Foreign Direct Investment Vital to Mexican Aerospace Industry

Foreign Direct Investment Vital to Mexican Aerospace Industry

Commercial jets could be completely assembled in Mexico in the near future, but the overall success of Mexico’s aerospace industry hinges on foreign direct investment.

So says Mike Smith, an aerospace industry strategic sourcing specialist who has worked with a major OEM in the Mexican aerospace industry, and is now a member of The Offshore Group Smith also heads a side project, Independent Mexican Advisory Council, assisting organizations and smaller aerospace companies seeking to support original equipment manufacturer (OEM) activities in Mexico as part of their growing supply chain efforts.
Smith first visited Mexico to examine its aerospace supply chain structure. “That led me to more investigation throughout Mexico, visiting different states in the country,” he says.

In his travels, Smith saw patterns emerging. Mexicali and Baja California were among the earlier aerospace clusters evolving in Mexico, focusing on electronics, non-complex sub-assemblies and heavier aerospace machining to support California-based companies. Farther east in Guaymas, the emphasis was on engine components. Continuing eastward, Smith found “the largest and fastest-growing clusters” in Chihuahua, home to some of the large aero structure manufacturers and OEMs. In Queretaro, the focus was on repair and overhaul for engines, smaller aero structures and landing-gear components. (Though Monterrey, Nuevo Leon offers “a great complement of a variety of Mexican aerospace companies,” no specific niche industry is highlighted there, he notes.)

“There were a number of suppliers very eager to enter into the aerospace industry” with previous experience in automotive, home appliances, refrigeration and electrical, Smith notes, “but (they) didn’t really understand the steps it took to become an AS9100 certified supplier for aerospace industry purposes.” (AS9100 is a standardized quality management system for the aerospace industry.)

Promexico and the Mexican government “really stepped up” in providing education support to companies seeking AS9100 certification, Smith notes. But learning is only half the battle.

“The effort and cost it takes to develop a supplier up to the AS9100 standard and have them understand is a long process,” he explains. “The task of locating an aerospace manufacturing facility in Mexico to get the market to offer their customers a cost-competitive model is their number-one priority. That is why we see, over the course of the last several years, a huge effort on trying to entice Tier 2 suppliers to the aerospace OEMs to come locate a facility in Mexico. We will use the local Mexican suppliers for subcontract work to the Tier 2 companies, to start small before they start to run on a larger scale.

“Right now I see how we’re in transition of having our aerospace suppliers invest in Mexico to support our expansion strategies there,” Smith continues. “We currently see a lot of activities being partially completed in Mexico, and sent back to Canada, U.S. or Europe.”

That may soon change. According to Mexico’s trade ministry, more than 50 aerospace and defense companies have started operations in Baja California in the past five to 10 years. (The majority of these are American, producing everything from electronic components to steel bolts for military and commercial aircraft.) Additionally, the Canadian Trade Commissioner Service notes a 2009 AeroStrategy study placed Mexico among the top countries in terms of total aerospace investments. Mexico is No. 1 in manufacturing investments ($ 33 billion in the last 20 years) ahead of both the United States and the BRIC countries (Brazil, Russia, India and China).

“We’re starting to see a great recovery of business jets, more being bought in Mexico, companies like Bombardier making their Lear Jet 85 in Queretaro,” Smith says. “We’re seeing the larger air frames like Hawker Beechcraft, Cessna. Also, there are larger air frames coming out of Mexico. In my opinion, it’s only a matter of time until we see a full airplane assembled in Mexico.”

Steven is the director of corporate marketing for the Tucson, Arizona-based Offshore Group. The Offshore Group has enabled businesses to establish and start-up low-cost and low-risk operations since 1986 Steve has been working in the area of U.S. -Mexico manufacturing and trade for the past twenty years, and is fluent in both Spanish and Portuguese Manufacturing in Mexico , Mexico Shelter Companies

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