NAFTA Success Story--Sanluis Rassini will quadruple its brake sales

Sometimes, large investments pay off handsomely.

In the past few years, Mexican supplier Sanluis Rassini has poured $320 million into three new plants in Piedras Negras near the U.S. border and in Mexico City, as well as in a technical center in Plymouth, MI. The investments nearly matched the company's 1998 sales, which totaled $381 million.

Part of the strategy was to cultivate Rassini's recent foray into rear brake components for trucks, an orphan business that was acquired from a Mexican construction company after residing previously withAlliedSignal Inc. and Budd Co.

In 1998, Rassini reported only $37 million in total brake sales, a figure expected to reach $50 million in 1999, $100 million in '03 and $200 million in '05, based on contracts in hand. Customers include the high-volume GMT-800 full-size pickups (discs, hubs and drums), as well as Volkswagen's New Beetle, which is produced in Puebla, Mexico.

"We're a new company from what we were five years ago," says Antonio Madero, chairman and CEO of Sanluis Rassini. "Now we have a productive workforce and a multinational team. We have achieved a high level of quality and consistency and we've become customer-focused."

The brake venture is ancillary to Rassini's primary automotive product line of leaf springs, coil springs and torsion bars. In all, suspension products made up more than 90% of Rassini's 1998 sales.

The company commands 60% of the North American market for leaf springs, which is likely to remain a healthy segment for rear suspensions in pickups, although sport/utility vehicles and minivans are moving toward smoother-riding independent rear suspensions.

Sanluis Rassini is among the companies reaping the benefits of 1994's North American Free Trade Agreement, which removed some tariffs and trade barriers between the U.S., Mexico and Canada.

"Growth in the Mexican auto industry since NAFTA has been spectacular," Mr. Madero says. "We see more of it coming as the light vehicle market keeps its momentum and the American economy stays in good shape."

Rassini's exports, primarily to automakers in the U.S., account for 93% of 1998 sales.

But NAFTA has done more for Mexico than bolster its auto industry. Increased demand from its northern neighbors has created a new attitude and stricter work ethic. Just recently, for example, Mexico eliminated the siesta, the midday shutdown that left only a small window in the morning for business communications with much of North America.

"Mexico is a good place for manufacturing because we have a good manufacturing culture, and that's not only when you have something to be assembled but when you have more sophisticated products," Mr. Madero says.

Vehicle production figures convey the growth in Mexican manufacturing. Car, truck and bus production in the region skyrocketed from 285,485 in 1983 to 1,080,144 in 1993 and 1,459,478 in 1998.

Other suppliers also are expanding their presence in Mexico, a good source for low-cost labor. Eaton Corp. announces plans to spend more than $100 million to build a new plant for truck transmissions to meet increased demand.

"The Mexican labor force is very malleable, young, dedicated and accepts ideas very openly," Mr. Madero says. "They're not tied up to fixed ideas. They are very trainable, therefore, with the proper training you can get the best production."

And Mexican manufacturing is earning a new reputation for better technology and quality. "We are a Mexican company, but we are not a 'Mexican company,'" Mr. Madero says. "We are being rewarded with quality awards by General Motors Corp., Ford Motor Co. and Nissan Motor Co. Ltd."

The company wants to be global and already has suspension component plants in Rio de Janeiro and Sao Paulo, Brazil. In addition, it isn't ruling out the possibility of beginning an operation in the U.S., perhaps through an acquisition.

Its biggest potential lies in more complete brake systems. Currently, Rassini supplies rotors, discs, drums and hubs, which are assembled by the automaker or another supplier. Mr. Madero wants to supply a full corner module. "I expect that we will be in that business in the next few years," he vows.