Manuel de la Torre
General Counsel and Institutional Relations Director
Kia Motors México
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View from the Top

Newcomer KIA Ramps Up

Thu, 09/01/2016 - 12:42

Q: As KIA enters the Mexican market, what are your expectations for the new manufacturing plant in Pesqueria, Nuevo Leon?

A: The plant in Pesqueria is already operating but not at full capacity, producing only 100,000 units annually, which is our first-year target. It will be completed when the pending infrastructure is provided. With the collaboration of the state government, we are certain these issues will be resolved in the near future. We will then be able to operate at full capacity, producing 300,000 units per year and hiring over 14,000 workers by 2017, of which more than 90 percent will be Mexicans working directly for us or for our suppliers.

This plant will be the core base for exports to Latin America and North America. Overall it will prepare units for export to about 80 countries. The official opening of the plant is scheduled for September 2016 and we are looking forward to contributing to Mexico’s export competitiveness and its economic development.

Q: What challenges did the company face while constructing this new facility and how did it overcome them?

A: Building the plant was not easy. Torrential rain at the beginning of 2015 and a lack of industrial infrastructure were difficulties that had to be overcome to make it a reality. Despite these issues, we persevered and have reached a point at which we can start the mass production of vehicles.

The dollar to peso exchange rate could result in higher import costs for KIA, especially in steel, which Hyundai Steel imports to produce cold-rolled steel plates for our production. KIA needs 10,000 tons of cold-rolled steel plates to produce the planned units for 2016. Ternium, a local supplier, provides our plant with these plates and could supply 30 percent of KIA’s requirements. Nevertheless, Hyundai Steel has requested an increase in the steel import quota.

Q: What was lacking in Pesquería and how has KIA collaborated with the government to develop the region?

A: The full production capacity of the plant will be compromised without the remaining infrastructure that has been the basis of a dispute with the state government. There are several infrastructure aspects and services that KIA lacks but are necessary for the plant. We need a railway for component transport and to export assembled cars, as well as northern and southern highways to increase mobility in the zone. The construction of an additional electricity line and a substation would prevent blackouts and pipelines for industrial water, waste water and potable water as well as a water treatment installation are needed. The removal of a high-pressure gas pipeline that crosses the construction site is also pending as it poses a risk of explosion.

We have reached a satisfactory agreement for both parties. KIA will now contribute to the construction of the necessary infrastructure and the state will provide the land needed to build proper railways for KIA’s exports.

Q: What are your production plans for electric and hybrid models in Mexico?

A: The Pesqueria plant makes the compact Forte model from KIA’s sedan and hatchback series. It is possible new models will be incorporated into the production line, depending on our performance and the market. KIA will also launch two hybrids in Mexico in the near future, one based on the Optima sedan and a completely redesigned Niro.

Q: What distinguishes the plant's technological layout?

A: Our plant has better technology than those in Korea because it is new and the company invested in the latest equipment. We have extensive quality-analysis equipment, including an emissions analyzer, which is unlike anything in Latin America. Even some US plants do not have one. It comes from Japan and enables us to analyze vehicle emissions to comply with standardization for different markets. We also have an environmental chamber to measure vehicles in different weather conditions, built specifically for this plant.