Mexico has surpassed Canada as top exporter of components to the U.S. auto industry, according to Deloitte Consulting in Mexico City.
However, most of the auto parts growth has been spurred by components facilities owned by foreign firms. And if domestic companies want to survive, they must continue to globalize and become competitive in the production of high technology products, say industry insiders. “They have three options because the Mexican market is too small. Either they expand, get acquired or they partner with someone who has a global reach,” says a spokesman for San Luis Rossini, a supplier of suspensions and brakes.
Mexico accounted for 28.8% of auto parts imported into the U.S. in 2000, the data indicates, slightly edging out Canada's 28.7%. Shipments of Mexican-made components to foreign markets totaled $10.68 billion last year, up 4% from 1999. Suppliers invested $1.575 billion in Mexico in 2000, and auto parts industry employment totaled 402,810 compared to 372,970 in 1999 and 355,890 in 1998.
Many Mexican-owned suppliers rely heavily on the domestic market. As assembly plants go from producing cheap compact vehicles to important product programs such as theNew Beetle and Chevy Avalanche, weaknesses are being exposed.
“Segments of the Mexican auto parts industry, such as engines and engine parts, are globally competitive, providing good quality products and attractive prices,” explains Mr. Renero. “But it is weak in the production of high-tech products such as computerized systems, high-tech safety systems, fuel injection systems, emission control devices, etc. There are a lot of parts that have a shortage here that the automakers have to look elsewhere to buy.”
Small and midsize local firms lacking global resources and deep pockets have been unable to keep up with the pace of technology. While consolidation has been underway for several years, Mr. Renero forecasts more activity in the next five to 10 years. Currently about 4% of the estimated 500 suppliers in Mexico account for 59% of total sales.
Many larger suppliers are part of conglomerates, which goes against the trend of divesting non-core businesses. Engine parts supplier Nemak is part of Grupo Industrial Alfa SA and San Luis Rassini is part of Corporacion San Luis SA.