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Plastics Today, September 2015

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Mexico outlook 14 Global Plastics RePoRt 2015 Plasticstoday.coM Mexico's manufacturing boom lures U.S. molders A shortage of quality molders south of the border and OEM demand for a regionalized supply base are creating tremendous opportunities for plastics processors. But making the move is not without risk. Clare Goldsberry P ick up any manufacturing trade publication and you will prob- ably find an article about Mexico's booming automotive and aerospace sec- tors. Announcements from automotive OEMs, U.S.-based as well as Japanese and European carmakers, concerning new plant constructions and expansions are plentiful. So what does that mean for U.S. manufacturers, particularly the smaller Tier 2 and 3 suppliers to large multinationals, that want to serve these OEMs in Mexico? For U.S. suppliers, Mexico offers a close-to-home base that makes supply- ing aerospace and automotive OEMs more convenient and cost effective than locating facilities in Asia. Daron Gifford, a partner leading strategy consulting at accounting firm and consultancy Plante Moran (Southfield, MI), commented recently in an article that staying close to home is not an option these days. "Virtually every major automaker has developed global platforms for its prod- uct lineup, and suppliers are expected to support these programs," wrote Gifford. While there has always been a degree of reluctance among molders and mold- makers to venture beyond the U.S. bor- der into Mexico, there is certainly a lot of opportunity there. Some of the reluc- tance has been tied to finding skilled employees and trained management to run Mexican operations. A case study of Mahle's (Morristown, TN) new HVAC manufacturing facility in Ramos Arizpe, Mexico, recounted by Gifford offers some perspective on this. The plant was established next door to Behr GmbH, a company that also makes HVAC and engine cooling systems that was acquired by Mahle in 2013. Mahle was able to bring in some employees from the Behr facility to help get the new Mahle plant up and running, along with an "outside engineer and a tooling specialist—both Mexican—to oversee the injection mold- ing machines," Gifford said. Wilm Uhlenbecker, President of Mahle Behr USA, shared that employee "turnover hasn't been a big problem in Mahle's Mexican facilities, in part because suppliers in the region have an informal agreement not to poach talent from their competitors." The financial risk was diminished, as well, because of Behr's presence in Mexico as an established supplier. "The company can expand the capacity of its assembly lines and injection molds on a step-by-step basis," wrote Gifford. Cultural issues often come up when talking to Tier 2 suppliers like mold- ers and moldmakers. However, cultural differences are not as insurmountable as many believe. "Given its proximity to the United States and its integration into North America's manufacturing network, Mexico doesn't present the cultural hurdles one might encounter in other emerging markets," said Gifford. Doug Donahue is VP of Business Development at Entrada Group, a company that helps small to mid-sized manufacturers quickly establish produc- tion capabilities in northern and central Mexico while minimizing cost and risk. According to Entrada Group, more than $10 billion of foreign direct investment has poured into central Mexico over the past 30 months. However, companies like Toyota, General Motors and Volks- wagen aren't just setting up there to tap into less expensive labor. "At the macro level, Mexico's com- petitiveness has increased dramatically over the last two to three years vis à vis China and Asia," Donahue told PlasticsToday. "What was being produced by subcontractors in China has stayed [in China]. The big OEMs that have multiple locations are evaluating the best price to manufacture their products and components, and they are placing the work there. Evco Plastics has been operating in Monterrey, Mexico, for more than 15 years, and it has seen its business grow exponentially over that time.

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