Labor Law Reform: Mexican Federal Labor Law (Alert)

Recently the House of Representatives of the Mexican Congress in a plenary session, by majority has approved a reform to the Mexican Federal Labor Law, which will be sent to the Senate for its discussion and has to be resolved within the term of 30 days. In the event of its approval the reform will be sent to the Executive Office for observations or its publication or to be returned to the House of Representatives for further discussion.

Notwithstanding the result of the above mentioned process, we consider important to share some of the main aspects of the Reform:

To download 5-page Alert, please click here.

Source: Baker & McKenzieGAI


Second Round Between South America and Mexico

First, it happened with Brazil. President Dilma Rousseff’s government announced that it would cancel the ACE-55, signed between the Mercosur (Brazil, Argentina, Uruguay and Paraguay) and Mexico in 2002 to allow the free trade of light vehicles between the five countries. In 2011, the trade deficit between Brazil and Mexico was US$1.5 billion and the Brazilian government worried it would not stop increasing. Mexico did not want to lose the benefits of exporting to Brazil, the fourth main market in the world, and agreed to have limits until March 2015 and to increase local content. If a car is imported after the limits are reached, it will pay taxes as any other imported vehicle.

Afterwards, Argentina tried to negotiate the agreement with Mexico as well, but the North American country denied any limits to Argentina. President Cristina Kirchner – which has been accused by several countries of closing the country’s borders to imported goods – was not satisfied and announced on June 26 that Argentina would suspend the ACE-55 with Mexico for the next three years. She understands that the trade between Mexico and Brazil, with limits and higher local content, will make Argentina buy even more Mexican vehicles.

According to the Mexican government, light vehicle exports to Brazil increased 90% in 2011 compared to 2010, but only 18% to Argentina. In total, Mexican exports to Brazil were 29.2% higher last year and 10.6% higher to Argentina. What Mrs. Kirchner did not take into consideration is that Brazil and Argentina import very different vehicles from Mexico.

Increased purchasing power has allowed Brazilians to drive more expensive cars. Models like the Volkswagen Jetta and the Honda CR-V were selling more and more. However, much of the growth was driven by Nissan: the March and the Versa were launched in Brazil last year and were very successful by offering more value for the money that locally produced compact cars weren’t offering.

Although Argentina imports both the Jetta and the CR-V, the Mexican best seller was the Volkswagen Bora last year which is the previous generation of the Jetta with a facelift to give it some extra life along with a new one, named Vento in Argentina. Last year, 19,433 units were sold, making the sedan the 9th best seller in the Argentinean market. However, as its lifecycle approaches the end, sales this year are dramatically down. Between January and April, they total 1,555 units compared to 7,434 units during the same months last year. Brazil stopped importing the Bora in 2011, when only 302 units were registered.

The Chevrolet Aveo (11th in the 2011 sales ranking) has seen stable sales this year, but it is another example of a model that is not a novelty. It is not the previous generation of the Nissan Frontier, called NP300 in many South American countries. If we look at the new generations of these products, Argentina imports the Chevrolet Sonic from South Korea and the new Frontier from Thailand. The Mexican Ford Fiesta tends to be replaced by the Brazilian Fiesta as we expect the new generation to start being produced in Brazil next year.

Polk’s light vehicle forecast of Mexican products in Argentina shows a decline of 27.4% in 2012, to 59,295 units from 81,644 in 2011. We anticipate total sales to be 824,000 light vehicles this year. In 2013, Mexican vehicles should recover (a growth of 10.4% compared to 2012), thanks to Nissan. As it happened in Brazil, we expect Nissan to improve sales in Argentina with Mexican products.

Nissan is re-organizing its operations in Argentina since it became independent from Renault, which caused some launch delays. The March was launched in May 2012 and the Versa is expected to come late this year – both arrived in Brazil in 2011. But the impact has a limit: Nissan’s dealer network. There are 25 point of sales in Argentina, compared to Volkswagen’s 24 just in Buenos Aires, the capital city. Volkswagen is the market leader, with a share of 20.9%.

