By Guy Taylor
Monday, May 14, 2012
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Instructor Hipolito Correa shows students Isabel Lugo (right) and Luisa Elizondo how to operate a lathe at Cenaltec, an aerospace-industry training center in Chihuahua City, Mexico, set up by state and federal governments in collaboration with local businesses. (Keith Dannemiller/Special to The Washington Times)
CHIHUAHUA CITY, Mexico — When a jumbo jetliner touches down almost anywhere in the world, the last thing on the pilot’s mind is that the plane’s brakes likely were made in the capital of one of the most crime-riddled states in Mexico.
Behind the headlines of warring drug gangs and a soaring murder rate in Mexico, a fast-growing high-tech economy centered on the aerospace industry has sprung up in recent years.
In Chihuahua City alone, 36 aerospace plants have opened since 2007 as a growing number of international parts makers use the city as a base for tapping a massive airplane-production market in the United States.
“Our first objective was to get into the U.S. market and get a deal with U.S. customers,” said Nicolas Maillard, director of the French-owned Manoir Aerospace plant in Chihuahua City, 235 miles south of El Paso, Texas.
Shiny, precision-shaped steel discs produced by the plant are shipped to companies in Ohio and Kentucky, where they are added into the assembly line for brake systems on the Boeing Co.’s commercial airplanes.
With the average cost of manufacturing labor running about $6 per hour in the city, a new era of high-tech growth is taking root.
“The real advantage is the cost of labor,” Mr. Maillard said. “In France, labor would account for about 30 percent of the cost of production on an item like this. Here, it’s roughly 10 percent, and we’re closer to the market we’re trying to reach.”
The sky’s the limit
Jose Luis Enriquez oversees Nordam Mexico, the Chihuahua City branch of the Tulsa, Okla.-based aerospace giant that specializes in making everything from airplane windows to cockpit doors.
“Right now, it might seem like we’re doing basic things. But going forward, I see aerospace in Mexico moving along a similar trend that the auto industry did 40 years ago,” Mr. Luis Enriquez said.
U.S. and European automakers have been tapping the nation’s cheaper labor pool since long before the 1994 North American Free Trade Agreement. A Ford Motor Co. plant in Chihuahua City has built 6.5 million truck engines since 1983.
“What started as parts manufacturing in the auto industry now involves design and making whole cars. This is what will happen with aerospace,” Mr. Luis Enriquez said.
“The difference is that the evolution won’t take 40 years, it will occur much, much faster because the Mexican government now knows how to develop an industry like this. It learned a thing or two from the first time around with the auto industry.”
The prediction appears close to a reality. In 2007, Mexico had 150 aerospace factories exporting roughly $2.7 billion worth of products. By last year, the number had soared to 260, with exports totaling $3.8 billion, an increase of more than 40 percent over four years.
The same period saw violence spiral in Mexico, a nation plagued by more than 47,000 drug-war killings since 2007. But the killing has done little to deter foreign companies from wanting in on the hot aerospace market.
The sector drew $1.25 billion in foreign investment in 2010 in a 25 percent increase over the previous year, and 30,000 Mexicans are employed in factories spread across 16 of nation’s 31 states.
The states of Baja California in the west and Queretaro in central Mexico are emerging as aerospace hubs.
And signs of growth are around almost every corner to the north in Chihuahua City, a city of roughly 900,000 people, where a visitor can’t help noticing the abundance of new housing developments.
More revealing, city planners say, are the dozen of vast and neatly demarcated open lots that surround recently opened factories east of downtown.
“You can see we have a lot of room to grow,” said Jesus Mesta Delgado, president of Index Chihuahua, the city’s main nongovernment business group.
“Today, the world’s capacity to produce airplanes is falling about 50 percent short of demand,” he said.
“By 2030, 33,500 new airplanes will be needed. To meet that demand, there will need to be more than double the production of what’s so far been made in the history of the airplane industry.”
The top three commercial airplane makers in the world are the French-based Airbus, the U.S.-based Boeing and the Canadian-based Bombardier.
Business leaders in Chihuahua are pushing for the city to emerge as a go-to destination for the hundreds of smaller companies supplying parts to the giants.
“What we’re planning to do is to make Chihuahua a one-stop city,” Mr. Mesta Delgado said. “In the U.S., you’d have to travel to seven different cities to do what we’re trying to make possible right here.”
The key, he added, rests in the region’s ability to attract what are known as original equipment manufacturers (OEMs) — brand-name companies that not only make parts, but also buy components from other firms.
Chihuahua so far has attracted four of them: Cessna, Hawker Beechcraft, Textron and Honeywell.
The Wichita, Kan.-based Hawker Beechcraft recently opened its second plant in Chihuahua, a 180,000-square-foot facility that assembles sheet-metal sections for its jets.
“That the big OEMs are now here means they’re are attracting small companies, and that’s why the boom in aerospace is coming,” said Jose Luis Rodriguez, who runs Chihuahua operations at Fokker Aerostructures, a plant owned by the Netherlands-based Fokker Technologies.
A stroll across the facility’s vast production floor, which opened in January, gives one the sense of being surrounded by life-sized sections of a model airplane.
“This is the tail, and this part is where we put the rudder,” said Mr. Rodriguez, pointing to various sections of plane spread across the production floor. “Over there, those are the wings.”
