to enter Toyota’s supply chain in Mexico, although that goal, would be handled by TI Fluid Systems’ plants in the US.

According to Veraza, TI Fluid Systems México is on track to achieve 5 percent annual growth thanks to new production projects at the Tultitlan and San Luis Potosi plants. This, however, will depend directly on OEM component demand. “We expect that supporting the newly arrived OEMs will help us reach our growth expectations a few months after their Mexico operations kick off,” says Veraza.

While remaining optimistic, Veraza also acknowledges the challenges in the US and Mexican markets that could affect the company’s growth. “Automotive plants in the US, including some of GM’s assembly operations, are closing while other clients are cutting back their production volumes. The launch of new projects in that market have also been delayed,” he says. These results mirror those in Mexico, where some carmakers even reduced their vehicle output in 1H19. “This has had a direct impact on TI Automotive and the rest of the supply chain and will also impact our performance in 2H19,” says Veraza. Nevertheless, TI Automotive has found a rich opportunity in the exports market. According to Veraza, TI Fluid Systems’ component exports have enjoyed significant increases since 2016. “As long as we can continue to produce and export components, we will balance our dependence on the Mexican market,” he says.

The company is considering expanding its production capacity in Mexico in 2020 but these plans will depend on demand in 2H19 and later on. Moreover, to increase exports, the company will also have to consider changes in rules of origin established in USMCA and make strategic adjustments accordingly. “While we need to adapt to Mexican regulations from an economic and labor perspective, we also need to make changes to our approach regarding imports and exports,” says Veraza. Changes in rules of origin mean some raw materials used by TI Automotive will pay more taxes while others will be in a better trade position. “We will focus on looking for new suppliers to source materials that will pay more taxes under USMCA regulations,” he says.

TI Automotive has also focused on quality and technology innovation to remain a competitive player in the Mexican and North American markets. According to Veraza, some automotive companies based in the region have issued recalls due to quality issues with sub-assemblies offered by some Mexican suppliers. “This situation puts TI Automotive in an advantageous position to compete with these suppliers,” he says. The company has also developed more advanced materials and components for its gas- and fluid-carrying systems and plans to expand its product portfolio in 2019. “One of our greatest successes is the development of thermal products for vehicle HVAC systems,” says Veraza.

The company is also preparing for the electrification revolution without losing sight of its combustion-engine expertise. “TI Fluid Systems understand EVs are the future but these vehicles will not account for more than 15 percent of all cars assembled globally by 2024,” says Veraza. The company expects these vehicles to gain momentum in developed countries, while the rest of the world and Eastern Europe, Latin America and Asia, in particular, continue focusing on combustion-engine models and maybe hybrids. Either way, Veraza says TI Automotive is ready to supply both markets. “Both electrified and combustion-engine vehicles will need fluid-powered braking systems for the next 30 years until electromagnetic brakes replace them,” he says.

Photo by:   MBN
Alejandro Salas Alejandro Salas Senior Editorial Manager