Luis Felipe Seldner, The Offshore Group, CEO

Please describe the development experienced by The Offshore Group over the last several years.

Our company effectively doubled in size over the period 2003 – 2007. When the current economic crisis began, we, as is the case with the vast majority of companies in the broader economy, felt its negative effects. We lost business and headcount in the Offshore Group industrial parks. Most of this loss was concentrated in automotive industry manufacturing. Since things have leveled off somewhat, we have had some organic growth return. That is, we have seen companies with operations in our industrial parks ramp up in terms of headcount above their 2009 numbers.

In terms of bringing new investments to Mexico, the last few years have been challenging. In addition to economic conditions, reports of cartel related violence have not had the most positive effect on our efforts. Despite this, however, we have had recent success in signing two clients. One is a company that designs and fabricates custom decorative metal trim for appliances and other manufactured items. The other is a firm that will be bringing some of its production from China back to North America. If all goes well during the remainder of this calendar year, we project the addition of three more companies to our organization's client base.

As of this moment, total headcount at all of The Offshore Group's facilities is 11,121 workers. This number includes 660 individuals who are employed by our Vangtel subsidiary.

Vangtel provides shelter services in Hermosillo, Sonora, for companies that operate in the business process outsourcing (BPO), IT development and the call center spheres. Given the need to reduce operating costs and retain margins in the broader economy, we have an expectation of significant growth at Vangtel.

What services does the Offshore Group offer at this time?

The Offshore Group is best known as the market leader for the provision of full-service outsourced manufacturing support, or shelter services for companies seeking to establish and maintain production facilities in Mexico. The full service shelter is a turnkey solution that provides companies with the human, legal, and physical infrastructure required to reach their manufacturing objectives within the context of gated industrial parks with 24 hour human and CCTV security. We also offer our shelter services in select markets to companies that either rent from third parties, or own their own real-estate.

In addition to manufacturing, we provide companies that have back office, IT and call center cost reduction needs with shelter services especially designed for them through our Vangtel subsidiary in Hermosillo. Lastly, our third party logistics company, International Logistic Solutions (ILS), provides a gamut of supply chain management solutions primarily in the Arizona – Sonora and Texas –Coahuila trade corridors as well as in Central Mexico.

Please explain the development of the Guaymas/ Empalme, Sonora aerospace cluster.

The majority of The Offshore Group's aerospace manufacturing clientele is housed in the Roca Fuerte Industrial Park located in Guaymas. The first aerospace company to install operations in the city was Smith West, a Phoenix-based company that was involved in the machining of aero structures. A Goodrich operation was the first aviation related tenant at the Roca Fuerte Park.

They were followed by an Esco Corporation sand casting facility.

Today, we have a total of 18 companies making parts in Mexico for OEMs. Activities that they are engaged in encompass everything from the manufacture of electrical systems, the fabrication of precision machine parts that are utilized in jet engine turbines to the elaborations of ailerons. Ailerons are hinged control surfaces attached to the trailing edge of the wing aircraft.

What are the present and future prospects of the aerospace industry in Mexico?

Mexico's aerospace related exports have more than tripled since 2004, and today the country is ranked 15th overall in total aerospace activity. During the last several years foreign manufacturers have moved the fabrication of big ticket items like tails and fuselages into the country. The growing aerospace cluster in Guaymas and Empalme is developing as the preeminent Mexican center for the precision machining of close tolerance parts that are used in jet engines. Although present economic turmoil began in 2008, we experienced growth at our industrial sites through 2009. This was due mainly to companies' filling back orders that had already been booked. The challenge as regards further growth in Sonora's aerospace cluster, and in the Mexican aerospace industry as a whole, is to get over the present economic speed bump that has been placed in our path.

Once current economic hurdles have been overcome Mexico will continue to be a preferred location for aerospace investment.

Although second to China in low-cost country industry investments, it has several advantages when looked at through a comparative prism. Mexico, in fact, offers:

• A labor force with a manufacturing culture and a historical expertise in electronics.
• A completed bilateral aviation safety agreement with the United States.
• A willingness to protect international property rights; and
• A geographic proximity to the United States.

These advantages will ensure that Mexico continues to attract a significant share of foreign aerospace manufacturing capital moving forward.

Please explain the participation of The Offshore Group in the development of Sonora's active aerospace industry.

First, I would like to take the opportunity to recognize the competent and conscientious assistance that we have received from the present Sonoran government administration and its economic development promotion agency, Copreson. They have both been particularly helpful to The Offshore Group in its efforts to promote the state to potential aerospace investors. They have acted to generate leads, to provide training incentives and information, and to attract the attention of providers of secondary operations. Our organization, of course, is continually making contact with aerospace manufacturers from all over the globe to inform them of the benefits to be found for them in Mexico in general, and in Sonora in particular.

And finally, our organization has invested in the construction of a new training center at the Roca Fuerte Industrial Park in Guaymas. We continue to work pro-actively with our aerospace manufacturing client base for the purpose of developing training programs that will give local workers the skills to master increasingly sophisticated operations.

Who are your aerospace industry clients?

For reasons of competitive advantage there are many clients who we would prefer not to identify by name. Some, however, include:

• Vermillion, Inc., is a manufacturer of custom made cables for defense and aerospace applications. www.vermillioninc.com
• GS Precision is a leader in the manufacture of high-precision machined components and sub-assemblies for aircraft engines. www.gsprecision.com
• Precision Products de Mexico is a manufacturer of complex machined parts. www.precisionaerospace.com
• Horst Engineering is an aerospace sheet metal and machining operation. www.horstengineering.com
• Trac Tool is a UK-based company capable of machining complex high, intermediate and low-pressure blades and vanes. www.trac-group.com

What projects are you developing at this time?

As regards to manufacturing, we will be offering our shelter services in Guadalajara in the not too distant future.

We believe that the city is one of the most attractive places for foreign investment in Mexico. It is also one of the most important non-border locations for manufacturing. We believe that our services will be welcomed by companies in the electronics, appliances and other industries located there, as well as by their suppliers.

Concerning International Logistic Services (ILS), The Offshore Group's 3 PL service provider, we are currently working on developing the capacity to process large ocean shipments. This will complement ILS' already well-developed ability to ship by land. In addition, ILS is also launching a service whereby it will distribute the manufacturers' finished product to their customers in Mexico.

Finally, Vangtel, the member of The Offshore Group that provides shelter services to companies in the call center, IT development and BPO markets, will soon be expanding to add another building to its inventory to accommodate recent growth. This will be in addition to its current 40,000 sq. ft. of business space at Hermosillo's Plaza Girasol, plus space at the Sonora Soft Technological Park in Obregon and expansion at the Hermosillo campus of the Monterrey Tech.

What is your plan of action for the remainder of 2010?

At present we are concentrating on organizing our 16th Annual Manufacturing at the Mexico Summit. This year it will take place at the Quinta Real Hotel in Saltillo, Coahuila.

Over the years, it has become the largest gathering of top level manufacturing executives in Mexico. Readers can learn more about the event at: www.offshoregroup.com/summit.asp

What final comment would you like to make to MEXICONOW readers?

I would just like to wish them success in their business endeavors during these challenging economic times.