Mexico’s industry grows under another’s wing
Building jet airplanes has long been the domain of advanced industrial nations. Now, Mexico is trying to join the club by hitching a ride with a Canadian aerospace company.
Montreal-based Bombardier Aerospace broke ground this month in this central Mexican city on a massive complex to build wiring harnesses, fuselages and flight controls. The company, best known for its Learjets and other executive jets, employs 450 workers here. It plans to have 1,200 by the end of next year.
For the record:
12:00 a.m. May 26, 2007 For The Record
Los Angeles Times Saturday May 26, 2007 Home Edition Main News Part A Page 2 National Desk 1 inches; 30 words Type of Material: Correction
Helicopters: An article in Business on Tuesday about Mexico’s aerospace industry said McDonnell Douglas was manufacturing helicopter fuselages in Monterrey, Mexico. The company making the fuselages is MD Helicopters Inc.
Since it began production in temporary quarters in May 2006, Bombardier has hit the throttle. Its Mexican employees are cranking out sub-assemblies such as tail rudders and stabilizers two years ahead of schedule.
Mexican officials project Bombardier will start assembling complete planes here within five years. Company executives won’t make any promises, but it’s clearly on their radar screen.
“There is no doubt in my mind that if we stay focused the way we are now ... that [Mexico] can do the same as we do in Canada or Europe or the United States,” said Real Gervais, director general of Bombardier’s Mexican operations.
Industry experts are dubious. Some suspect that Bombardier’s talk of building aircraft here is a ruse to keep Canadian unions in line.
But if it comes to pass, Mexico will be one of the few developing nations doing final assembly of sophisticated planes.
“This is the great objective that we all have, not only Queretaro, but the nation,” said Renato Lopez Otamendi, secretary of sustainable development for the state of Queretaro.
Mexico’s aerospace industry comprises about 125 firms and 16,500 workers, most in the northern part of the country. Once little more than a low-cost job shop for U.S. aerospace suppliers, Mexico is handling increasingly sophisticated tasks.
A General Electric Co. subsidiary employs 500 aerospace research and development workers in Queretero. McDonnell Douglas is manufacturing helicopter fuselages in Monterrey. Some large aircraft maintenance operations are setting up shop. U.S. imports of Mexican aerospace products totaled nearly $178 million last year, up 60% from 2000. Total aerospace exports topped $500 million in 2006, according to Mexico’s Economy Secretariat.
Government officials want to keep Mexico moving up the supply chain. Although it has no ambitions to launch its own national program, as China is planning, Mexico wants more high-value tasks from big companies, including structure and design work and final assembly.
“The big challenge for our country is to move toward a technology economy, toward a knowledge-based economy,” said Eduardo Solis, head of investment promotion for the Economy Secretariat.
Mexico doesn’t have much choice. It’s fast losing basic industries such as textiles to nations with cheaper labor. So Mexico is looking to capitalize on its success at building products such as automobiles.
Aerospace carries a special cachet. The industry has a huge “pulling” effect on other industries such as electronics and metallurgy. Countries that can build something as complex as a jetliner are viewed as having their industrial act together.
“It’s a big deal,” said consultant John Walsh of Maryland-based Walsh Aviation. “But there are a lot of hurdles to getting into the big leagues.”
Developing countries produced fewer than 10% of the aerospace parts imported by the U.S. last year, according to U.S. government figures.
The industry is capital-intensive and highly regulated, said Richard Aboulafia, aerospace analyst at Virginia-based Teal Group Corp. He said the world’s plane builders produced fewer than 3,600 turbine-powered aircraft last year, so there’s little incentive for new competitors to jump into the business. Existing players don’t need vast amounts of cheap labor; they need highly skilled factory hands. Quality demands are relentless.
Still, developing nations see opportunities. Despite previous failed efforts, China plans to develop large cargo and passenger aircraft to serve its burgeoning aviation market. Brazil’s Embraer has made a global splash with its small regional jets.
Embraer’s biggest competitor is Bombardier. The Canadian company is the world’s No. 3 aircraft maker, behind Boeing Co. and Airbus. Its main products are business jets, which are experiencing soaring demand, and regional jets, a segment that is struggling. The company has laid off thousands of workers in recent years and is under pressure to reduce costs. That was a major factor in its decision to put a facility in Mexico.
Bombardier’s interest in Mexico began with former Mexican President Vicente Fox, who persuaded company executives to consider including his nation in their global manufacturing network. After a lengthy search, Bombardier in late 2005 settled on Queretaro, an industrial hub of 1.6 million people 140 miles northwest of Mexico City. It is home to research centers and multinationals attracted by its solid universities and educated workforce.
The city’s international airport was a particular attraction for Bombardier. That’s where it is building its new complex, part of the company’s plans to invest $200 million in Mexico by 2016.
The temporary plant is running at full capacity. Workers are producing wiring harnesses for CRJ 700 and CRJ 900 regional jets and for Challenger 300 and Global Express executive jets. Plans call for Mexico to become the main producer of the electrical guts for all Bombardier planes. It’s typical of the labor-intensive work being outsourced to lower-cost countries.
Still, Bombardier’s Mexican employees have proved capable of more complex tasks. Workers in polo shirts and goggles build the center fuselages for Challenger 850 executive jets and flight controls for the Q400 turboprop regional aircraft. When the new facilities open, they’ll assemble aft fuselages for Global Express business jets.
Employees are thinking even bigger.
“I want to design airplanes,” said harness builder Enrique Del Bosque, who spends his days hunched over a table plugging wires into connectors, grunt work for a 38-year-old engineer.
Plant manager Gervais said managing those high expectations was one of his biggest challenges. The company has attracted a slew of qualified workers, some of whom left better-paying jobs for Bombardier.
Gervais said that their enthusiasm was first-rate, but that their productivity and leadership abilities weren’t -- not yet, anyway. The learning curve to build planes is steep. He said it would take years for his team to acquire the needed experience. Mexico must seal a safety agreement with the U.S. so that aircraft made here would pass muster with American aviation authorities, he added. Suppliers would have to commit to join Bombardier in Queretaro. The company now imports most of the components, a time-consuming hassle.
“We need to build the base of the aerospace industry [in Mexico] before we start designing planes and manufacturing complete planes,” Gervais said.
Queretaro officials are pushing to make it happen. A local university created a technician program within weeks of Bombardier’s commitment to Queretaro. The state is building a $50-million aeronautic training center. It recently hosted a group of 20 potential suppliers to persuade them to set up shop.
Consultant Walsh is skeptical about Mexico’s chances. He said Bombardier had a history of shifting work around as a bargaining tool in labor talks.
“Most people see it as a ploy to help with the union negotiations within Canada,” he said.
Workers such as Maribel Rojas Morales hope he’s wrong.
“We’re improving every day,” said the 24-year-old wire harness worker. “We can do it.”