Mexico has said Argentina’s reasoning is “unsustainable” and it will complain to the WTO with 39 other countries that are not satisfied with Argentina’s protectionism. However, Mexico had a presidential election on July 1st and Enrique Peña Nieto, the new president, will not be inaugurated until December. Economics were not part of the campaign, so it is unlikely there will be any major changes toward Argentina before 2013. With this scenario, Polk will not change its forecast for Argentina at this time.




Assembly Allocation to Mexico will Grow at Canada’s Expense

The Polk forecasting team is in a position to report good news as the North American assembly and sales volumes continue to improve year over year. This is the direct result of modest economic improvement and the satisfaction of pent-up demand. Polk anticipates North American assembly volumes will increase by 10% (14.4 M) in 2012, following a 10% increase in 2011 (13.1 M) and a 39% increase in 2010 (12M), following a dreadful fall to 8.6 million units in 2009.

To view graph “North America Light Vehicle Assembly”, please click here.

However, there is at least one fly in the ointment, besides the threat of Europe’s problems derailing our recovery, and that is the fact that Canada and the U.S. will continue to lose new vehicle assembly allocation to lower-cost Mexico.  As illustrated in the graph below, Canada will likely produce 16% (2.2 million) of all light vehicles assembled in North America in 2012, down from 17% in 2007 (2.5 million). The U.S. will likely produce 66% (9.5 million) of all vehicles in 2012, down from 70% (12.1 million) in 2002 and 78% (11.6 million) in 1995.

However, if you dig deeper into the data you learn that the U.S. market, while losing ground on a percentage basis, will likely realize an increase of over 2 million units by the year 2022 when compared to anticipated 2012 assembly volumes. This is largely related to an improving industry and capacity expansion by non-domestic automakers.

To view graph “North America Light Vehicle Assembly Allocation by Country”, please
click here.

Canada, on the other hand, will continue to lose assembly volumes and many well-paying automotive jobs to Mexico. This is largely related to cost. Many Canadian automotive plants in operation were constructed at a time when exchange rates made Canada a lower cost alternative to the U.S. However, now that the Canadian dollar value is nearly on par with the U.S. dollar, Canadian labor costs are relatively high. In fact, The Windsor Star recently quoted Dan Akerson, General Motors’ CEO as saying, “Canada is the most expensive auto-producing jurisdiction in the world and the Canadian Auto Workers union must close the labor cost gap with their U.S. counterparts in upcoming contract talks.”  In U.S. dollars, the CAW’s total labor cost for hourly wages and benefits is about $60 per hour, compared with $58 for U.S. workers at General Motors, $56 at Ford and about $50 at Chrysler, according to the Center for Automotive Research.

Related to this, GM has confirmed it will follow through on its plans to shutter a portion of its Oshawa plant in mid-2013, which will likely eliminate 2,000 jobs. GM will continue operations at its Ingersoll, Ontario plant.

GM’s announcement is creating a great deal of tension with the Canadian Auto Workers (CAW) as they enter contract negotiations in August (contract expires on September 17). Tensions are also high for Canadians who contributed billions of dollars to preserve automotive jobs. The CAW, which impacts only Chrysler, Ford and GM, will likely refuse to accept wage reductions that automakers are requesting to match current UAW wages in the U.S.

North America Light Vehicle Assembly Forecast by Country: 2012 – 2022
Country      2007             2012                  2017                2022
Canada     2,542,150     2,210,000        2,030,000       2,040,000
Mexico       2,033,658     2,752,000        3,339,800       3,604,400
USA         10,555,043     9,484,400        11,272,870     11,564,100
Total         15,130,851     14,446,400     16,642,670     17,208,500

Polk will monitor the CAW negotiations as well as Mexico’s growing automotive industry. Mexico assembly will likely continue to grow as a result of attractive labor wages, experienced labor force and free trade agreements with countries in South America and the European Union. However, drug-related crime, also known as narcoterrorism, has been on the rise. Mexico’s new president, Enrique Peña Nieto, said he is committed to fighting drug violence and corruption. We will also watch this situation and its potential impact on the auto industry.

