My car (a Fiat 500e) was built in Mexico. Chances are yours may have been as well.
Image courtesy: Norbert Aepli, Switzerland (User:Noebu)
In one month alone -- August 2015 -- automakers produced in Mexico nearly 300,000 vehicles, exporting 80% of them. This production level is 7.7% higher than in August 2014. In fact, 30% of Mexico's exports are automobile, according to the Mexican Automotive Industry Association (AMIA).
Auto growth drives electronics manufacturing in Mexico
For the electronics manufacturing services (EMS) sector in Mexico, these market statistics get even more attractive -- given that the share of autos' electronics is increasing faster than the overall value of auto content.
Specifically, Central Mexico -- more so than the USA-Mexico border region -- is attracting nearly every auto manufacturer and Tier-1 supplier you can name.
Mazda's new assembly plant in Salamanca, Mexico
According to a Technology Forecasters Inc. (TFI) study completed this month (December 2015), two-thirds of EMS executives and managers interviewed reported that their companies are building and/or enlarging facilities in Central Mexico -- in large part to keep up with Tier-1 automotive suppliers' demand for high-reliability electronics manufacturing there.
Examples of Tier-1s using EMS suppliers in Central Mexico include Valeo (making engine controls), Magneti Marelli (LED lighting), Actia (lighting, entertainment, reverse-drive sensors), Johnson Controls (car-seat motion control, airbags), and Faurecia (motion control for window/door/sunroof; and sensors).
Flex vice president of corporate, social, and environmental responsibility Bruce Klafter told TFI, "Auto electronics will grow. Cars are getting 'smarter' with sensors, full connectivity, and self-driving. We'll be at the leading edge of all this."
The Tier-1 executives and managers whom TFI interviewed require that their EMS suppliers meet strict quality standards; maintain certifications in automotive and Lean Manufacturing standards; maintain inventory and Just-in-Time delivery; meet short lead times on new designs; manage bills of material (providing advance notice about end-of-life components); minimize shipping and logistics costs while ensuring adequate safety during transport and delivery; and meet environmental and safety requirements.
Whereas the report covers each of these industry requirements, in this blog post I focus on the environmental, health, and safety requirements, as well as environmental sustainability.
Car production & EHS rise in Mexico
Traditionally, the Environment, Health, and Safety (EHS) standards at Mexican companies have not been considered among the world's best. However, EHS practices are improving at Mexican automotive electronics (and other automotive parts) facilities for numerous reasons:
- World-class automotive-manufacturing companies audit the responsible EHS practices of their suppliers in Mexico (and elsewhere). One EMS was found to be applying conformal coating in the middle of the production floor with only a cardboard box for "protection" -- subjecting workers to fumes and overspray. Thanks to the USA company auditing the facility, the EMS built a conformal coating room to California's high EHS standards. TFI interviewed a Mexico-based manager at Tier-1 Supplier Denso, who said, "There is always the concern of safety; we place emphasis in maintaining our people's safety in work."
- Multinational EMS companies with facilities in Mexico are increasingly holding their Mexican facilities to the high standards of their headquarters locations. In September (2015), Plexus' EMS facility in Guadalajara, Mexico, achieved ISO 14001 certification. This certification "not only supports our customers across our market sectors, but also aligns with Plexus' values," said Jose Coelho, Plexus vice president of operations, Latin America. In 2013, Sanmina's Guadalajara operations received two of Mexico's prestigious corporate social responsibility awards, including the Mexican Center for Philanthropy Socially Responsible Business Distinction Award.
Photo: Plexus employees participating in a May 2015 "Nariz Roja" (Red Nose Day) event in Guadalajara, providing children with cancer and their families with "food, shelter, and smiles."
Challenges & solutions to drive good practices
As might be expected, every geography and culture presents both its own unique challenges and opportunities. Consider this:
Training: Though more and more safety gear is now provided for workers at EMS facilities in Mexico, the workers need to actually use the gear to be effective. An EMS respondent to the TFI study reported, "It can be a constant struggle to get Mexican workers to wear safety equipment if they haven't been trained in why to do so."
From her experience in managing Mexican electronics-manufacturing operations, TFI Consultant Pamela Wiseman advises that discovering why employees prefer not to use safety gear is the first step to solving the problem. "Gloves or protective eyewear can make employees uncomfortable and/or less adept at doing their tasks. Ask the employees. " Perhaps the safety gear is too large or small, scratchy, or otherwise uncomfortable or awkward.
Culture: Mexican employees devote more to their employers than to their own health, explains TFI Analyst Mariana Via. "Many Mexican workers take on risky jobs without caring about their personal safety -- such as window washers sitting on wooden planks without safety cables."
EHS training should be conducted by people who understand nuances of Mexican worker culture, which varies in different portions of the country. Mariana Via says that Mexican workers in Central Mexico want their voices to be heard, and to feel comfortable in a family-oriented company setting. Further South in Mexico, workers are less likely to share information or collaborate in the workplace until they get to know their employers.
National Priority: Beyond individual companies and their workers, Mexico's national priorities can be further aligned with EHS and environmental sustainability in general. "Mexican companies are big users of fossil fuels, generate significant air pollution, and have not yet widely adopted good practices to counter these environmental impacts," said Ernesto Sanchez, CEO, Seerauber (Jalisco, Mexico). "There's still a lot to do in Mexico: Responsible disposal of garbage, cleaning up water pollution in rivers and lakes, and more. It's not that expensive to curb this pollution, but it's not yet a corporate / national priority." With the Paris Climate Conference (COP21) having ended earlier this month, it's encouraging that Mexico recently pledged to unconditionally reduce its Greenhouse Gas and black carbon emissions.
Overall recommendations to EMS execs with Mexican operations
The growth in Central Mexico's auto industry and especially the electronics portion is compelling, and most Tier-1 automotive companies do prefer to have EMS suppliers nearby. Also in this region are corporate customers demanding the highest in quality, environment, health, and safety; increasing competition for well-trained, high-performing employees; and new commitment by the Mexican Government for reducing Climate Change.
To be successful, electronics suppliers in Mexico -- especially for the automotive industry -- need to perform at world-class EHS standards, provide employees with a warm "family" work environment with career advancement opportunities, and be part of the increasing Mexican movement toward environmental sustainability.
I invite comments from readers who consider themselves to be part of Mexico's rising and positive international role in EHS and sustainability.