Michelin breaks ground on plant in León, Mexico

Michelin breaks ground on plant in León, Mexico

LEÓN, Mexico (Aug. 24, 2016) — Group Michelin has started construction in Mexico of its 21st factory in North America — eight years after the global economic crisis of 2008 forced it to postpone the project.

“I’m really excited because a few years ago, in 2008, I had to come to this country to postpone our investment because of the crisis,” Michelin CEO Jean-Dominique Senard told Tire Business Aug. 22.

“At the same time I was incredibly impressed by the way the Mexican authorities took the news. So coming back with the decision (to revive the project) is a joy.”

Mr. Senard had earlier hosted a groundbreaking ceremony at the 242-acre site in central Mexico where the French tire company is investing $510 million in what, according to one senior executive, will be Michelin’s first greenfield passenger tire plant in North America in three decades.

In a speech, Mr. Senard said the León investment is the tire maker’s largest investment anywhere in 2016.

“The last time we launched a greenfield passenger tire plant in North America was over 30 years ago,” Scott Clark, executive vice president and COO of Michelin North America, said in a separate interview with Tire Business.

“So this is not something we do every day. This is a big deal and this is exactly the right place to be and at the right time.”

The factory, which will employ 1,000 when finished in late 2018, will be within a threehour drive of 18 car maker assembly plants, Mr. Clark said. It is located in a new industrial park called León-Bajio, which stands beside the León-Silao highway.

 

“The new Michelin investment in Mexico represents a vote of confidence that strengthens the positioning of Mexico as an investment destination, because it comes from a company with a long tradition in the industry and widely recognized for its commitment to innovation”

Idelfonso Guajardo Villarreal, Mexico’s federal economy secretary.

 

Source: http://www.tirebusiness.com/article/20160824/NEWS/160829978

 

Security Concerns Take a Back Seat as More US Manufacturers Look to Mexico

Mexico City (CNSNews.com) – Experts who help foreign companies build factories in Mexico report a recent surge in interest by U.S. and international firms, with executives voicing less concern about Mexico’s crime and security problems.

“We’ve seen a 40 percent increase in inquiries about building factories in Mexico compared to where we were last year,” Ricardo Rascon, a salesman with The Offshore Group in Tucson told CNSNews.com.

“It has surged dramatically in recent years,” he said. The number of companies approaching the company looking to build facilities in Mexico is not as high as it was prior to the financial crisis of 2007, however.

Half of the increased interest is coming from U.S. companies, while the other half is from companies located in Canada, Germany, South Korea and even China, Rascon said.

“We signed our first Chinese company this week. They are moving a product line from China into Mexico for the logistical advantages for serving the U.S. market.”

Companies in Germany in particular were also showing a “big interest” in building factories in Mexico to be closer to the U.S. market, Rascon said.

U.S. companies that move to Mexico don’t always shut down in the U.S., but often instead open new factories in Mexico to be closer to suppliers, he said.

Rascon also said company executives were asking fewer questions about crime in Mexico than was the case several years ago.

“I could tell you three or four years ago, security was the first thing people would ask, but now it’s on the back burner. Now, all they ask about is cost.”

According to the business data firm Dun & Bradstreet, inquiries from multinational companies about locating in Mexico have increased by 20 percent through June just this year, Reuters reported on Tuesday.

A recent survey of companies that moved jobs overseas to take advantage of lower wages and costs in Asia, but now want to relocate them back to North America, found Mexico to be their “first-choice destination” over the United States.

A third of the companies surveyed said they were now actively looking at moving “primary production and assembly operations currently located in China, India and Brazil back to North America,” it said.

Entitled “Footprint 2020: Expansion and Optimization Approaches for U.S. Manufacturers,” the survey was sponsored by Deloitte and The Manufacturers Alliance for Productivity and Innovation.

In a report this week analyzing corporate credit worthiness in Mexico, Moody’s Investors Service said free trade agreements make Mexico especially attractive to U.S. automakers Ford, GM and Chrysler.

“Hourly industry wages in Mexico are well below rates in Brazil, South Korea and even China,” the report said, noting that the auto manufacturing industry in Mexico is now the seventh largest worldwide and the country’s second largest industry.

“Mexico’s auto-parts manufacturers depend heavily on North America, which bought 82 percent of their exports in 2015, far more than South America (8 percent) or Europe (6 percent),” the report said.

A 2015 survey of 250 senior-level manufacturing and distribution executives in North America and Western Europe by the consulting firm Alix Partners found “continued appetite for nearshoring” with a 32 percent of those surveyed reporting they had recently moved production facilities nearer to their customer markets.

Fifty-five percent of the North American companies said they preferred to locate in the U.S. in order to be closer to their markets while 31 percent favored Mexico.

The firm’s research showed Mexico’s popularity with manufacturers had declined in 2015 from 49 percent three years earlier, possibly due to security concerns.

Asked about security concerns in Mexico, the number of respondents saying they “expected improvement in those areas” dropped from the previous year’s survey.

 

Reshoring is the New Offshoring – But it’s Not Just a U.S. Trend

The offshoring trend that has dominated manufacturing footprint strategy for the last 30 years was based on solid benefits: lower labor costs, access to raw materials, inexpensive rent, etc. However, many factors such as the significant travel involved in managing overseas business, proximity to the U.S. market, perpetually shifting regulations and intellectual property concerns are significant deterrents for companies to offshore their manufacturing lines. OEMs with constantly scaling or smaller volumes find it especially hard to justify the hassle and expense involved in offshoring. As a result, many OEMs are reversing the trend and moving to a reshoring strategy, and they have sound rationale for doing so. While the United States manufacturing industry has plenty to celebrate with this trend, the movement is more broadly focused on North America as a whole, and Mexico is an especially attractive location for manufacturers.

According to a Deloitte report, 66 percent of survey respondents have offshored manufacturing work overseas in the last two decades. Among those, a third are now considering relocating operations to North America, with Mexico being their first choice and the United States their second.

Mexico offers several key benefits that make it especially attractive: lower labor costs, advantageous land and facility cost structures, more favorable transportation logistics expenses and increased proximity to the U.S. market are a couple of examples.

However, some of the obstacles and concerns manufacturers had about Mexico years ago remain today – transportation infrastructure, security concerns in certain areas and access to skilled labor are a few examples. That is why the component distribution model employed in the U.S. can’t be easily replicated in Mexico and that is also the driving force that led TTI to create a sustainable model that would allow it to fully serve this growing market buyers.”