The Manufacturing Move to Mexico Continues

bearings

With more than $8 billion in sales in 2012 and over 27,000 employees, Japan-based NSK Limited is a truly global power in ball bearings. NSK’s bearings are made for use in a multitude of products from aircraft engines and automobiles to machine tools and office equipment. The company has 130 overseas operations in 26 countries, and they recently announced their plans to establish a manufacturing subsidiary in Mexico.

The announcement furthers a recent trend of suppliers to the automotive industry opening or expanding facilities in the country, to take advantage of lower labor costs, proximity to the North American market and a plentiful, eager workforce.

NSK previously produced seat belts in Tijuana, Mexico from 1990 and 2000. But this time, NSK‘s 100,000 square-meter, $70 million facility, scheduled for opening in the spring of 2014, will be located in Guanajuato, Mexico, in the center of the country. Labor costs in this central region of Mexico can be as much as 50% lower than those in US/Mexico border cities like Monterrey or Tijuana. NSK decided this was the ideal area to situate its new facility in order to better take advantage of expanding automobile production in Mexico, to increase capacity in the Americas market and better manage exchange rate fluctuations, especially in comparison to its facilities in Asia.

Similarly, labor savings and efficiencies motivated automotive supplier Federal-Mogul Corporation to expand its plant in Puebla, Mexico. The Southfield, Michigan-based $6.9 billion global auto supplier will move 100 jobs from its Lake City, Minnesota plant to Mexico, to allow the consolidation of piston manufacture, which previously occurred in both facilities. Federal-Mogul designs, engineers, manufactures and distributes technologies to improve fuel economy, reduce emissions and enhance vehicle safety.

Not Just Suppliers

Automotive suppliers aren’t the only manufacturers making the move to Mexico, however. For example, Ball Corporation, a producer of aluminum aerosol packaging recently completed its acquisition of Envases del Plata S.A. de C.V., a producer of aluminum aerosol packaging with a manufacturing plant in San Luis Potosi, Mexico. The plant produces aluminum aerosol cans for personal care and household products to customers in North, Central and South America.

Boulder, Colorado-based Ball is the world’s largest manufacturer of aerosol and beverage cans. Overall, the company and its subsidiaries generated sales of more than $8.6 billion globally in 2011. The company was drawn not only by San Luis Potosi’s access to affordable labor in central Mexico, but also to a new end market for Ball’s products.

The San Luis Potosi facility, also situated in Mexico’s center, employs about 150 people and will serve as a unit of Ball’s Metal Food and Household Products Packaging Division, Americas.

Cost Factors

Emerson Process Management, a division of Emerson Electric Co., is also contemplating a move to central Mexico, though further north in Chihuahua, Mexico. It is considering the city as the site for a new manufacturing facility, in addition to considering Shakopee, Minnesota.

Chihuahua’s well-educated workforce are balanced by relatively high wages in the city, making Shakopee, Minnesota roughly on par from a cost standpoint.

Sources:

Finance Yahoo

Post Bulletin

Global Trade Magazine

Business Journal

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