Assembly allocation is often dictated by cost – the low cost producer wins. During the 1970s Canada benefited from their lower cost and increased capacity allocation. More recently, Mexico is the benefactor.




Assessing an Investment in the Mexican Automotive Industry

This is a publication that analyzes key factors to be evaluated by investors wishing to enter or expand in the automotive industry in our country.

The industry is the most important in Mexican manufacturing industries and accounts for approximately 3% of GDP, 14% of manufacturing output and 23% of total exports. It also generates 30 billion dollars in revenue, representing 6% of foreign direct investment (FDI) and directly employs almost 500,000 people.

Mexico has many competitive advantages in the global automotive industry, including:

- Low costs combined with high productivity and skilled labor
- Free trade agreements with several countries
- Geographical proximity to the EU car market, which allows lower transport costs and faster time to market

The paper examines the landscape of opportunities this industry, the major investments that will make the world’s leading companies in the sector in coming years, the benefits of these investments and how to evaluate the market to establish an entry strategy.

To download 20-page report, please click here.

Source: KPMG MexicoGAI


Why Mexico’s Economy Could Be One of the Most Attractive Emerging Markets

Enrique Pena Nieto has just been elected president of Mexico.  It’s not what you’d describe as a dream job.

Mexico’s problems put all our worries into sharp perspective.  The most tragic and visible of these woes is the violent drug war. The war against the cartels (as well as infighting between cartels) has left 55,000 people dead over the last five years. It’s easy to see why most investors give the country a wide berth.

But they’re making a mistake. Behind the gory headlines lies a country with strong economic growth and surprisingly prudent management. Here’s why Mexico’s economy could be one of the most attractive emerging markets in the world.

A Manufacturing Boom in Mexico’s Economy

This may surprise you, but Mexico’s economy has become a formidable export power. Manufacturing accounted for just 2% of GDP in the 1980s. Now it’s 24%.

The boom began when the North American Free Trade Agreement (Nafta) was signed in 1994. Over the last ten years, the weak peso has given the sector a further boost. Healthy demographics – with a large and growing work force – also checks wage inflation and makes Mexican goods more competitive.

The gap between Chinese and Mexican wages has narrowed sharply from 260% in 2006 to just 10% today, notes HSBC’s Sergio Martin. Taking into account travel costs, Mexican factories now beat Chinese ones on cost for many goods. That explains why 12.5% of America’s imports currently come from Mexico. That’s the highest in a decade, and second only to Canada.

Of course, with so many of its exports going to one place, Mexico’s fortunes are tightly tied to America’s. But that’s not necessarily a bad thing, as David Rees at Capital Economics points out: ‘With America growing at around 2%, Mexico’s economy should grow at between 3% to 4%.’

It’s ‘not spectacular’, but it beats plenty of other parts of the world. More importantly, while Mexico is still growing its share of the US market, it’s also increasing sales to its Latin American neighbours.

In the last six years, the share of Mexican exports going to the US has fallen from 90% to 80%. Meanwhile, the overall value of exports, which currently stands at $700bn, is expected to double within the next eight years.

Mexico’s economy is also “moving up the value chain”. ‘More jobs, more energy, [and] more foreign investment are going into more advanced applications’, says Scot Overson, boss of chipmaker Intel’s Mexican division.  These include ‘technology and aerospace’, or ‘advanced manufacturing, not just simple unskilled manufacturing. Those aspects of Mexico economy seem to be accelerating.’

The country has also been wise enough to avoid squandering the proceeds of the boom. Public debt stands at 35% of GDP and falling. Inflation, historically a bugbear, is hovering around 3.8% – below the upper band of 4% targeted by the central bank.

