GM invests US$5 billion for further Mexico growth

By Graeme Stewart

Ernesto Hernandez, President of GM MexicoGM is going from strength to strength in Mexico and, thanks to a US$5billion investment to upgrade its plants in the country, is confident it can maintain its position as Mexico’s Number One vehicle export company.
Ernesto Hernandez, President of GM Mexico, was in bullish mood when MexicoNow caught up with him at the Xlll International Congress of the Mexican Automotive Industry held recently in Mexico City.
He emphasized the confidence GM has in Mexico and looked forward to even more exciting times ahead.
He told MexicoNow: “Everything is going according to plan for GM and we are confident in the future of Mexico. We made it clear last December that we would be investing US$5 billion in Mexico between 2013 and 2018 for the purposes of upgrading and expanding our facilities. So that is a real sign of confidence in the future of the automotive industry in Mexico.”
“That US$5bn includes the US$350m investment for the next generation Chevrolet Cruze small car that we will build at our plant in Coahuila.”
GM plant, Toluca
Hernandez had one word of caution involving the Mexican domestic market. He said: “The auto industry in Mexico has been performing well but, actually, I don’t think we are performing to the whole potential of the industry. There have been several years in which we have been underperforming in the domestic market. It should be running at 1.7million to 1.8 million units domestic sales but we have been running at around 1.1million and not even as high as 1.2 million. So there is tremendous potential there.”
But that apart, he was happy and added: “On the export side, yes we have grown thanks to our growth in capacity and the investments we have put into this country. Now GM is the number one vehicle exporter in Mexico. There are other important players but we are number one in vehicles.”
“Hopefully, we will be able to see further growth not only in investment but also in production, based on the leverage that the industry has been given. It is a good country for the auto industry for several reasons, some of them obvious others not so much”.
“I would have to say that the workforce is very talented, that the application is there, that there is talent in technical schools with a good set of skills on the engineering side and as such, combined with some macroeconomic factors and also some macroeconomics of the industry, it makes Mexico the place to manufacture vehicles for the Americas. So we have the potential to continue growing.”
Hernandez had words of praise for the Mexican government authorities and added: “Over the years, we have had good backing not only from the Federal Government but also from the government of the States in which we operate. So we can have no complaints at all on that front.”
And as to the future, he had this to say: “You can expect a lot more from GM. We are happy with our performance, we are happy with our expectations and we look forward to a bright future in the automotive industry in Mexico. GM is one of the key components of that industry, if not the main driver, and that will continue to be the case.”
GM plans to build more cars, engines and transmissions in Mexico, where it has been operating for the past 80 years.
Hernandez told the Congress that the investment would double GM’s production in the country. The expansion will create up to 5,600 GM jobs plus 40,000 jobs in related industries in Mexico.
He said the country had set new records last year in terms of production, exports and sales as Mexico produced 3.3 million cars from January to November 2014, up 240,000 from the same period in 2013.
GM plant, San Luis Potosi
While the U.S. is Mexico’s biggest market, Hernandez said exports to Canada and China have seen the strongest growth recently.
GM has 14 factories and 15,000 employees in Mexico, where it builds cars such as the Chevy Aveo and the Cadillac SRX, as well as engines and transmissions. In 2013, GM made 647,000 vehicles in the country.
The automaker said it plans to upgrade facilities in Toluca, Ramos Arizpe, Silao and San Luis Potosi.
Hernandez’s confidence in Mexico was reflected in figures released by AMIA, Mexico’s Automotive Industry Association, which showed that Mexico’s automotive industry was mature, dynamic and in continuous growth. That was shown in the fact that in 2014, light vehicle production reached a new historical record with 3m vehicles.
Currently, the automotive sector accounts for more than 6 per cent of the national GDP and 18 per cent of manufacturing production. AMIA says the Mexican automotive industry was expected to continue increasing in the future and forecasts indicated production will reach 4 million units by 2018 and 5 million by 2020.
Companies in the light vehicle industry have a total of 18 production complexes located in 11 states of Mexico, where they perform activities that range from assembly to casting and stamping of vehicles and engines. Currently, more than 48 car and light truck models are produced in Mexico.
In terms of heavy vehicles, the OEMs have reached an important level of development in the country, performing activities ranging from assembly, stamping and bodywork, producing a wide range of models to satisfy the demand of the domestic and export markets. Currently, 11 commercial vehicle manufacturers and two engine manufacturers for this kind of vehicle have production facilities in Mexico.
GM plant, Ramos Arizpe
In 2011, Mexico reached production of 136,678 heavy vehicles, ranking as sixth producer globally behind China, Japan, India, The United States and Brazil. Heavy vehicle production in Mexico is expected to reach 196.8 thousand vehicles by 2016.
Mexico is the wold’s eighth car, truck, part and component producer. It’s main export market is still the United States, even when in recent years, several markets, such as many Latin American countries, have increased their share in Mexican exports.
In 2014, nine of every 100 vehicles were exported to Latin America. The main destinations for Mexican exports were Brazil, Argentina, Colombia and Chile.
Europe is another important destination for Mexican exports: four of every 100 light vehicles exported in 2014 were sent to the European Union. But the U.S. remains the main market for Mexico with a 70% share of all light vehicle exports.