Cummins Engine to Open Parts Plant in Mexico : Expansion: The Indiana-based firm is one of many U.S. auto parts makers opening assembly lines south of the border.
Cummins Engine Co. announced Wednesday the second of what Mexican authorities expect will be a flood of export-oriented auto parts plant expansions and openings that will bring $5 billion or more in investment to the country over the next few years.
The Columbus, Ind.-based diesel engine manufacturer with $3.5 billion in annual sales will make half the worldwide production of crankshafts for its two fastest-growing engine lines in a plant that the company bought from the Mexican government four years ago.
The $24-million investment in machine tools and equipment for two crankshaft assembly lines, one of which will begin operating late next year, will more than double the company’s investment in Mexico, said Theodore M. Solso, vice president and general manager of Cummins’ engine business group. All but 1% of the 140,000 crankshafts produced each year will be for export.
The announcement follows closely on Ford Motor Co.’s decision to double the size of its Chihuahua engine plant in northern Mexico. Currently, five other foreign auto parts investments are under study, including an automobile heater line by Valeo, the French auto parts maker, said Jorge Amigo, Commerce Ministry director of foreign investment.
With or without the pending North American Free Trade Agreement, Mexico expects 25 to 30 international auto parts companies to open or expand Mexican operations, he said.
Auto parts, including engines, are already Mexico’s single-most important manufactured export.
Besides expansions of existing plants, new auto parts suppliers will open factories as Nissan Motor Corp. and Volkswagen build billion-dollar automotive assembly plants in Mexico, Amigo said.
Mexican authorities are eager to promote automotive-related factories in part because the capital-intensive, high-technology plants refute the image of Mexico as a backward country with little to offer foreign investors except cheap labor.
The plant in the old mining town in the central Mexico desert beat out two U.S. sites for the crankshaft lines, Solso said. “San Luis Potosi was chosen because of the tremendous increase in productivity and quality since privatization,” he said.
In 1987, Cummins bought the 60% of the Mexican subsidiary it did not already own from the Mexican government. Since then, the subsidiary has nearly doubled its sales to $91 million a year, despite a market ravaged by a nine-year economic depression.
Production from the Mexico plant will complement, not replace, current production in Fostoria, Ohio, said Rick J. Mills, president of Atlas Inc., the Cummins subsidiary that makes crankshafts and other engine components.
Cummins expects international demand for the “B” and “C” engines that use the crankshafts to increase from 650 a day last year to 1,500 by 1995, Solso said.
