Uniform Demands Help Sideshaft Market to GrowMon, 09/01/2014 - 11:00
With GKN Driveline (GKN) holding 45% of the global sideshafts market and 75% of the Mexican market, Fidel Otake could be forgiven for resting on his laurels. But as the Director General for GKN Driveline Mexico, the local subsidiary of the global leader in automotive driveline components, he is aware that more growth in Mexico is there for the taking. “We are seeing significant growth in the NAFTA region, and one of our main strategies is to grow the Mexican market, even beyond our current 75% market share,” he says. GKN’s presence in Mexico was first established in 1979 through a joint venture, but GKN took over 100% control in 2005, just as market growth began to accelerate. At first, GKN’s strategy was for its US and Mexican operations to each service each country’s domestic market. However, the small size of the US market soon led to realignment with Mexican facilities beginning to support the US market. Otake points out that since this decision, GKN has gone from producing 1.8 million sideshafts in Mexico in 2005 to around 7.5 million in 2013, and is seeking to reach 9.5 million by 2015. Establishing a top-notch facility in Celaya, Guanajuato, has proved wise twofold for GKN. It allowed the company to service the US market from Mexico and put it in prime position to supply OEMs in the central region of Mexico.
Today, this double priority sees GKN investing heavily in its Mexican machine and forging operations to cater to the US and Mexican markets. “We mainly sell our products to OEMs based in Mexico but we do send some to OEMs based in the US. Our major clients include Chrysler, GM, Volkswagen, and Ford, for whom we produce shafts for most segments,” says Otake. He explains that when it comes to shafts, all sections of the automotive industry have very similar requirements, ranging from premium to low-cost vehicles. While cost remains the big differentiator, the pressure to create low emission vehicles has seen efficiency being scrutinized in all aspects of the car. This has seen GKN working on revising all the joints it produces to help reduce emissions. “Every two or three years, we develop a new generation of joints. We have reduced the overall weight of the shafts to make them more efficient while maintaining our quality and durability,” he adds. Mexico is at the core of updating GKN’s joints as the company’s local tech center tests and reviews all designs for new joints. Where many technological advances in Mexico are brought in by companies after being proven in other markets, the demands of the Mexican market directly influence GKN’s strategy. Otake explains that Mexico is seeking premium cars moving to full transmission all-wheel drive, which requires more parts from GKN. A smaller front-wheel drive vehicle requires just two sideshafts, but full transmission all-wheel drive cars can need up to eight shafts, depending on the configuration of the transmission.
In order to cater to the evolving needs of the Mexican market and the OEMs that move it, GKN has been investing in expanding its facilities in Mexico. By the end of 2013, GKN had invested over US$233 million since 2005, with US$40 million going to its facility in Villagran, Guanajuato, in 2013 alone. “We want to increase our capacity in Villagran, mainly in machining which represents the largest part of our operations and is running at full capacity. We will be moving additional machining lines to that facility, while the assembly line segment will also be growing,” says Otake. While Mexico grows as a GKN manufacturing base, the company has also had to find the right suppliers to support that growth. Otake states that GKN’s purchases are more or less equally divided between local Mexican suppliers, the rest of the NAFTA region, and Asia. While the company has a conscious strategy to source more products locally, it has faced troubles in doing so. GKN now hopes to meet its targets for locally sourced products within the next five years. “The right suppliers are not easy to find, since the automotive industry has such specific requirements. Sometimes the volume of work is not large enough to justify a new supplier facility, which forces us to source from other parts of the world. The other issue is the quality our suppliers can provide since it can take up to a year to develop and implement our full quality control system with a new supplier,” says Otake.
GKN’s long history in Mexico has made it a desirable place to work, according to Otake, adding that this allows the firm to pick the right people and make a difference to the quality of the products it makes. “New plants are opening in the center of Mexico, which is obviously increasing demand for employees, but that has not been a major issue so far. We added around 200 people in 2013 to take our Mexican staff numbers to 1,800,” he adds. Engineers are often hired out of university and put through a one-year training program to reach a desired level of knowledge. Further career development takes between five and seven years for the engineers to develop the right mix of competences GKN looks for. After that, specific specializations are open to them, such as becoming product engineers.