BMW to Open Plant in Central Mexico – What’s at Stake for Suppliers?

Commentary by John Paul McDaris

As originally reported in El Informador and covered in Maquila Portal, four states in central Mexico are under consideration by BMW as the location for the plant they will build in 2014. Guanajuato, Querétaro and San Luis Potosi were joined by Hidalgo, which gained last-minute consideration by the German OEM for the new facility.

Of course, BMW will succeed in central Mexico wherever they set up. Simply because they are BMW. That is given. What is less obvious is how BMW’s decision will affect tier suppliers and how such companies are likely to fare in each of the four states. Suppliers are certain to follow BMW, but the location BMW chooses will have a big bearing on their level of success.

When we examine how successful suppliers will be in each of these four states, several questions come to mind:
• Can suppliers afford to be here? The region is becoming increasingly expensive, translating to rising wages.
• Will suppliers want to setup operations with BMW in their backyard? Companies are reluctant to be too close to the OEMs they serve, primarily for fear of poaching top staff.
• If Querétaro is chosen, will BMW and the tier suppliers have difficulty competing with better-paying aerospace companies in the state? Will they want to put up with that level of competition?
• Is there enough talent in Guanajuato to accommodate another OEM?
• In San Luis Potosi, GM and some bus manufacturers are already operating in the state. Does this area offer enough skilled labor for BMW on top of that?
• If Hidalgo is the winner, would companies (either BMW or its suppliers) want to be that close to Volkswagen?

No matter where BMW sets up, it’s further proof that the Mexican auto manufacturing industry is moving up the food chain. BMW will be the second luxury OEM in the area after Audi (in Tlaxcala), further proving that central Mexico manufacturing is sophisticated enough to high-end vehicles.

Source: Maquila Portal

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