Strategic Partnerships to Foster GrowthBy Alejandro Enríquez | Tue, 04/21/2020 - 12:41
Q: How important are alliances to Tachi-S’ business?
A: Globally, we have established relationships with other automotive companies like Toyota Boshoku (TB). This allows us to make mutual use of the footprint of those businesses and to jointly develop new technologies. In the last year, our alliance with TB was the most relevant but locally we are analyzing the possibility of creating new alliances or joint ventures to develop other components. We expect to close these deals in 2020 so we can expand our capacities.
Q: How has Tachi-S progressed in its plans to do advanced engineering and prototype-designing at TSELA?
A: In the area of prototypes there have been advances but these remain incipient. The intention is to consolidate this and we are training people to work on prototype manufacturing. We have closer ties with our sister company in the US as well. The engineering part is going to take more time as this is a matter of technology development, concepts and processes. Advanced engineering in Mexico will take three more years to ramp up properly. We still need to consolidate testing operations and advanced engineering for prototype development.
Q: What results has Tachi-S achieved in its goal to supply Mazda and Toyota as a Tier 2 supplier?
A: We were successful in that goal and are ramping up mass production for Toyota through its Tier 1 suppliers and for Mazda through its Tier 1 suppliers. The objective with Toyota was achieved as a result of our already-established global alliance with TB. The Mazda achievement was made through a deal with its seat supplier. We are now analyzing the possibility to grow both operations. For example, we can explore new opportunities to export components within Mazda.
Q: How has the reboot of Honda’s Celaya plant helped Tachi-S recover its production levels after a tough 2018?
A: We had four months where production stopped, just like many other companies. Nevertheless, we made a commitment to Honda to support them no matter what. We kept our workforce intact; we absorbed all those costs so we could assure Honda that we would be ready to restart operations when they were ready. Tachi-S maintained its commitment to its customers, despite the implications. It was a sacrifice, but it was worth it. It was a tough commitment and last year our financial recovery was very slow given that our volumes were not at the levels we expected.
Q: How will Tachi-S’ Mexico operations help the company’s OEM clients more easily meet USMCA’s rules of origin?
A: The presence in Mexico of automotive suppliers helps OEMs to increase their regional content. Rules of origin and trade conditions change over time. Before, they were the same for suppliers and for OEMs. Now, one of the new rules affecting OEMs particularly is labor costs. An unavoidable reality is that some products make no financial or operational sense for OEMs to manufacture in the US, so the logical option is to manufacture them in Mexico. In this sense, Mexico is the best solution for auto parts.
Q: How has lightweight impacted the vehicle seat sector?
A: It has influenced the entire industry by creating the need to find alternatives for materials and processes. Regarding seats, weight reduction is related to their structure. Our alliance with TB is part of Tachi-S’ strategy to find lightweight alternatives for seats. Tachi-S has been a little behind this trend but our alliance with TB will help us catch up and allow us to compete against other companies. Weight reduction also means a necessary alignment to other market necessities. In fact, weight is a consequence of focusing on other necessities.
Q: What role does Tachi-S want to play in the electrification revolution?
A: First, I want to point out that EVs are only one of many options, although they are the most visible and developed one. There will be other energy-saving alternatives and we are going to see different technologies hitting the streets. Nonetheless, we are analyzing strategies to make our seats part of these new connected vehicles. We are exploring how the seat can contribute to improving user experience by helping the user to feel more connected. We are also looking at how to improve the vehicle’s atmosphere, starting with the integration of more features into the seat.
The other major trend is autonomous vehicles, as well as a shared economy. This will definitely set a breaking point for seats, which are currently designed for users who do the driving. These new vehicles will require seats that are designed for users who are resting or doing other things. Autonomy will force a seat redesign. Tachi-S is focusing on R&D to be ready for the autonomous trend.
Q: How important are Mexican companies within Tachi-S’s supplier base?
A: They are very important and our national content is growing. There are limitations for Mexican companies regarding technology and raw materials that cannot be found locally, however. In our experience, many local suppliers are not ready for that level of operation. We have given opportunities to some stamping suppliers, for example, but the amount of business usually is beyond their capabilities. They need to jump from being a small company to a medium-sized company at least. For them to grow, they need to be prepared. They know how to stamp or do a plastic injection, but they do not know how to manage an operation that requires 200 employees while maintaining quality. Government support in these cases is vital.
Q: What is Tachi-S’ strategy to collaborate with both OEMs and other suppliers to develop the capacities of Mexican companies?
A: We need to acknowledge this has been a key omission on Tachi-S’ part locally. We have developed some suppliers very successfully. We accompanied them from the very early stages and they have grown alongside Tachi-S. However, there have also been unsuccessful experiences because we have not designed a system to follow up with these suppliers. Those in which we see potential, we give them business and basic orientation and that is it. We are working on a follow-up strategy to rectify this situation.
Q: What opportunities will new OEM operations such as BMW or Toyota bring for Tachi-S?
A: In reality, as a seat supplier and a tooling company, the opportunity to collaborate with these new OEMs is complicated. They usually arrive with their assigned suppliers. In the midterm, a door will open to become a Tier 2 supplier for these companies as we did with Mazda and Toyota. Maybe in the long term, we could be talking about Tier 1. Regardless, as a Tier 2 company, there are many opportunities as well and in fact, we are already in discussions with some of these companies.
Q: What are Tachi-S’ most important growth projections and expansion plans for 2020?
A: In 2019 we opened a new trim cover plant where we are about to launch mass production. We are also reaching full capacity for our laminate processes. In 2019, our goals were to start operations as a Tier 2 company and implement new processes. For 2020, we are visualizing new operations as a Tier 2 with new OEMs, mostly for EVs. Some of this new business is already in the advanced stage. From Mexico, we are either going to supply components to affiliated companies in the US that would sell seats to those companies or sell directly from Mexico to those companies.
Tachi-S México is based in Aguascalientes. Its production is focused on seats for Nissan, Honda and Kasai, as well as other components for the industry, including trims, frames, foaming and bending of tubes and wires