Page 93 - STRATEGY Magazine

From Avocados to Water
Heaters (and Everything
in Between)
Mexico’s manufacturing sector is thriving. Will the international regime created by NAFTA continue to deliver for its southernmost partner,
or will Mexico have to look to other foreign markets for future trade partnerships?
When José Manuel Arana, CEO of Grupo Industrial Saltillo, looks around him, he sees a vast ocean of cars. “There’s a twenty-one million vehicle market between Mexico, the U.S.A., and Canada,” he says. He notes that the European market is also around 21 million vehicles, while the Chinese market is approximately 25 million. These numbers make Arana happy, as he believes his country is well positioned to feed this hungry maw with a massive supply of auto parts.
Particularly ripe to jump into this fray is the southeastern state of Coahuila, the most important automotive cluster in the country. Coahuila currently hosts such multinationals as Chrysler, John Deere, General Motors, and Caterpillar. Other industries are represented too, including aerospace, metal and mechanics, electronics, and information technologies. All told, manufacturing jobs make up a stunning 52 percent of the region’s labor force, accounting for almost 77,500 jobs. With numbers like these, Arana is optimistic. “I see a future with a manufacturing capability that will grow. Mexico will benefit in different sectors—not just in automotive.”
EDUCATION, EDUCATION, EDUCATION
A key to making this vision a reality, Arana believes, is innovative partnerships between formal education and industry leaders. Such collaborations would prepare Mexican citizens to work in industry and would help fill what could become labor shortages. Mexico has experienced negative immigration since 2013, but there is still a risk of workers heading abroad if they are not properly equipped for the employment opportunities available to them in their own country.
“I think the answer is to insinuate your way into education,” Arana recommends. He calls for “strong links” between industry and universities, hiring people directly from college, reaching out to technical schools, and creating innovative summer internships.
These best practices, in fact, are already emerging. “When young people graduate from college, their hope is to become part of well-organized companies that have training programs,” says Arana. These innovations must keep pace with industry growth to avoid the vacuum created by jobseekers fleeing the country.
SAVING MONEY, SAVING LIVES
Even with a prepared labor force, manufacturing leaders must also ensure the safety of their products. Arana describes the careful tightrope that spans both the bottom line and good quality.
JOSÉ MANUEL ARANA
CEO
Grupo Industrial Saltillo
On the one hand, manufacturers are already finding ways to tighten their production costs. Arana gives the example of producing a new auto part that weighs only 80 percent of its predecessor’s weight, leading to savings in cost and efficiency.
At the same time, in the face of recent phenomena such as the recall of Takata airbags—the largest safety recall in U.S. history—Arana also takes the question of quality intensely seriously. Specifically, he points to direction bars and brakes. “Brakes and their components are very delicate. They are vital components because any mistake or any quality failure might impact a human life.”
STAY TUNED
Arana attributes strides in manufacturing and production over the past two decades largely to NAFTA. He observes that, because of NAFTA, “We don’t see the automotive market in Mexico as nine hundred thousand vehicles or even three or four million, but as twenty million.”
Whether the treaty will endure under the new Trump administration remains an open question. Any changes to NAFTA could affect Mexico dramatically. Arana is quick to note that other national and regional industries are booming under the agreement, too. He rattles off a long list of Mexican products from avocados, pears, and orange juice to ceramic floors, aerospace parts, water heaters, and even tortillas and bread that have benefited under the international regime.
These industries, he is quick to clarify, “are not Mexican companies anymore; they are multinational.” Take, for example, Grupo Bimbo: the organization, which was born in Mexico, now proudly touts itself as “the most important baking company in the world.”
So, 10 years from now, will large numbers of Americans drive automobiles with Mexican brake systems while they munch on Bimbo avocado sandwiches? The answer to that question depends on how isolationist Mexico’s neighbor to the north decides to be.
It’s a sellers’ market. More than 16,000 export companies currently flourish throughout Mexico. The state of Coahuila leads the pack with 3,200 of these companies operating within its borders.
INTERVIEW: GRUPO INDUSTRIAL SALTILLO
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