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Aerospace OEMS: Analyzing a Move to Mexico by Steven Colantuoni

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Aerospace OEMS: Analyzing a Move to Mexico by
Article Posted: 11/05/2012
Article Views: 40
Articles Written: 82
Word Count: 665
Article Votes: 0
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Aerospace OEMS: Analyzing a Move to Mexico

With exponential growth apparent in Mexico’s aerospace industry, business owners have good reason to explore whether manufacturing in Mexico makes economic and strategic sense.

From 1986 to 1994, few Mexico-based companies pursued aerospace manufacturing (Manufacturing Mexico) activities. However, in the decade following NAFTA’s implementation in 1994, scattered Mexican aerospace industry growth occurred. From 2005 forward, major OEMs have made their presence felt in Mexico. This boom has resulted in an increase in the number of aerospace manufacturing suppliers present in Mexico from 100 to more than 250 at present. This growth has confirmed Mexico’s relevance as a serious global aerospace contender.

“Mexican aerospace exports have grown from $100 million in the 1990s to $140 million in 2005,” senior aerospace consultant Jean Claude Bouche notes. “Today, Mexican aerospace products that are exported have an aggregate value of $4 to $5 billion.

“By 2015,” Bouche adds, “it may be possible that $12 billion of aerospace exports have their origin in Mexican aerospace manufacturing facilities.”

With those figures in mind, there’s nothing unusual about the fact that aerospace manufacturers are considering Mexico as the location for their next manufacturing facilities. The country provides low-cost manufacturing options, more expeditious shipping than China and other overseas options, and a large population of talented aerospace engineering professionals eager to work in the industry. As a result, most of aviation’s important players – including Airbus, Bombardier, Hawker Beechcraft and many others – have integrated Mexico as an offshore manufacturing destination.

So, what makes sense in order for a business to consider moving operations to Mexico? While doing business in Mexico offers cost advantages in labor and offers protection of intellectual property, it well could be that one’s competitors “at home” are considering the same options. Still, it remains that locating some aerospace manufacturing in Mexico provides the ability to create the same end product in a lower cost structure utilizing skilled labor conforming to content, complexity and practices of one’s “home” organization. (An example of that is evident in a recent Industry Week article, which lists wages for a qualified Mexican machinist at an attractive $25 per day, compared to the $20- to $50-per-hour wages paid in America or Canada. A quoted metal-processing services executive notes Mexican workers in this field are “as capable and comparable to engineers you will find in the U.S. or Canada.”)

Do “new” pockets of opportunity exist in Mexico’s aerospace landscape? Of course, but these remain marginal. There is more MRO (maintenance, repair and operations) work available in Mexico with the growth of aircraft construction, along with more airport-related services and equipment as the country’s airport infrastructures continue to grow.

However, for the time being, Mexico should be viewed as a platform both to enhance a company’s global competitiveness and to reach the U.S. and Canadian markets.

Suppliers who consider themselves “average” in size and capabilities – those with limited financial and human resources who wish to grow yet do not want to take on unnecessary risks – might want to consider partnering with an offshore operation to help them establish a business presence in Mexico. Questions that these suppliers should consider: Do I need offshoring? Is it within my reach? Does it optimize my chances of a good startup? Answering this triad usually leads to the appropriate business decision.

It should be stated that companies considering a move to Mexico should not view this adjustment in their business as a procurement or operation, nor should it be likened to a real-estate project. It is, in essence, establishing a full-fledged organization utilizing your knowledge and company culture to make quality, cost-effective products. So, when consulting a shelter service to help your company reach its goals of establishing a Mexico plant, your offshore plan must be in support of your business needs – rather than the other way around.


Steven A. Colantuoni is the director of corporate marketing for the Tucson, Arizona-based Offshore Group. Mexico Call Centers , Mexico BPO Facilities

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