TBY talks to two leading manufacturers in the aerospace industry on the strategic and competitive advantages of Mexico as a production base for aerospace firms.
What does Mexico represent for your global operations?
RÉAL GERVAIS Bombardier Mexico became a very important link in our company’s supply chain, and we are now providing parts for almost every product line. For example, we are manufacturing the electrical harness for almost all of our business and commercial aircraft. Electrical harness manufacturing has now become the center of excellence for our operations in Mexico. We are also supplying components for a number of other product lines.
FRÉDÉRIC GARCÍA Mexico is a strategic country for EADS. For five years, we have been working toward our 2020 strategy outside of Europe, and the key countries are emerging nations. Mexico is one of these up-and-coming economies. We are selling all the products of the EADS group, and the main drivers of the company are increasing job creation, sourcing, and investing in manufacturing. In this regard, Airbus and Eurocopter are the parts of the business that have the most potential for growth.
What is your outlook for the aerospace industry in the country?
RG The aerospace industry in Mexico has shown incredible growth in the past years. According to the Mexican Federation of the Aerospace Industry (FEMIA) and the Secretariat of Economy, the aerospace industry exported $3.4 billion in 2010 and $4.5 billion in 2011, which represents growth of more than 25%. This parameter shows that it is highly likely the industry will continue to develop and attract other aerospace companies to the country. An industry of this caliber takes a long time to develop and requires partnerships with governments. An international company such as Bombardier has to make large investments in technology, training, and research, as well as manufacturing facilities. When Bombardier establishes itself in other countries, it values the commitment of the government in terms of infrastructure, certification, and training, which are the essential pillars of the aerospace industry. Bombardier Aerospace honors a long-term commitment in Mexico. We recently announced a new investment of $50 million to manufacture the aft fuselage for the new Global 7000 and 8000 business jets at our Querétaro facility. In a few months, we will start the construction of our fourth building for this program, and the new work package will generate 400 jobs. These jobs will add to the existing 1,800-person workforce already in place at the site.
What competitive advantages does Mexico offer as a manufacturing base?
FG Mexico is a large market for Airbus, Eurocopter, Astrium, and Cassidian. In the coming 10-15 years, we estimate the size of the market will reach approximately €12 billion. There is definitely potential, and the market is very interesting for us. On the manufacturing side, the advantage is that we are in the US dollar zone. This is very important for EADS; the aeronautics sector operates in dollars, not euros. We manufacture in euros and sell in dollars. The issue of the euro-dollar conversion was very severe in 2008 and 2009. The CEO of EADS used to say that every time the dollar loses $0.10 against the euro, the company loses €1 billion per its EBIT. One thing that has become very important for EADS is to overcome this euro-dollar issue. There are several ways, and one is to increase our sourcing and manufacturing in dollar zones. There is no direct link between dollars and pesos, but analyzing the trends over the past few years, there is a strong correlation between the value of the Mexican and US currencies. In fact, 80% of Mexican exports are destined for the US. We could consider that to a certain point Mexico is a dollar country. Another advantage is that Mexico is in close proximity to the US, the main aeronautical and defense market in the world. The third advantage is the well-trained, productive manpower in Mexico. These have been the three main factors for EADS.
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