Substitution of Imports Improve Mexico's Manufacturing Position

Q: What is GKN Driveline’s strategy to participate in OEM supply chains and stand out from competing driveline systems suppliers?

A: Our main differentiator is technology. Right now, we are the preferred supplier of traction systems. This allows us to be in high-quality cars with innovative technology systems that improve fuel performance, driving experience and safety. In Mexico, we supply Mazda, Honda, GM, Ford, Volkswagen, Audi, BMW, Nissan and Daimler.

Another key point is the ability to develop human talent and retain it. Advanced technology in this sector can only be created by talented humans. Generally speaking, the high level of competition in Mexico in our segment leads to high quality standards. Price, quality and on-time delivery are very important differentiators.

Q: What is GKN Driveline’s participation in electric-vehicle manufacturing?

A: We have had a subdivision focused on electrification systems for a few years now. Our idea is to become suppliers in the electric-vehicle sector by 2025. Mexico will have a strong manufacturing role in this sector, but this will become a reality in about three years when solutions for electric vehicles have evolved. Our relationship with the US and the number of investments coming into the country support a positive forecast.

Q: What is the best strategy for GKN Driveline to help its Mexico-based OEM clients to adapt to new rules of origin?

A: The only way to comply with the new rules is to work together with clients. I see major opportunities in the integration of local supply chains. Many materials in Mexico are imported from Asia and Europe. Working with Tier 1 suppliers and OEMs, we can increase the percentage of resources manufactured locally. This would strengthen our region and we would have a better footing on USMCA. This cannot work if proposals only come from Tier 1 suppliers, however. There needs to be cooperation with clients.

Despite tensions between the US and Mexico, the country remains a solid investment destination. Mexico has received a vote of confidence from European investors and even though the market may be suffering at the moment, we remain a competitive manufacturing hub.

Q: What are the biggest gaps in GKN Driveline’s Mexican supply chain?

A: The biggest challenge in Mexico is logistics efficiency. Our routes are very clear with well-established time frames. Shipments generally go as planned but there are areas of opportunity to make operations faster and more efficient. We have to work with the government and with logistics partners to further reduce transport times. We are not using trains, only highways. Meanwhile, transit times through ports remain high. Materials arrive in 25 days from Europe or Asia and then takes another 10 days to arrive to us.

Q: What is the best strategy for Mexican suppliers to participate in global supply chains?

A: Tier 1, 2 and 3 suppliers have to adjust their strategy to integrate their operations vertically in a different way. Right now, the government and several institutions are working to make smaller suppliers more efficient but there is still an opportunity to connect these players with large Tier 1 manufacturers. The strategy should be to broaden the role of the automotive cluster, using this body to provide a forum where suppliers can connect with potential clients.

Q: How will GKN Sinter Metals’ new plant in Guanajuato add value to GKN Driveline’s operations in Mexico?

A: With this plant, GKN Sinter Metals will be closer to its Mexican clients. This will add value to our automotive operations in Guanajuato and outside of Mexico, too. GKN Sinter Metals’ technological processes can also start integrating more quickly into GKN Driveline’s traction systems. This would be a significant technological development and lead to changes in other products in our portfolio, which could grow our penetration in the market.

Q: What are GKN Driveline’s growth projections and expansion plans for the Mexican market in 2019?

A: We have seen exponential growth for the past eight years. This has produced new challenges. Right now, our goal is to continue consolidating our operations and to resolve some issues at our plants. We have a solid investment plan that will allow us to grow in some areas and maintain our operations in others.

GKN Driveline is a leading worldwide producer of automotive transmission components. It supplies over 90 percent of all car manufacturers with 50 percent of all cars produced annually carrying GKN Driveline technology