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American Axle in Mexico

08 | 02 | 2011

Plant shows how far American Axle has come in Mexico

By STEPHEN DOWNER,
Automotive News, June 27, 2011 12:14 PM

American Axle in MexicoSILAO, Mexico — The advanced manufacturing complex of American Axle & Manufacturing Holdings Inc. here illustrates how far the auto industry in Mexico has come in the past decade.

The plant opened in 1998 with just 12 employees. Last year, with 2,700 hourly employees, it accounted for 28 percent of American Axle's global revenues of $2.3 billion.

In 2009 the plant won the prestigious Shingo Prize for manufacturing excellence, efficiency and working conditions. The prize, awarded by Utah State University's business school, is named for the late Shigeo Shingo, co-creator of the Toyota Production System.

The Silao complex is "a benchmark facility for the Mexican automotive industry," says Federico Flores, a Mexican national and director of American Axle's manufacturing systems at world headquarters in Detroit.

Take lean manufacturing. Before 2004, the plant needed five hours to change a typical die. Investments cut the time to 25 minutes in 2006, Flores says.

The Silao complex manufactures rear-axle assemblies, propeller shafts, driveline systems and forging components. In 2010 it registered 6.7 defective parts per million, down from 63 in 2004, the company says.

Kevin Lange, a quality consultant for Omnex Inc. and a former Chrysler purchasing executive, says defective parts under 10 per million is considered world-class.

American Axle has invested $4 million in equipment to measure dimensions of parts at the site, American Axle's only one in Mexico.

The company says about 40 percent of its production in Silao is for vehicles assembled in Mexico.

Low wages

American Axle invested heavily in Silao for two main reasons:

1. To supply parts to General Motors, its top customer in Mexico, and to Chrysler Group LLC. Both automakers have boosted production in Mexico substantially in recent years.

2. Low wages. "Obviously, we were looking for the most competitive labor costs, says John Bellanti, 57, American Axle's executive vice president for world operations.

The company declined to disclose its average wage in Silao — or at its American plants.

But, for context, the average wage and benefit package for hourly Mexican auto assembly workers is $6.94, according to Mexico's National Institute of Statistics and Geography.

Bob King, president of the United Auto Workers, estimates that his members in the United States working at auto assembly plants and parts factories earn an average of about $35 an hour in combined wages and benefits.

Workers at the Silao plant are young and well-educated compared with the largely gray-haired plant work force in the United States. The average age at Silao is 23, and 35 percent are women.

Agustin Rios, president of Mexico's suppliers association, INA, said that about 345 Tier 1 suppliers have plants in Mexico.

Magna International Inc., for instance, had 17,025 employees, including 1,500 engineers, at 29 manufacturing plants and two engineering centers in the country at the end of 2010.

Five years ago, it had 11,000 employees at 15 plants.

And Mexico has attracted high-tech work, not just work that requires cheap labor.

Mexico is "where we bring our latest technology," such as hydroforming, says Scott Paradise, vice president of marketing and business development for Magna in the Americas.

Hydroforming uses high-pressure hydraulic fluids and sophisticated machinery to bend metals into rigid shapes difficult to achieve with conventional die stamping. Vehicle frame parts are often made with hydroforming.

Bilingual children

For executives, Mexico generally is a congenial place to live, despite concerns about security in some areas. Guanajuato state, where Silao is located, has one of the country's lowest crime rates, local government officials say. Many American executives find the culture, food and schools in Mexico far more agreeable than in China, a global competitor with Mexico for low-cost parts.

When Gregory Tokarz moved to Mexico 18 months ago as manager of American Axle's Silao plant, he brought his wife and two young children. "We feel relatively safe here," Tokarz says. "It was an easy transition. There are very good schools for the kids, and housing is very good. It's a family-oriented culture."

They live 20 miles from the American Axle complex in the agricultural city of Irapuato, a city of 500,000, famous for growing strawberries and for its zoo.

They mix with their neighbors, most of whom are Mexicans, and do much of their shopping at the local Sam's Club and Costco stores.

Of the 300 salaried staff members currently at the American Axle complex, only nine are non-Mexicans. Usually they stay for an average of three years before being reassigned.

Lance Reinhard, executive director of global procurement and supply chain management at American Axle, met his Mexican wife in Irapuato, where he lived for six years before being transferred back recently to company headquarters in Detroit.

"There are advantages and disadvantages to having an assignment outside your home country," he says. "The biggest positives have been learning a new culture, learning new languages and truly becoming part of the local culture."

What he liked most about living in Mexico was "the openness of the people."

"I have made great friends who are truly now part of my extended family," he says.

Tokarz says his children's school — a private, bilingual institution for Mexican and foreign youngsters — introduces academic subjects earlier than in the United States. His kids speak Spanish fluently.

He's typical of many expatriates now — and unlike the ones whom Jacobo Gardea used to see about 10 years ago.

Says Gardea, new-business director of Silao's 3-year-old, $220 million Puerto Interior business park, "One executive would fly home to Ohio every weekend."


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