Mexican and Japanese Aerospace Companies

Looking a Teaming up to Supply OEMs in North America The Mexico Japan Economic Partnership Agreement (EPA) was formed in 2005 and its main objective is to promote the expansion of business between Mexico and Japan. The following piece was published in the EPA News Letter #19.

Over the last few decades, global companies have looked to Mexico as one of the leading emerging economies fully using its human capital endowment into producing in high-tech areas such as software design and aerospace production. In order to be able to capitalize on the global economic recovery currently underway, North American and European aerospace OEMs are pressured to reduce costs and maintain and expand markets. Since the aerospace industry is highly globalized, companies from both industrial and emerging economies compete to develop aerospace products with the best quality and low cost.

Mexico has rapidly developed its aerospace industry, and today, it boasts that it is considered by industry experts as one of the world’s most competitive countries for production in this sector with manufacturing clusters that have attracted OEMs, including Bombardier.

The establishment of OEMs in Mexico has prompted suppliers worldwide to establish themselves close to their manufacturing and assembly facilities to save on cost and time for delivery. Today, among the 200 aerospace companies which are operating in Mexico, 79% are engaged in manufacturing, 11% in repair and maintenance, and 10% in engineering and design. The industry has created 27,000 direct jobs in 16 Mexican states. Its exports were growing consistently, mainly to North American markets, until the recession hit last year. A wide range of products are manufactured in Mexico, including propellers, landing gear, turbines, turbo-reactors, fuselages and rotors, as well as small parts such as hoses, harnesses, and sensors.

As a market for aerospace products, Mexico is also among the world’s top 20 importers of parts, components, systems, and aircraft. Moreover, Mexico ranks second in the Americas in the number of aircraft in the General Aviation segment. In 2008, Mexico had the largest feet of aero taxis in Latin America with 1,723 aircraft.

It also accounted for 87 percent of the total number of executive jets in the region with 1,045 registered aircraft in that category.
Japan’s aerospace industry has distinguished itself for its innovation, engineering, design, and quality in manufacturing of aircraft and space parts and electronic systems. Its companies are important suppliers to domestic manufacturers but also to North American clients including Boeing, with exports of airframes and engines for commercial aircraft, military parts and components, as well as space related products. For commercial aircraft, Japanese companies have engaged in international cooperation agreements, or have worked under licensed contracts to supply products. As the most recent example of the latter, in the development of the newest Boeing 787 model, this company outsourced the production of wings for the first time to Japanese companies whose work share has reached about 35% of airframe and 15% of engine production.

For Japanese suppliers to be able to work more efficiently with North American aerospace clients, outsourcing some of their production of key parts and components to Mexico is the answer to save costs and shipping time for delivery.

Mexican Mission of Aerospace Companies finds Business Opportunities in Japan

As a result of the Mexico-Japan EPA implemented in 2005, the Mexican government started to promote synergies among aerospace industries in both countries with the aim of developing business and investments in manufacturing and outsourcing across the Pacific. The promotion of the sector in Japan by the Embassy of Mexico in Tokyo has increased in the last few years, with the participation of the government of Japan through METI and JETRO, the Society of Japanese Aerospace Companies (SJAC), and companies such as IHI, Nabtesco, Mitsubishi Heavy Industries, and Mitsubishi Aircraft Corporation.

In 2008, the first mission ever of Japanese company executives visited Mexico to learn about the country’s manufacturing and design capabilities in this sector. The Japanese mission visited manufacturing plants and held meetings with industry executives and local government officials in the cities of Queretaro, Chihuahua, and Monterrey, where aerospace clusters have been developed.

In September, a reciprocal mission of Mexican aerospace company executives visited Japan. The mission, which visited Tokyo and Nagoya, was composed of fourteen representatives from the Mexican Federation of the Aerospace Industry (FEMIA) and eleven Mexican aerospace companies.

The Embassy of Mexico in Tokyo, the Greater Nagoya Initiative Center, Chubu METI, and the Chubu Aerospace Technology Center (C-ASTEC) co-organized a seminar and plant visits for mission members in Nagoya. The seminar was attended by almost two hundred participants.

A business matching session with more than thirty companies from the Nagoya area, and visits to the plants of Nabtesco, MHI, and IHI complemented the mission’s activities and business networking.

As a result of the mission, some Japanese companies are already researching possibilities in building partnerships with Mexican suppliers. A well-known Japanese aerospace components manufacturer that produces fight control actuators is considering partnering with several Mexican companies. One is a company based in Chihuahua which produces harnesses and fight control systems for the global aerospace industry.
Bombardier Chooses Mexico for its Global Aerospace Manufacturing Today, as the global recession wanes, investors’ confidence focuses on the opportunities and markets with the best prospects. In 2005, Bombardier Aerospace chose Mexico as the manufacturing site for its long-term strategy to produce aircraft products, and eventually, complete aircraft.

A year later, Bombardier’s Queretaro Aerospace Park in central Mexico opened its world-class manufacturing facility complementing existing manufacturing sites located in Canada, Northern Ireland, and the United States. Currently, Bombardier Aerospace has approximately 1,900 full-time employees working at its plant facilities in Mexico where they manufacture electrical harnesses and structural aircraft components. These components include the Challenger 850 mid-fuselage, the Q400 aircraft fight control work package (rudder, elevator and horizontal stabilizer), and the Global family of aircraft fuselages.

A local supplier base to further support Bombardier’s Mexican operations is being developed, along with an aerospace university that has started to graduate engineers and technicians in Queretaro.

In 2010, Bombardier will complete its fourth plant in Queretaro which will produce airframes and wings made of carbon composite materials and electric harnesses for the Learjet 85. Components built in Mexico will be shipped to Wichita, Kansas, in the United States for final assembly, interior finishing, fight tests, and customer delivery.

The reasons for which Bombardier chose Mexico as its premier manufacturing site include the country’s infrastructure, competitive transportation costs, manufacturing quality, ample availability of highly trained skilled workers and engineers, its proximity to North American clients, and its aircraft component manufacturing certi fication. In 2007, Mexico signed the Bilateral Aviation Safety Agreement (BASA) with the United States, by which aerospace products and services certified by Mexican civil aviation authorities are fully recognized by the U.S. Federal Aviation Authority. This certification mechanism has improved the advantage of Mexico as a site for manufacturing and services to provide North American OEMs. As for manufacturing cost, several independent research firms have found Mexico as the most competitive place for manufacturing.

According to the 2008 edition of “Competitive Alternatives” report published by KPMG, for example, manufacturing cost for aircraft parts in Mexico is 23% less than that of the United States.

The EPA office may be contacted at the Embassy of Mexico in Tokyo, Japan. The EPA website is www.mexicotradeandinvestment.com