NSK: Supporting Local SuppliersBy Alejandro Enríquez | Wed, 12/09/2020 - 06:06
Q: How has NSK impacted the development of the automotive industry in the Bajio area?
A: Our journey began in 2012 when we were selecting the location to set up our first bearings factory. Guanajuato’s incentives and good infrastructure allowed us to settle here. The IECA training center and borderless education program were among the main elements behind our decision. One of our commitments was to hire people from Guanajuato or who had studied in Guanajuato.
Our plant started operations in 2014. Due to our success, we started our joint venture with BorgWarner in 2017 with our NSK-Warner plant focused on clutches for Honda. In 2018, we moved our distribution center in Tlalnepantla to Silao, Guanajuato.
Most recently, our headquarters approved a new project to manufacture the spheres that go inside the bearings. Construction was originally scheduled for 2020 but due to the pandemic, we expect to start the new plant in 2021. Between our three current facilities and a fourth coming next year, we are talking about a combined US$1 billion investment. Our plants were launched with Industry 4.0, but we still have approximately 700 collaborators. We expect to have a second bearings plant in 2023 and a third in 2025.
Q: How has the pandemic affected NSK’s operations?
A: Interestingly enough, the pandemic has helped us. We have tried to work with Toyota since 2012 and today we have several projects to be concluded in 2021. The pandemic allowed us to think about our market niche. Traditionally, bearings products come from China and OEMs are looking to transfer those products to Mexico. Other OEMs such as Honda and Tesla have also requested components from us. At the global level, NSK is the largest bearings supplier for the automotive industry and we are now exploring the motorcycle segment as well.
We reached our target of producing 100,000 bearings a month in mid-2019. We were exceeding the target in 2020, but due to the pandemic, we reduced our capacity by 50 percent in 2Q20. By the end of the year, we will regain our usual production level.
Besides, our priority was not to fire anyone. Everything is about the people, no matter how complex your systems are. Since we have automated our operations to a great extent, there was no need to fire anyone. We are also focusing on local supplier development and logistics optimization. We have been really successful in this regard; we have even invited Korean and Japanese companies to come to Mexico. We are working with two steel suppliers to improve our margins by 10-15 percent.
Q: How has NSK supported the development of local suppliers?
A: NSK in Mexico has developed a great number of local suppliers. We have an agreement with CANACINTRA regarding industrial tourism for the automotive industry, including the specifics of what companies need to become an automotive supplier. Where we struggle the most is in finding forging suppliers in Mexico or the US. We struggle because NSK’s mission is for bearings to last a lifetime. Consequently, the alloys we require are special and we currently import them directly from Japan, with all the tariffs that USMCA now demands.
We are on really good terms with Audi, BMW, Mercedes, Mazda, Honda, Toyota, and Tesla and we work with all of them and our suppliers to come up with the best products. Validation for a prototype for Audi, for instance, includes sending components to our laboratories and to Audi’s laboratories, which can take up to six months at a cost between US$100,000 and US$120,000. We are scheduling those tests for 2020 and 2021, while already working with our suppliers. In this process, we split the costs of the development stage.
Q: How is USMCA influencing your strategies?
A: The new trade deal has benefited us greatly. Considering the tensions between the US and China, the latter is now coming to North America but installing its manufacturing plants in Mexico. The Chinese-Mexican Chamber of Commerce has been very active in this regard. The downside of USMCA comes with the tariffs set to special steels, but due to our productivity and efficiency levels, we are surpassing that obstacle.
We are also creating strategic partnerships with our competitors to purchase special steels from them while we supply them with other components. The taboo in which our competitor was our enemy has shifted to creating win-win relationships. The scenario remains positive amid USMCA.
Q: When do you expect the automotive industry to recover?
A: In the worst-case scenario, I see the industry recovering to pre-pandemic levels by 2022. We have received requests from customers that cut production by half, but others have augmented their production by between 15 and 30 percent. As a result, by the end of 2020, we will be at the levels we forecasted. Our strategy is not waiting for the industry to recover, but diversifying our business, particularly in the motorcycle segment. In Brazil, for instance, 80 percent of NSK’s portfolio is related to motorcycles.
Between 30 and 33 percent of our operation focuses on the automotive bearings segment. We are focusing on the aftermarket by developing distributors and our goal for 2021 is to grow 15 percent in this segment. We are also exploring other sectors such as mining. Although it is low-volume, a bearing can cost much more than in the automotive sector.
Q: What is the role of human capital in NSK’s results?
A: After achieving good results, we started to focus on improving quality, being a socially responsible company, and gaining Best Place to Work and other certificates. We have created international training programs in which an operator can travel for three months to Japan or London to learn our processes there. Besides, we are working with CONALEP on new courses to develop the abilities the industry needs, including soft skills such as resilience, emotional intelligence, and innovation.
NSK is a Japanese supplier of bearings for vehicles and industrial machinery. In Mexico, it has a plant and a distribution center in Silao, as well as a joint facility with BorgWarner