It helps that central bank governor Agustín Carstens is seen as a safe pair of hands. As finance minister, he hedged Mexico’s entire oil output just before the oil price tanked in late 2008. It saved the nation $8bn and – so the joke went – made him ‘the world’s most successful, but worst-paid, oil manager’.

The Three Biggest Challenges Facing Mexico’s Economy

Despite Mexico undergoing one of its best-ever periods of growth and economic stability, its main stock index, the MEXBOL, doesn’t look too expensive. The price/earnings (pe) ratio of 14 is pretty much in line with the index average since its 1978 inception.

The main drag on the country is the drug-related violence. Any long-term solution can’t be down to just Mexico. Consumer countries (such as the US) need to alter policies too. That won’t happen in the near future.

However, there’s plenty of room for improvement. Mexico’s murder rate has tripled to 22 per 100,000 people – far higher than other Latin American countries with similarly powerful narco gangs. If any progress could be made here, Mexico’s other attractions would become far more apparent to investors.

Pena Nieto has promised to halve deaths by changing tactics. Instead of using the army to take on the cartels, he will use the police to minimise civilian deaths. He has also recruited the Colombian police chief credited with helping to stem that country’s problems. Even Nieto’s critics think he can halt the violence – although admittedly that’s because they think his party, PRI, will do a secret deal with the gangs.

The second big problem is Mexico’s falling oil output. Mexico has plenty of oil, especially offshore. The trouble is that while state-owned Pemex has exclusive rights to the country’s oil, it lacks the capital and expertise to develop new fields. Production has fallen from 3.4 million barrels per day (bpd) in 2006 to 2.5 million today. It’s expected to slip to 2.2 million by 2016.

So Pena Nieto has proposed partial privatisation. This won’t be easy: Pemex’s position is enshrined in the constitution. However, Eduardo Gonzales, a lawyer with Mexican firm Creel, believes it can be done. ‘Private equity funds are already raising the finance to take advantage of it.’ If he can pull it off, Capital Economics reckon it would add almost 1% a year to Mexico’s GDP.

The final challenge is Mexico’s uncompetitive domestic economy. Many markets are dominated by local oligopolies that rip off the people and block new entrants. Inflexible labour laws and a tiny tax base are also a problem: Mexico’s total tax take is about 22% of GDP, far less than the 36% raised in Brazil.

The oligopolies look safe for now. Many supported PRI, and Pena Nieto is unlikely to attack them in his first term. Instead, he will probably focus on freeing up the labour market and reforming tax, says Rees. ‘Strong exports will keep the economy ticking over but if the domestic economy could be reformed then we would see exceptional growth.’

Invest in the Mexican Economy?

Be warned. Mexico’s economy is definitely a ‘risk-on trade’: when investors get nervous they will jump ship indiscriminately. However, in the long run, it has great potential. Put it this way – if you’ve been thinking of allocating capital to the BRIC countries, I’d suggest looking at Mexico as an alternative.

Source: Money Morning AustraliaGAI


Going Global: The 2012 Investor’s Guide to Mexico’s Business and Technology Services

Despite an uncertain global economy, Mexico’s outsourcing industry is expected to grow by 10-15 percent this year, amounting to roughly USD $13 billion by year’s end. ITO will represent around 60 percent of this revenue. However, fitting the proper project to the right region within Mexico requires a keen understanding of how the country and the regions within it compare on criticalattributes such as wage levels, skills, infrastructure and security. This white paper provides a detailed look at the state of the Mexican IT and outsourcing ecosystem, and a detailed comparison of these outsourcing and IT “hot spots” to help customers make more informed nearshoring decisions.

