Warren Carter » Manufacturing

A Mexican Technology Park in Monterrey

Warren Carter — Wed, 29 Jul 2009 16:22:26 +0000

In a bid to move Mexico’s industry from manufacturing to “mindfacturing,” the new research facility has attracted many global corporations

The mix of tenants may seem curious. A new research building for PepsiCo (PEP) stands next door to future R&D centers for Motorola (MOT), Mexican cement giant Cemex (CX), and a Mexican auto-parts maker. But for Mexico, this hodgepodge is the nation’s hope to turn industrial Monterrey into an “international city of knowledge.”

Mexico has made huge gains in export manufacturing in the 15 years since the North America Free Trade Agreement was signed with the U.S. and Canada. But it has not kept up with Asian dynamos like China in terms of physical infrastructure and training of skilled workers. Mexico also lacks the up-to-date, efficiently run science parks that are popping up around Chinese cities like Beijing, Dalian, and Shanghai.

The Research & Innovation Technology Park, known locally by its Spanish acronym PIIT, could change that. Spread over 172 acres near Monterrey’s airport, the park grew from a program called Monterrey International City of Knowledge, started in 2003 by Nuevo Leon Governor Jose Natividad Gonzalez Parás, aimed and coordinating the public and private sectors to help reposition the city. It also was part of a larger goal to boost Mexico’s per-capita gross domestic product from about $10,000 today to $35,000, the current level of industrialized nations, by 2030. Another target is to rank among the top 25 nations in global competitiveness.

A Place of Knowledge

“We want to move from manufacturing to ‘mindfacturing,’” says PIIT Director Reynold González. Rather than being known mainly for its maquiladoras—low-wage factories that export to the U.S. and Canada—”we want this place to be a maquila of knowledge,” he adds.

Monterrey already is Mexico’s premier base for manufacturing. Among the city’s big-name factory operators are United Technologies’ (UTX) Carrier unit, Ford (F), General Electric (GE), Lenovo, and Whirlpool (WHR). Metro Monterrey, which with a population of 4.7 million ranks third in the country, is also headquarters to several of Mexico’s biggest conglomerates as well as Mexico’s top engineering school, Tecnológico de Monterrey.

The diversity of labs at PIIT illustrates the breadth of the city’s economic ambitions. The park’s first $145 million phase, which is around 85% complete, includes research and development facilities by national laboratories and universities for nanomaterials, microelectronics, mechatronics, water-treatment technologies, information technology, and materials for sustainable housing, among others.

Motorola engineers already are moving into PIIT to design telecom devices. In December, construction will begin on PepsiCo’s $20 million circular glass structure that will house a “baking innovation center,” where among other things 200 staff will develop cookies and crackers for Latin America and the U.S. The roof will have solar panels and gardens.

Pillars of the Mexican Economy

By clustering so many technologies, PIIT’s managers hope the campus will help spawn hybrid companies and industries. “We want to create technology-based companies that will be pillars of the Mexican economy of the future,” González says. Only around 300 people now work in PIIT. But that’s expected to reach 3,500 by late 2010.

PIIT also aims to help Mexican tech entrepreneurs. To that end, the park has set aside a building to incubate nanotech startups. Another facility will be run by the IC2 Institute, a University of Texas at Austin program devoted to commercializing technology. Visiting IC2 faculty will teach a masters program in technology transfer. A $3 million venture-capital fund also is being set up. “Mexico lacks a system for commercializing ideas,” González says. “We are trying to work with top industrialists to get them to become angel investors, but it’s not easy because they are used to safer investments.”

Even though PIIT still is in its infancy, González says, Mexico City, Chihuahua, and other cities are already looking to emulate it. “There are many initiatives to set up knowledge cities,” he says. “We are getting visits practically every other week.”

Engardio is an international senior writer for BusinessWeek .

Chrysler’s North American Plants to Resume Production in July

Warren Carter — Thu, 23 Jul 2009 00:01:46 +0000

By ALEX P. KELLOGG

Chrysler Group LLC will have all of its North American assembly plants up and running by late July, according to a schedule provided to the company’s suppliers Friday.

Production at a truck plant in Mexico will begin July 6, according to the schedule, while three other idle plants Illinois, Michigan and Ohio that primarily build Jeeps will resume production July 27.

