Supporting our Partners with Integrated Corporate Strength through Half a Century of Business in Mexico
- Transportation & Construction Systems Business Unit
In Salamanca in the Mexican state of Guanajuato, roughly in the middle of the Central Mexican Plateau, a groundbreaking ceremony was held for the construction of a new automobile and engine assembly plant to be jointly established by Mazda Motor Corporation and Sumitomo Corporation. I was there to attend the ceremony. The plant is scheduled to be completed in 2013, and to commence shipment of Mazda2 (Mazda Demio in Japan) and Mazda3 (Mazda Axela in Japan) models from around 2014, targeting mainly the North and South American markets.
Sumitomo Corporation’s business in Mexico and how its business with Mazda is positioned
Having concluded Free Trade Agreements (FTAs) and Economic Partnership Agreements (EPAs) with 44 countries around the world, Mexico has access to a worldwide market of some 30 million new cars a year. Mexico, therefore, has enormous potential as a base for automobile production and export.
Sumitomo Corporation’s involvement with Mexico goes back more than 50 years. Focusing mainly on the manufacturing of vehicle parts, the Company has also been engaged in a wide range of businesses that meet local needs in a timely manner, including metal processing, water treatment, and agrochemicals marketing.
To produce automobiles in Mexico with Mazda, Sumitomo Corporation will draw on the wide-ranging management know-how acquired through its business activities in the country, with a particular focus on its expertise in human resources development, tax and labor affairs, logistics, and IT infrastructure. The Company boasts itself as being a top-flight Integrated Trading Company in the automobile business, encompassing upstream parts manufacturing and downstream auto dealing, leasing, and financing. Yet embarking on automobile production is an adventure into uncharted territory and a challenging dream to pursue.
On the day of the ceremony, we were blessed with sunny weather in sharp contrast to the heavy downpour the day before. The ceremony was a tremendous success, symbolizing our first step toward achieving our aspiration. Behind the bright smiles of our staff, I could sense their strong determination and commitment to leading the business to success.
Groundbreaking ceremony for the new plant. Mazda’s Representative Director and Chairman of the Board, President and CEO Takashi Yamanouchi, is second from the left and Kazuo Ohmori, Executive Vice President of Sumitomo Corporation, is second from the right.
Sumitomo Corporation’s business in the automobile industry
Suppressing my desire to watch Lucha Libre (professional wrestling) since I had come all the way to Mexico, I took myself to the beautiful city of Querétaro, the central part of which is a registered World Heritage site. I paid a visit to Servilamina Summit Mexicana (SSM)detail, a steel service center that operates a plant here.
The business environment surrounding SSM has changed drastically in recent years, resulting in the company’s sales to the automobile industry increasing from just over 40% of total sales in 2004 to nearly 70% in 2010. Demand for steel sheets is growing significantly, reflecting high demand not only from automakers expanding into Mexico, but also from the auto parts manufacturers that followed suit. Steel sheets imported from the United States, Europe, and Asia are transported into the steel service center from major Mexican ports by rail twice a week, and a continuous line of large trucks is always waiting to deliver the steel sheets, which is no wonder, considering that steel sheet demand in the Central Mexican Plateau is projected to climb by half a million tons by 2015.
SSM’s competitive strength lies in its rigorous quality control and customer trust. Meanwhile, for automakers setting up new plants, SSM’s plant is conveniently located to provide efficient logistics. Steel sheet demand, however, is susceptible to change due to various factors including the economic climate, trends in customers’ industries, changes in product composition, etc. The steel business, therefore, is not free from risks. Sumitomo Corporation’s steel service centers boast top-tier steel business operations and expertise on a global basis. “By leveraging Sumitomo Corporation’s experience in operating its steel service centers, SSM will further streamline its corporate operations, increasingly enhance its competitiveness, and achieve business growth,” stressed Hironori Aoki, an employee seconded to SSM.
Steel sheets are orderly stacked at the worksite.