Among the key findings:

- Despite hurdles, Mexico’s outsourcing industry is expected to grow in 2012.
- Key areas where Mexico can add value include multimedia web development, mobile application development, gaming, and software testing.
- Challenges for Mexico include conservative business attitudes, high telecommunications costs, and a potential shortage of skilled
- English-speaking personnel in key outsourcing locales such as Mexico City, Guadalajara, and Monterrey.
- Customers should take into account signicant dierences in education and training quality among dierent areas of the country.
- While security is a concern, actual risk levels vary widely across the country, and rarely affect either outsourcers or customers.

To download 39-page report, please click here.



Global Insider: Mexico-Mercosur Auto Moves Send Mixed Signals

Under pressure from Brasilia, Mexico agreed last month to limit its automotive exports to Brazil, prompting Argentina to threaten to revoke its own trade agreement with Mexico in an effort to gain further concessions. In an email interview, Barbara Kotschwar, a research associate at the Peterson Institute for International Economics, discussed the Economic Complementation Agreement 55 (ACE 55), the 2002 automotive trade deal between Mexico and Mercosur, the trade bloc comprised of Argentina, Brazil, Paraguay and Uruguay.

WPR: What is the current state of trade between Mexico and Mercosur, particularly Brazil and Argentina, and what is the ACE 55 agreement meant to accomplish?

Barbara Kotschwar: The current state of trade between Mexico and Mercosur is volatile, marked by the recent renegotiation of the Mexico-Brazil ACE 55 and Argentina’s rhetoric threatening to pull out of its ACE 55 with Mexico. ACE 55 is part of a greater framework agreement initiative between Mexico and the Mercosur countries (ACE 54) that aims to enhance trade and economic ties between the two sides. From Mexico’s perspective, this was a step toward increasing economic relations with its main Latin American market.

Since ACE 55 went into effect in January 2003, trade between Mexico and Mercosur has more than doubled. Auto trade (Harmonized System code 87) has also doubled, but the dynamics of trade in this sector have changed — and have driven the dynamic of overall trade. In addition to autos, the bulk of Mexico-Mercosur trade is made up of HS categories 85, 84 and 29, which include machinery, electronics and organic chemicals.

WPR: What prompted Brazil and Argentina’s moves to renegotiate their arrangements with Mexico?

Kotschwar: Brazil and Argentina’s moves are motivated by a turnaround in the trade flows: While previously they had seen a surplus in trade with Mexico, over the past few years this has turned to a deficit as the Southern Cone countries have seen their currencies appreciate against the dollar.

With regard to auto trade, until 2008, Mexico had a trade deficit with Mercosur. This changed in recent years, and a deficit of $1.75 billion in the auto sector in 2003 turned into a surplus of $1.16 billion in 2010. Mexico’s auto sector exports to Argentina grew by 33 percent per year from 2003 to 2010, with auto exports increasing from $12 million to $943 million, while imports remained roughly the same, from $331 million in 2003 to $341 million in 2010. Auto-sector exports to Brazil grew even more dramatically, at 66 percent per year, while imports from Brazil fell by 5 percent per year. Uruguay — also a signatory to ACE 55, but which has to date not threatened to abrogate the agreement — has seen a similar dynamic: Mexico’s exports of auto sector goods have grown by 122 percent per year, while imports in that category from Uruguay have grown by only 4 percent by year.

Overall, auto-related exports have grown from making up 6 percent of Mexico’s exports to the Mercosur countries in 2003 to 44 percent in 2010 and have fallen from 35 percent to 24 percent of Mexico’s imports from Mercosur over that same period.

The renegotiation — and threatened withdrawal — from this agreement are worrying, particularly if this signifies a trend in regional trade policy. International automakers have already expressed concern at these changes in long-held agreements. One purpose of trade agreements — even limited, sectoral-scope agreements such as ACE 55 — is to provide security and predictability for the economic actors operating within the framework established by the agreement. If countries abandon treaties when the results of those treaties are, in the short-run, seen as unfavorable — a trade deficit, for example — then companies will no longer have the confidence in the rules established by these international contracts. Argentina is sending a warning signal to the markets. Mexico, by renegotiating with Brazil, has sent a mixed signal to the markets about its commitment to international economic terms of engagement.