Passing through the building’s spanking new corridors, meanwhile, can feel a bit like crossing the lobby of an international hotel. Dutchmen, Americans and Mexicans work side by side, with English the common language among them.
In one section of the plant, Daniel Gerardo appeared beside a half-built airplane wing to announce that he was having a “great experience” at the new plant.
Mr. Gerardo said he lived in Colorado for 10 years while growing up but later returned to his native Mexico and felt fortunate to have his current job.
“There’s a lot of work here in Mexico right now, but I feel very lucky that I got in here,” the 19-year-old said.
He explained that Fokker hired him in November and sent him through three months of training to prepare for the job of drilling and riveting wing sections together.
Tension over jobs
Mexican aerospace leaders understand that high-tech job creation in Mexico is a sensitive issue when U.S. unemployment rides steadily above 8 percent.
Several executives argued that growth in cities such as Chihuahua is actually sharpening the competitive edge of major U.S. companies on the world stage.
“We’re not trying to take jobs from other countries,” Mr. Mesta Delgado said. “What’s happening is that things are moving in the global market. By investing in operations, jointly or directly, in Chihuahua, a company can become stronger and more competitive on the global market by producing at a lower cost.”
That is why Nordam set up in Chihuahua, Mr. Luis Enriquez added.
“If it weren’t for this facility, we wouldn’t be able to bid competitively on the global level, and that would equate to a serious loss for U.S. jobs, not to mention the ability of the United States to embrace 21st-century thinking about business,” he said.
“Knowing that intensive labor-related jobs are already fleeing the United States, it’s either jump on the train, or you’re going to lose your competitive advantage to other countries like Brazil or China.
“If you’re going to have to go out of the United States, Mexico is a great choice.”
He said companies are still going to be able to preserve jobs in the United States, particularly in management, research and development, engineering, design, logistics support and service.
“We still have all those jobs in Oklahoma,” he said. “If you go to China, your chances are much higher of outsourcing all of that.”
U.S. analysts argue there also is something much deeper at stake than simply tapping cheaper labor south of the border.
“A full 40 percent of the content of U.S. imports from Mexico was originally made in the United States,” according to a November report by Washington-based Woodrow Wilson International Center for Scholars.
“Despite an ‘hecho en Mexico’ or ‘made in Mexico’ label, a large portion of the money U.S. consumers spend on Mexican imports actually goes to U.S. companies and workers,” the report states.
“The same cannot be said for Chinese imports, which have only 4 percent U.S. content, or for goods coming from any other country in the world, with the exception of Canada, where U.S. content is 25 percent.”
Mexico ranks as the second-largest destination for U.S. exports, which translates into an estimated 6 million U.S. jobs dependent on trade with the southern neighbor.
Some analysts noted that property rights are better respected in Mexico.
“There are very strong intellectual-property-rights agreements between Mexico and the United States, and that’s not the case with China,” said Frank Esparza, vice president of sales at Co-Production International, a San Diego-based consulting firm that helps U.S. companies open in Mexico.
“If a company moves operations to China, they don’t own anything in China. They’re basically turning over the production work to China,” he said.
“At some point, the Chinese will copy it. And two or three years down the road, you’re going to see your product on the market in the U.S. for less money.”
Other factors are driving companies to Mexico.
Apart from its location just south of the United States and its highway infrastructure for shipping, the “educational system in place here was a big factor,” Mr. Luis Enriquez said.
“The government, locally, is working very hard at helping companies like us meet our workforce need here,” he said.
Growing the future
“What is making Chihuahua so attractive is not only the $4-an-hour salaries, but also the growing number of engineers here,” said Alonso Ramos Vaca, vice president of strategic studies at Chihuahua Economic Development, a nonprofit organization.
“The local colleges and universities are developing centers that specialize in engineering and aerospace technology,” he said.
“What we’re trying to build here is the whole package, not just some industrial park. It’s like an entire ecosystem of business for aerospace manufacturing that we’re trying to build.”
Mexican federal and state governments have spent roughly $20 million over the past 10 years to create vocational schools like the Cenaltec High Technology Center in Chihuahua.
Foreign companies setting up shop in Chihuahua also help pay for their workers to be trained at the schools.
“At first, there was only a small group of students. But then the companies started realizing how useful this is, especially since we adjust the training programs to meet what individual companies need,” said Alberto N. Salomon, director of operations at the center.
There is also a higher-education trend taking hold at the region’s universities, and, with the aerospace industry’s growth, new programs are increasingly competitive.
Jose Luis Rodriguez, manager of Fokker’s plant in Chihuahua, beamed when he revealed that his son was accepted recently to the newly minted aerospace program at the Autonomous University of Chihuahua.
“They only accepted 20 students out of a pool of 350 applicants,” he said.
Louis Eduardo Rodriguez, 18, stood with his father on a recent day near the Fokker plant.
“I wanted to get into aerospace because it’s a growing field, and I’ve gotten a good experience from my dad,” the younger Mr. Rodriguez said.
He added that his personal sights are set much higher than basic manufacturing.
“I’d like to work for NASA one day,” he said with a smile. “That’s my dream.”
© Copyright 2012 The Washington Times, LLC.