Chrysler idled all of its plants during its bankruptcy process, which began April 30. The shutdown, along with cutting 789 dealers, helped it reduce its inventory of cars and pickup trucks.

The bulk of the company exited bankruptcy earlier this month. Last week, it inked a long-anticipated partnership with Italy’s Fiat SpA.

But only one of Chrysler’s 12 North American assembly plants is running at the moment. The company announced earlier this week that seven others will begin production by the last week in June.

The Saltillo Assembly plant in the northern Mexican state of Coahuila will be the first of the remaining unnamed plants to reopen. The Belvidere Assembly plant in Illinois, Jefferson North Assembly in Michigan and Toledo North in Ohio will reopen simultaneously in late July, according to the schedule.

In Saltillo, Chrysler builds the Dodge Ram and engines such as the HEMI; in Belvidere, the Dodge Caliber, Jeep Compass and Jeep Patriot; and in Toledo, the Jeep Liberty.

Chrysler resumed production at its Detroit Conner Avenue plant Monday. The plant, which makes the Dodge Viper, was the first it restarted.

Plants that will resume production later this month include Michigan’s Sterling Heights Assembly plant, home to the Chrysler Sebring and Dodge Avenger; Warren Truck Assembly, which produces the Dodge Ram and Dodge Dakota pickups and is also in Michigan; and St. Louis North Assembly, another plant where Dodge Rams are built.

Chrysler will continue its traditional two-week summer shutdown and idle all plants that restart during the weeks of July 13 and July 20.

The production schedule Chrysler provided to suppliers Friday indicated eight of its 12 assembly plants will work one shift, while four will work two. Those include the Windsor plant and a Brampton, Ontario one that builds the Chrysler 300, Dodge Charger and Dodge Challenger.

In a letter to suppliers also sent out this week, senior vice president of purchasing Scott Garberding reassured suppliers that the schedule it is providing is the company’s “plan of record.”

He also assured them the company will continue production through 2009, and complete all 2010 model year vehicles in time for “launches later this year.”

He did not specify what vehicles the company will launch, but Chrysler has announced it will introduce an electric vehicle this year.

“Chrysler is grateful for your patience during the Bankruptcy period,” said Garberding in the letter. “I simply ask that you work with us.”

Chrysler’s efforts to get its plants up and running come just as the company announced more changes up high. The company named new leaders in manufacturing, engineering and product design Friday.

Led by Fiat and Chrysler CEO Sergio Marchionne, the company had earlier named new heads of each of its three brands – Chrysler, Dodge and Jeep. It has also put a new face on its parts-and-services business, for example, and has shown a number of top, longtime executives the door.

Write to Alex P. Kellogg at alex.kellogg@wsj.com

So Much for the Cheap ‘China Price’

Warren Carter — Tue, 23 Jun 2009 19:37:29 +0000

A new study says rising mainland wages and higher shipping costs, among other things, make Mexico a better choice for manufacturing

By Pete Engardio

So Much for the 'China Price'

As purchasing manager for the North American arm of Japanese auto supplier Takata, Fred Heegan used to feel pressure to shift manufacturing to China. But when a customer pointed to a lower-priced Chinese part, Heegan would talk about the added challenges of quality, logistics, and engineering changes. “There are significant hidden costs to having supply lines that extend to China,” says Heegan, whose company manufactures auto parts in the U.S. and Mexico.

Heegan now looks like a visionary. A growing number of companies are moving beyond the usual considerations of labor and raw material costs in deciding where to produce goods to calculate the “total cost of ownership.” That means tallying expenses associated with things such as storage and delays. By this light, the so-called China price, which always seemed to be at least 40% below U.S. costs on everything from bedroom furniture to telecom gear, isn’t so low. In fact, China’s once-formidable edge in manufacturing has all but disappeared in some industries, according to a new study by Southfield (Mich.) firm AlixPartners, which researches and consults on outsourcing.

AlixPartners studied five categories of machined products, ranging from large engine parts requiring significant labor to small plastic components that need little. The cost shift has been dramatic. In 2005, AlixPartners found that by the time the items had arrived at a U.S. port, Chinese-made parts were 22% cheaper on average than those produced in the U.S. By the end of 2008, however, the average price gap had dropped to 5.5%, which often isn’t large enough to merit the hassle of manufacturing halfway around the world.