Mexico's Battle to Overcome Challenges of Cost Competitiveness

Q: How does your integrated production system ensure product quality?

A: We have an original assembly process that we have been mastering for over 16 years. Four years ago, we transferred the assembly, injection, and press process from Mexico City to Celaya. We were very successful in passing on the knowledge of press maintenance and machining to the new location. Compared with local suppliers, our in-house costs are competitive and our products offer an exceptional quality to cost ratio. This is partly due to the fact that our processes are well- supervised, making it very easy to identify a problem, isolate it, and deal with it. The injection and press systems are interconnected, making it simpler to fix any problems as soon as they arise.

Q: What new products would you like to introduce to the Mexican market?

A: If we have the chance, we would like to start producing bigger parts, such as sunroofs or doorframes. Clients look for suppliers that are situated near their factory in order to reduce logistics costs for large components. Aisin knows the products and manufacturing processes very well, so if our plants in China and the US can manufacture the bigger parts, so can Mexico. Even though we would have to open a new plant to produce these parts, we are eager to close a business deal, as it is an opportunity to produce them cheaply for any potential clients.

Q: With many OEMs expanding their capacity in Mexico, what effect is this having on Aisin’s business strategy?

A: Many of our related companies in the US currently ship their products to Texas, Mississippi, or California, which creates enough considerable competition for the time being. However, in the near future, competitors will produce products in Mexico and ship them to the south of the US at a lower cost. If our competitors begin expanding into the US market, where we already have a presence, we would have to diversify our product portfolio to hold on to our clients in that country.

Q: What are the most important products Aisin produces in North America?

A: In North America, we are making body parts for many companies, such as sunroofs, door frames, and moldings. We also make outside handles, and seat adjusters, as well as engine components such as water pumps, oil pumps, transmission cases, and transmission clutch covers. In Mexico, we are only making door components. The fact that our competitors are making body and engine parts in Mexico and shipping them to the US is a big problem. We would like to start producing bigger products in Mexico in order to increase our chances of selling to Mexican customers.

Q: Which steps are you taking to increase your local sourcing to be more cost competitive?

A: Many of our eight plants globally do pressing, which allows us to compare a simple cost path, checking each component to see where it is cheapest. We usually find the cheapest components, not in Mexico or the US, but in Asia. We want to have 100% of our suppliers in Mexico for our Mexican plants. Unfortunately, the cost competitiveness of each component does not make NAFTA or Mexico the cheapest sourcing option. We use Asian parts for benchmarking, and we try to find suppliers that can make them for the same price in Mexico, but so far we are struggling with this. If we set the benchmark for local suppliers with the prices of Asian products, it might be an incentive for them to innovate. However, it is complicated, because even though human capital in Mexico is cheap, the costs of components remain expensive. This makes it hard for suppliers to be cost-competitive.

Q: What will be the main focus of Aisin over the course of 2015?

A: We need to protect our actual business as many competitors are coming to the region and are presenting competitive prices to the customers. To take care of our customers, we need to reduce our costs, which is our main goal for 2015. A point in our favor is that we have been manufacturing the same parts in Mexico for 16 years, perfecting the process and doing it in the most economical way possible. Many new Korean and Japanese companies are entering the market, but even though they may offer similar assembling and injection processes, it will take some time to match us.