WPR: To what degree do the automotive-trade negotiations reflect broader shifts in Latin American economic and investment flows?

Kotschwar: The auto sector is highly internationalized. The companies producing the autos that are traded between Argentina and Mexico include Fiat, Ford, General Motors, Mercedes, Peugeot, Renault, Toyota and Volkswagen. Thus the auto sector represents the globalized nature of Latin American economic flows. It is also, however, a highly protected industry in Mercosur, with relatively high tariffs, prohibitive local-content rules on outsiders — and even against other Mercosur countries. This latest auto spat seems symptomatic of the region’s turning inward, and of the bifurcation in trade policy between the inward-looking Mercosur and the outward-looking, Pacific-oriented countries, such as Chile, Colombia and Peru.

Source: World Politics Review – GAI


Nearshoring Fuels Mexican Manufacturing Growth

Security concerns don’t yet appear to be putting a major dent in Mexico’s appeal to manufacturers. Here’s why.

Closer, cheaper, friendlier. That might have been the formula underlying moving to or opening manufacturing operations in Mexico. The United States’ southern neighbor offers transportation distances a fraction of those from Asia, a labor force a good deal cheaper than domestic workers, and a country causing fewer headaches about intellectual property and other trade concerns. But in recent years, drug-related violence along the border has caused some manufacturers to be more cautious about making the move to Mexico.

Even with those concerns, Mexico continues to benefit from U.S. companies and other foreign investors who see it as an attractive manufacturing destination. In fact, 63% of those surveyed by AlixPartners, a business advisory firm, named Mexico the most attractive country for siting manufacturing operations closer to the United States. Only 19% of the companies reported supply-chain disruptions in Mexico as a result of security issues. And 50% reported they expect things to improve over the next five years.

Mexico’s proximity to the United States solves the most pressing issue facing manufacturers, which is speed to market, according to Rich Bergmann, global lead for manufacturing for Accenture. “The stability of the time schedule of supply has become paramount in manufacturing. Whether we like it or not, a 12-month forecast, steady-state demand is no longer a reality. Everyone is running lean supply chains and inventories. Being close to customers is key to reducing lead time. Add to that the overall total landed cost and that explains why reshoring is occurring in Mexico,” he says.

In fact, Mexico helps multinational firms cope with a variety of factors stemming from intense global competition, says Arnold Matlz, an associate professor at the W.P. Carey School of Business, Arizona State University. They include the pressure to reduce and control operating costs, the need for operational flexibility, the need for different service outcomes for different customers, and shorter product/service development cycles.

To date, manufacturers operating in Mexico have been largely shielded from the drug-related violence. “As reports have indicated, Mexico’s violence is characteristically cartel versus cartel. It is something that has not had a very large amount of leakage into civil society, nor has it affected, in a noticeable way, the companies that are already doing business there. As a matter of fact, in spite of what is in the news, Mexico’s manufacturing economy is humming along,” says Steve Colantuoni, director of corporate marketing for the Offshore Group. “Companies that are already in Mexico are increasing their numbers and their production.”

Foreign direct investment in Mexico rose 9.7% in 2011 compared to 2010 to reach $19.44 billion, indicating that violence is not chasing away dollars. This faith in Mexico is helping to fuel strong economic growth there. After a 5.5% growth rate in 2011, the Mexican economy is expected to grow 4.5% in 2012. Manufacturing has been a significant driver of the economy, growing 8% over the past year and creating 1.8 million jobs.

A High-Flying Aerospace Cluster

One industry flocking to Mexico for its lower cost structure and ample workforce is aerospace manufacturing. Between 2010 and 2011, total sales in Mexico’s aerospace cluster increased by 25% to $4.5 billion, according to the Aerospace Industries Association, far outstripping the industry’s overall annual growth rate of 15%, according to data from the World Bank.

