The recent opening by United Plastics Group Inc. of a new injection molding plant in Monterrey, Mexico, is just the latest sign that U.S. and European firms, especially those serving automotive or consumer end markets, are targeting Mexico for reinvestment with a renewed vigor.
This trend was a recurring theme with officials at the March 28-31 Plastimagen trade show in Mexico City, as some noted that just-in-time and speed-to-market supply-chain factors are breathing new life into Mexico as a closer-to-home option than China for North American manufacturers.
UPG, based in Oak Brook, Ill., has opened a new, 53,000-square-foot plant in Monterrey, Mexico's third-largest city. It is the company's second site in the city known as the Sultan of the North. The plant is slated for custom production of consumer, medical, automotive and electronics parts. UPG has a building large enough to expand its current base of 27 machines at the new site and is busy exploring sites for a possible third plant in western Mexico.
``The activity is exciting. For our footprint, we want to be a little more spread out,'' said Chuck Hoar, UPG's vice president of sales and marketing, by phone April 7.
``There's no doubt there's been a resurgence in activity by [original equipment manufacturers]. There was such an exodus for a few years. There was a lot of uncertainty in Mexico. But it's come back, and it's come back very strong.''
The company, which primarily serves the automotive and consumer industrial sectors, is looking at increasing its use of robots and automation to handle the jobs with less labor, as it explores smarter ways to set up its lean manufacturing, Hoar said. UPG is moving toward two-shot molding with a goal of introducing it in one of its Mexican facilities.
``The biggest thing that we have to keep remembering is that labor has increased over the last five years,'' he said. ``The days of throwing labor in to fix problems are gone, in Mexico.''
In good company
UPG is just one of many examples of the trend that has Mexico back on many companies' manufacturing radar screens. Firms such as Valeo Sylvania Automotive Lighting Systems, Moll Industries Inc., Whirlpool Corp. and Kamco Plastics Inc. recently have pumped money into plants in Mexico. And several offshore appliance makers, including South Korea's Samsung Group and LG Group, and Swedish giant Electrolux AB, also are investing in Mexican production facilities.
Electrolux announced in mid-2005 that it would open a refrigerator facility in Ciudad Juarez, with capacity to produce 1 million units annually.
Electrolux spokesman Tony Evans said in an April 10 e-mail that Electrolux has announced a $40 million addition to its refrigerator factory for production of additional refrigerator products. The Swedish appliance company plans to add as many as 1,000 workers in 2006 at the 1.6 million-square-foot plant. That would boost its employment to 2,500.
Coils of raw steel enter the factory, are formed into cabinets and joined with plastic interior liners that are molded on-site, foamed with insulation and then assembled into finished refrigerators. Electrolux invested more than $3 million in training before refrigerator production began, Evans said.
Officials pointed to many reasons for the flood of activity, including an emerging middle class in Mexico, where a salary of $650 a month qualifies a couple to buy a home that costs $25,200 in Mexico City, according to a recent Business Week article. Suppliers cite a need to be close to the U.S. market and more efficient command of a company's supply chain.
``We have a geographic advantage that China never will meet,'' said Eduardo de la Tijera, newly elected president for Mexican plastics association Anipac. ``U.S. companies are realizing that the China price is desirable, but they also see that managing their supply chain is easier from Mexico.''
While the trade show was taking place, the leaders of North America's three countries were meeting in Cancún, Mexico. There they announced the formation of the North American Competitiveness Council, which will integrate the economies of the U.S., Mexico and Canada even beyond the 1994 North American Free Trade Agreement. Mexican President Vicente Fox, U.S. President George Bush, and Canadian Prime Minister Stephen Harper said the council will consist of private-sector members from each country to give recommendations on the continent's competitiveness in areas such as automotive, transportation, manufacturing and services.
Still, the July 2 presidential election in Mexico has plastics industry officials wondering what's next, especially for the much-heralded Phoenix Project. The goal of that $2 billion project was to decrease Mexican processors' dependence on imported resin, and Anipac officials last year predicted that if Phoenix was deferred to the next administration, it would have the same impact as canceling it. The front-runner in the upcoming election is former Mexico City Mayor Andres Manual LÃ³pez Obrador of the Democratic Revolutionary Party.
Despite the uncertain state of the Phoenix Project, officials on the show floor were optimistic.
``Mexico is going to grow as well, because the U.S. is growing, said Antonio Febra, president of mold maker Geco LDA of Portugal. ``We want to be here when the market is profitable in 10 years. We've been very successful in showing clients the difference between what we have and what low-cost countries offer.''
Rodrigo Yniesta Rossier, general manager with Tai-Mex Importaciones SA de CV of San Luis Potosí, Mexico, said that the injection molding market in Mexico is expanding. In order to stay ahead of the game, officials will have to grow into new, nontraditional markets such as pets and agriculture.
``The competition is going to be very hard,'' he said in a March 28 interview at the show.
Mehmet SaraÃ§, with Trendy Molds in Istanbul, Turkey, said his firm is seeing growth in housewares and packaging. The company also is building its business in South America to sell injection molding equipment under its parent company, SaraÃ§ Plastics Machinery, also in Istanbul.
``The Mexico market has improved,'' SaraÃ§ said. ``The Chinese competition is coming faster and faster, day by day.''
``Projects are starting to come alive again because people are gaining on the capital side in Mexico,'' said Rui Soares, regional sales and marketing manager for Coperion Corp. of Ramsey, N.J. Small and midsize processors are starting to do their own compounding.
Jorge Carrillo Careaga, commercial manager for domestic resin giant PetrÃ³leos Mexicanos, also confirmed a growing investment trend among his Mexican customer base.
``In the last two years, we've seen customers acquire new machinery and we've had to adapt to suit their needs.'' While many of the country's smaller processors are disappearing, he said many others - extruders, injection molders and blow molders alike - are upgrading their technology by buying new machinery.
Oscar Carballo Gonzalez, Latin America business manager for resin distributor and compounder A. Schulman de Mexico SA de CV in San Luis Potosí, also said he is seeing positive signs.
``Most of the consolidation was done two years ago,'' he noted. There is still some restructuring happening among his customers, he said, but the results of those earlier actions are yielding stronger, healthier companies. He projected 15 percent growth, both in volume and value terms, for A. Schulman's business in Mexico in fiscal 2006, ending in August.
Meanwhile, recycling equipment maker Erema North America Inc. of Ipswich, Mass., is getting active in Mexico's bottle-to- bottle recycling sector.
``We're just now entering the market for this,'' said Clemens Zittmayr, area sales manager.
``Mexico is one of the top consumers of PET on the planet, so this to us is the most exciting path for our business. There are thousands of tons of plastic that leave Mexico and go to China. All this material could stay in Mexico, boost its economy and not the Chinese one.''
Plastics News Editor Robert Grace contributed to this report.