When you think of manufacturing in Mexico, planes might not be the first thing that comes to mind, but the Wall Street Journal reports that Mexican planes are coming courtesy of the Canadian aerospace firm Bombardier (The New Learjet…Now Mexican Made, Jul 29).Vodpod videos no longer available.
Here’s some eye candy showing just what Bombardier is doing where on this plane.
Bombardier’s decision to assemble the plane in Mexico is at least partially due to investments by the Mexican government to build an educational infrastructure. A university has opened in Querétaro (the city where Bombardier’s plant is) to train aerospace technicians and engineers providing Bombardier with qualified workers at a discounted price.
The main draw is price. Executives say its cost of labor offers savings of 25% to 30% over the U.S. and at least 30% over Japan. Proximity to North American companies means shipments can arrive in days, not weeks, and executives can coordinate plans during working hours. Carlos Bello, head of the aerospace industry group, says the idea is to begin with parts and basic manufacturing before expanding into more advanced areas like assembly and design.
Montreal-based Bombardier, the first major company to arrive in Querétaro in 2006, opened shop hoping that a big-name company’s presence in Mexico would attract others in the supply chain, says Réal Gervais, the general director of the Mexican plant. Things went according to plan, he says, and now Bombardier contracts with a small network of regional suppliers, a few of which are stationed directly on its campus, built alongside the city’s airport. This fall, it plans to open another hangar-sized facility as it expands its production of fuselages and electrical harnesses for big-sellers like its Challenger business aircraft.
There is an interesting alignment of competitive challenges here for both Bombardier and Mexico. As the article notes, Mexico’s manufacturing base of maquiladoras along the US border have been under pressure from China and other low wage Asian countries. Attracting higher-end products is one way to add growth and jobs that are not as susceptible to low-wage competition.
Mexico, however, provides a low-wage option for Bombardier. Boeing and Airbus duke it out in the big plane market with both being based in high-wage locations. One of Bombardier’s main competitors is Embraer, a Brazilian firm that presumably has long had a wage advantage on Bombardier. If this works well for Bombardier, the question will be when makers of larger planes will consider a similar strategy.