To read entire article, please click here.

Source: IndustryWeek – GAI


Brazil, Mexico settle dispute over auto exports

Mexico and Brazil have modified their accord regulating bilateral trade in automobiles, including agreeing to cap the value of their vehicle exports over next three years, officials said.

Mexican Economy Minister Bruno Ferrari made the announcement at the close of meetings that had begun here Wednesday involving senior officials from both nations.

Under the new terms, due to go into effect Monday, the value of each country’s auto exports will be capped at $1.45 billion in the first year, $1.56 billion the following year and $1.64 billion in the final year.

Ferrari said the two sides had reached a deal to “save the trade accord”, which has governed the countries’ bilateral trade in vehicles and auto parts since 2003, as well as “restore (market) confidence.”

He added that at the end of the three-year period the ceiling will be removed and free trade in light vehicles will resume.

The Mexican official said there were no “winners or losers” in the negotiations because if the trade accord had been canceled the consequences would have been very difficult.

Both countries also agreed to promote efforts to strengthen trade relations, which have been shrouded in uncertainty due to Brazil’s concerns about a spike in Mexican auto exports in recent years.

According to figures from the Mexican Automotive Industry Association, or AMIA, Mexican auto exports to Brazil grew from 28,283 vehicles in 2007 to 147,535 units in 2011, an increase of 421 percent.

The biggest increase occurred from 2010 to 2011, when the number of exported Mexican vehicles jumped by 89 percent from 78,000 to 147,535, “which was what generated concern on the Brazilian side”, Ferrari said Thursday.

Even so, Mexico’s overall trade deficit with the South American giant amounted to some $21.71 billion between 2003 and November 2011.

The two countries also agreed to raise the amount of regionally produced components in their cars from a current level of 30 percent to 35 percent in March 2013 and 40 percent by 2016.

Brazil’s auto industry, like other manufacturing sectors in the South American country, has been battered by a strong real, while Mexican subsidiaries of General Motors, Nissan and Volkswagen posted strong export results in 2011 due to a weaker peso.

Source: SME Times – GAI


Suppliers eye Brazil, Mexico

Mexico and Brazil, where almost $15 billion has been committed to new automotive plants, are becoming increasingly attractive for Canadian supplier companies.

A number of Windsor-area companies already have manufacturing plants or service shops in Mexico, and more appear poised to follow.

“We have no timetable, but I would expect us to open a manufacturing plant in Mexico within the next five years,” said Roy Verstraete, president and CEO of Anchor Danly.

“As our customers open plants in Mexico, and as they grow, we would expect to follow them.

“There’s no point in getting there before our customers, but we would expect to follow at some point in the future,” said Verstraete.

Anchor Danly specializes in die sets, steel plates, fabrications and precision metal parts for a range of industrial sectors including automotive, appliance and agricultural.

Verstraete said his company’s strategy would be tied to participating in Mexico’s growing automotive sector and not simply be “a cheap place to make products. Windsor has a large mould-making, tool and die sector, and as they develop and expand satellite operations in Mexico, we need to follow them.”

Among local companies operating manufacturing plants or service shops in Mexico are the Narmco Group, Concours Mold, Platinum Tool Technologies, Advantage Engineering, Integrity Tool, and Windsor Machine and Stamping.

“The opportunities for growth are phenomenal,” said Eduardo Solis, executive chairman of the Mexico Automotive Industry Association.

“I’m not here to say you should shut down shops in Windsor, but I do believe you should partner with Mexico because the growth potential is immense,” he said at Thursday’s Automotive Parts Manufacturers Association regional conference in Windsor.

Solis said that before the end of this year, new plants built by Honda, Mazda, Nissan, Chrysler-Fiat and Volkswagen, representing more than $5 billion in investment, will have opened in Mexico.

Source: The Windsor Star – GAI