Q & A

Hit the Road

The Mexican automotive industry has become the second largest driver of export revenues in the country, and auto component suppliers are a key link in the production chain.

TBY talks to two executives in the tire industry on the importance of Mexico as a production base, the demand for energy efficient products, and methods to cope with unstable commodity prices.

How important is Mexico in your global strategy?

LUIS ALEJANDRO MORENO Mexico is the fourth biggest producer of Continental tires. We also produce many other supplies related to the automotive industry. Continental has 164,000 employees worldwide and 15,000 are located in Mexico—almost 10%. In terms of volume, Continental is a leader in the Mexican tire market. We have around 20% market share. Mexico represents the production of 5 million tires annually for our group, and we are fifth in the world in terms of volume.

DANIEL BENVENUTI Bridgestone Mexico is very important. It represents around 20% of the company’s total business in Latin America. We have five plants in Latin America, and Bridgestone Mexico boasts one of the most productive facilities in the region. We also produce in Costa Rica, Venezuela, Brazil, and Argentina. At this time, Bridgestone, as a group, is studying different possibilities to add more plants to the mix according to demand in each country. We look forward to increasing our participation not only in the passenger and light truck segments, but also to gain a deeper participation in other segments.

What are the main challenges in the industry?

LAM We still have a lot of opportunities regarding labor relationships, because there is a strong union movement in Mexico, which limits us with a buy-low contract from the 1930s. We need to modernize the relationship with our unions. Another challenge is the import of products of doubtful quality, or from origins that don’t have transparent economies. Local governments are using resources to subsidize their production, creating unbalanced competition worldwide. We, as the Rubber Chamber of Mexico, are putting a lot of information in the hands of the authorities in order to receive protection. We don’t want to close the market, but we want fair competition. The third challenge for us is a little bit shocking—we receive a lot of second-hand tires. It’s unacceptable and dangerous for the health of people using the products and in terms of the environment. It’s also creating mafias, because the tires are not entering the market in a formal way. There is a quota of legal used tires imported into Mexico. There aren’t really any regulations, there are just quotas. Used tires entering the market legally in Mexico are waste. This is the main issue we attack.

DB At the beginning of 2011 commodities and raw materials prices increased drastically. For example, synthetic and natural rubber prices increased by 60%. And, of course, as a consequence of that, tire prices also increased. We are constantly trying to reduce our production costs, but in such a situation we are not left with much choice.

What are the main products your company supplies?

LAM We produce air bags, tachometers, radios, brake systems, electric bands for power transmissions, and hoses for various uses such as air conditioning. There are some German car brands that are 35% made by Continental. We have a great portfolio now, and manufacture parts for Mercedes-Benz and BMW. Worldwide, our product range is so important that we can build large portions of a car. In Mexico we are supplying parts for every car manufacturer operating here, such as Ford and Volkswagen.

Bridgestone’s plant in Cuernavaca was recently commended for its energy saving practices. What makes it unique?

DB Our main target is to permanently reduce costs and waste. For that reason we decided to start with the substitution of lamps. Normally, we use 400 W lamps that consume a lot of energy. We then decided to replace them with new energy-saving lamps, which drastically reduced our energy consumption. In addition, we have installed solar panels that help in production activities as well as in reducing our reliance on fossil fuels. All of these environmentally friendly actions are aimed not only at reducing the negative effect of our production on the environment, but also at positively affecting our productivity while reducing costs.