Japan’s competitiveness demonstrated by Hirotec Mexico
Hirotec Mexicodetail manufactures and assembles automobile exterior press parts such as doors and hoods. After pursuing long and strenuous kaizen activities, Hirotec Mexico came to adopt the current production system, which is surprisingly only half-automated, combining automatic press process with manual assembly. While full automation is not unusual in Japan, they believe that higher efficiency can be achieved in Mexico by having highly skilled workers undertake assembly by hand.
Hirotec Mexico’s rigorous efforts to reduce costs, review production processes, and improve operational quality have resulted in its plants achieving one of the highest levels of production efficiency in North America in terms of the number of sheets pressed per line every hour. The differentiating factor in process time is the time it takes to change press molds. Amazingly, Hirotec Mexico can change molds in about one tenth of the average time needed by North American manufacturers. This achievement is the culmination of the company’s kaizen activities, through which new facilities were introduced and thorough consideration was given even to the positioning of metal molds in the warehouse and the workers’ physical line of movement. Kaizen is the secret behind Hirotec Mexico’s competitiveness.
Since it launched operation in 1999, Hirotec Mexico has been providing support in all kinds of ways to automakers entering Mexico. Hirotec Mexico’s high operation quality is well exemplified by the performance of its metal-mold maintenance team composed of 15 specialists. Although inconspicuous, the team occasionally takes on contract repair work on large press molds from automakers. Since metal molds, which are cast metal, play a crucial role in automobile production, repair work is usually done by mold manufacturers in Japan. However, if all deficient molds were to be sent back to Japan for every little repair, production would fall behind schedule. This is where Hirotec Mexico’s team of specialists comes onto the scene; for minor repair work the team visits automakers to exert their craftsmanship. I felt that Hirotec Mexico’s management policy and strategy of fostering capable workers and responding to customer needs truly reflects the essence of manufacturing.
Work progresses at an unexpectedly high speed at Hirotec Mexico’s plant.
Sumitomo Corporation has built relationships of trust over long history in Mexico
Let us look back at history. In 1985, Sumitomo Corporation dispatched an employee to Mexico from its Automobile Division for the first time for the purpose of providing support to Ford, which was to establish a Japanese-style plant utilizing Mazda’s technologies in the state of Sonora in Northwestern Mexico. Staff from Ford, Mazda, and Sumitomo Corporation joined together as a team to construct the state-of-the-art plant. At the time, Nissan, Volkswagen, General Motors, Ford, and Chrysler, known as Mexico’s Big Five automakers, had already been manufacturing cars in the suburbs of Mexico City. Meanwhile, the location of the new Ford plant, namely the Central Mexican Plateau, provided geographical advantages to our team in terms of procurement, logistics, and the securing of human resources. These advantages later drove all of the Big Five other than Volkswagen to transfer their plants to the Central Mexican Plateau.
Subsequent to this Ford project, Sumitomo Corporation helped Japanese automakers install facilities in their new Mexican plants, made inroads into Mexico jointly with Hirotec Corporation, and sequentially launched parts production and coil center businesses, contributing to the development of Mexico’s automobile supporting industries. Up to now, Sumitomo Corporation has invested in a total of 12 companies including joint ventures engaged in the automobile and related businesses. Knowledge acquired through management of these companies, its track record in procurement and sales expansion, business partnerships with existing automakers in Mexico, and human networks—all these elements fostered over 25 years now serve as the foundation for embarking on auto production business with Mazda.
My trip to Mexico reassured me that Mexico, or the Central Mexican Plateau to be precise, was the inevitable and best choice for Sumitomo Corporation and Mazda to launch their new business.
Mayor Antonio Ramirez Vallejo of Salamanca (left) and Kazuo Ohmori of Sumitomo Corporation (right) on the day before the groundbreaking ceremony. They are holding up a work of calligraphy by Susumu Kato, President and CEO of Sumitomo Corporation, written to express the hope that Salamanca will enjoy further development. The characters pronounced “Salamanca” mean “Flowers to bloom even more.”
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