Ricardo Martínez
View from the Top

Unexpected but Welcome Growth and Alliances

Fri, 09/01/2017 - 13:32

Q: How did Ford moving production out San Luis Potosi impact SIMSA’s business?

A: We focus on powertrain manufacturers so we did not expect to benefit directly from the assembly plant’s introduction. We will participate in Ford’s new transmission plant’s production in Guanajuato, strengthening our ongoing relationship. SIMSA’s machines are already being delivered to the Ford plant. As BMW and Toyota increase their presence in Mexico, we have begun quoting for machine deliveries to their suppliers such as JD Norman Industries, which makes connecting rods and axles. Other SIMSA participation includes GM’s new three-cylinder engine to be made in Saltillo. Our equipment, including grinders and polishers, will be used to manufacture that engine.

Q: To what extent has SIMSA’s refurbishing service been welcomed by automotive clients?

A: Refurbishing has grown far more than I expected. Two years after opening the plant, we reached full capacity and are already investigating an expansion. We did not expect so much interest but until we introduced the service, refurbishing was not available in Mexico. Production grinders and balancers had to be sent to the US, Japan or Europe to be renovated beforehand, so offering this service locally has grabbed the attention of many large companies.

Q: What other areas of the company’s operations have been in the spotlight in 2017?

A: We are discussing an alliance with a French company that refurbishes in the US to start making new machines in Mexico and to deliver these worldwide. This will put us in competition with Europe, China, Korea and Japan. The plant will be located in Aguascalientes, where we had already found an excellent climate for manufacturing and a reliable workforce. The skillset of those working in Aguascalientes is regionally recognized and we plan to use their expertise to make grinders.

Another strategic alliance with Japan to rebuild spindles was formalized in 2017. Mechanical moving parts in any machine, like tires and wheels on a car, are subject to wear and tear. NTC, one of the largest manufacturers we work with, currently sources all its spindle-rebuilding from Japan, implying lead-times of four to five months per spindle. Its 1,000 machines installed in Mexico replace spindles frequently, forcing it to buy extra parts that cost US$25,000-35,000 each. This waste of resources can be avoided by SIMSA offering the service here in Mexico and we can offer turnaround times of three to four weeks. We have a spindle room in the Aguascalientes facilities and the company is already 95 percent equipped. We are also sending staff to Japan to train further.

Q: To what extent will the NTC venture affect your relationship with other clients?

A: This venture has attracted interest from other companies and will increase the value manufacturers can add to products in Mexico. We are considering developing a separate division to keep this joint venture specialized and not impose on our existing customers whose operations are unrelated to our NTC plan. Importantly, it does not pose a threat to our customers. On the contrary, a German client of ours has expressed interest in participating in manufacturing tools. This synergy provides an opportunity to reduce unnecessary transport of pieces and machines so unsurprisingly many want to be involved in the business.

Q: How do you expect SIMSA’s continued growth in 2017 will lead to new challenges?

A: Last year we grew from scratch to a little over US$1.8 million in income to date. We have set a goal for three years from now to be making income of between US$8 million and US$10 million. Our biggest hurdles so far have been at customs and sourcing within Mexico. Bureaucracy often complicates rapid imports, so we created a department within SIMSA dedicated solely to handling these operations. We import key components such as drives and motors that  are not available in Mexico, primarily from the US, so our operations depend heavily on smooth customs processes.

Powertrains are changing mechanically due to hybrid and electric cars entering the market. We do perceive a threat over the long-term because the market that contracts us will change dramatically. However, I still see life in the gasoline-powered market for another five or 10 years. We certainly hope that powertrains of this sort continue to be manufactured for much longer but we are reaching out to OEMs to see how we can help them with our existing operations in Mexico. We may be manufacturing some components for certain electric motors or axles in the future. We will have to adjust to the market and are planning accordingly, contacting foreign companies whose machines are no longer made in their country. Landis-Bryant precision grinders provide an example of a company that focused on automotive machines in the 1980s, and which we plan to rediscover. No longer made in the US, these grinders will be made by SIMSA in Mexico and will build off the branding that Landis established for this machine.

Q: How prepared is your current workforce for the changes you plan to make to SIMSA’s business?

A: We are bringing in new skilled workers who are shadowing our experienced engineers. The seniority of our personnel reaches 18-23 years working for SIMSA so we have faith in these knowledgeable technicians passing on their expertise. Making machines is a very specific, unusual task and especially to the technology standards that we maintain, so when inexperienced employees join our teams they are always excited and keen to get on board.

Seeing two generations of workers, within one family in some cases, is heartwarming. As they learn to service machines we are proud to see the younger generation grow alongside their parents. Some of the new recruits have just completed technical college certifications and they are all eager to learn.

Q: How are you building a reputation as a Mexican company to compete against many established players?

A: It is a challenge in an industry that tends to prefer buying from its own country’s suppliers, except Mexico. German brands buy German parts, Japanese buy Japanese but Mexican companies do not necessarily prefer Mexican suppliers. We believe this will change over time because Mexican talent and engineering is extraordinary. Overcoming this mentality is hard work that pays off, leading to programs under SIMSA’s charge established by our customers, shipping machines to the US beginning in the spring of 2017. This is a reflection on our dedication and trustworthiness. Our priorities remain finding resources and high-level expertise within Mexico, ideally Aguascalientes, to incorporate local talent and businesses into our supply chain.