Twenty Years Leading Mexico´s Trailer IndustryMon, 09/01/2014 - 11:40
Gabriel García Díaz, President of Utility Trailers de México, says the company’s holding group Utility Trailer Manufacturing supported him in the right way when he opened up the Mexican subsidiary. Instead of pumping capital into the fledgling start-up, the group consistently supervised his planning and growth strategies to ensure Utility Trailers de México could stand on its own. This preparation allowed the company to survive the numerous challenges that have beleaguered the Mexican industry, such as the financial crises of 1994 and 2008, by showing an ability to adapt its services to market conditions. Soon after the company was established in Mexico, the 1994 crisis hit, leading to a massive devaluation of the Mexican peso. This wiped out some of Mexico’s bigger trailer companies. Many of Utility Trailers’ investments were in US dollars, helping it to survive, while the NAFTA agreement allowed it to scale up production. After 1995, the company began pulling in more investment, reinvesting in expanding its fleet of trailers and growing its market share. This expansion hinged on one key aspect. Prior to NAFTA, Mexico was not allowed to import trailers from the US. After this, Utility Trailers de México became the first company to do so, allowing it to become the market leader and use the advantages presented on each side of the border. Today, this sees Utility Trailers produce 40,000 trailers a year. Refrigerated trailers, known as reefers, are made in Salt Lake City, Utah, while dry vans are made in Arkansas. Automatized production lines mean 40 trailers are produced a day in Arkansas, as opposed to just five a day at the plant in Mexico.
This savvy approach to trailer distribution has been translated today to Utility Trailers de México having a balanced customer base across three segments. Big fleet carriers, namely companies that use their fleets to offer transportation services to third-party customers, make up 40% of its customer base. Next, major private firms like Grupo Bimbo or FEMSA that own trailers to move their own production take up another 30%. The remaining 30% is comprised of owner-operators, most of which are SMEs that often struggle to obtain financing to lease new trailers. Having spotted an opportunity, Utility Trailers de México provides the financing itself by taking out loans from banks or financing companies and extending the credit to the owner-operators. Another example of the company’s adaptation to the needs of the Mexican market can be found in its aftermarket services. After the financial crisis of 2008, Utility Trailers had to change its strategy and look for a way to keep up its business. The company spotted the potential of the unattended aftermarket business in Mexico and began to invest in it. After just five years, Utility Trailers de México grew its aftermarket profits tenfold and gross sales fivefold. This also drove the company to expand these services overseas, and it now has seven aftermarket locations in Mexico and one in Colombia. García Díaz explains that the gross profit for a trailer ranges between 10 and 20%, but this rises to 34% for after parts, with a net profit of over 10%. In 2012, for the first time, the company drew more profits from the aftermarket than from sales. “This part of the business is good for us and for the market as well,” states García.
The next challenge for the company will be to face changes coming from the establishment of the reforms, especially the Energy Reform, and the formulation of the NOM-012-SCT-2-2008, often referred to as NOM-12. This legally binding norm regulates the weight and maximum dimensions of trailers that can circulate on federal highways. The NOM-12 states that the payload capacity for full double trailers has to be reduced by five metric tonnes. “For the first time, the weight of the trailer has become a competitive advantage,” says García Díaz, certain this norm will help Utility Trailers de México to stand out. “Our 40-foot dry van trailer that is used in most double operations weighs 5,300kg, whereas the competition’s weighs up to 7,000kg. This represents a 1,700kg difference in each trailer, so if you use two trailers for double operations, the customers will save more than 3,000kg in payload capacity.” The NOM-12 also forbids the use of double operations in petroleum tanks but PEMEX has around 150 carriers over the age of 20 working on double operations. Due to the norm, PEMEX will be unable to keep its fleet running as it is and will have to move from double to single trailers in a five-year period in order to not affect its distribution, García Díaz estimates. Utility Trailers de México is looking for a joint venture with Spanish company Cobo to begin creating lighter tank vessels in Mexico, while securing a competitive price for their import in the meantime. An alternative for the company is an agreement with Polar Tank Trailers, a company in Minnesota that produces premium petroleum tanks but its products are far more expensive than the Spanish ones. García Díaz expects to sell around 100 of these tank trailers in 2014. Along with these partnership plans, Utility Trailers de México is also ramping up its expansion plans, by building new facilities in its 40,000m2 Queretaro property that will include warehouses, offices, aftermarket, trailer sales, services, and assembly or manufacturing lines for tanks. For 2014, García Díaz forecasts sales of 2,000 trailers a year which will bring in US$10 million. In 2015, he predicts the sales volume will reach US$12 million. Interestingly, this growth does not come from selling more trailers. “We sold 2,000 trailers in 2012 but many of them had a low margin. We need to be more selective with our customers.”