On Auto Suppliers in Mexico and Goldilocks

Commentary by JP McDaris

We regularly meet with manufacturers on tours and site visits throughout central Mexico. As part of these meetings, we advise companies contemplating Mexico to look into plants and operations in a number of different regions of the countries.

They obviously consider factors such as the regional talent available, transport logistics, growth opportunities and the presence (or lack of) OEMs nearby. We typically provide them also with information about the union landscape in particular areas of the country, because the absence or presence of union traditions can have a huge impact on the human resources front. That’s why the aspect of navigating the local/regional union landscape is an important component of the service Entrada provides. We know the states and regions well due to our track record here.

In many markets, entering or prospective OEMs don’t want to deal with the headache of unionized labor. That’s why, for example, Audi moved as far away as they could from the city of Puebla, to a remote location closer to the border of Tlaxcala and Puebla.

As this blog post in Yahoo’s Motoramic blog points out, Volkswagen is driving much of the labor market in and around Puebla (its plant is situated just outside the city), where the German OEM operates the largest car plant in the Americas and the second-largest VW facility in the world. This situation is not unique to VW, of course, as an OEM will have a big affect on the local labor landscape.

All things being equal, suppliers will want to operate at a “Goldilocks” distance from the OEMs who are their customers – not too far and not too close. If they’re too far away, the OEM won’t accept their bid at all. If they’re too close, it opens up concerns about potential talent poaching as well as the risk of your client having too accurate a picture of your true costs.

Back to VW in Puebla

It’s no secret that most people working in the proximity of VW’s Puebla plant would want to work there. Who wouldn’t want to work in a clean, orderly, highly professional environment? Who wouldn’t want to add VW to their resume? According to the Yahoo blog post again, the plant receives an average of 1,100 applications for every 110 openings. The massive plant employs 15,000 people overall, with 12,000 dedicated to manufacturing.

The challenge is not finding the best and brightest if you are Volkswagen. It’s finding the best and brightest if you aren’t. Without the local market knowledge of an insider like Entrada, it is an enormous challenge.

Source: Yahoo

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