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Mon, May 28, 2007

Canada's Bombardier A Boon To Mexico's Aerospace Industry

Company Breaks Ground For New Complex

Aerospace companies, especially large ones, are not typically known for building production complexes in developing nations as they are for the industrialized world.

Not so for Bombardier Aerospace, which broke ground this month for a mammoth complex to build wiring harnesses, fuselages and flight controls in the central Mexican city of Querétaro, reports the Los Angeles Times.

Not a stranger to production in Mexico, Bombardier started production in temporary quarters in May 2006; its Mexican employees have moved at full speed in the production of sub-assemblies such as tail rudders and stabilizers -- two years before the company had planned.

Best known for its Learjets and other executive jets, Bombardier already employs 450 at its temporary quarters; the company plans to have 1,200 employees in Querétaro by the end of 2008.

Mexican officials project the company will start assembling complete planes in the country within five years. Company officials aren't making any promises, but it's clearly on their radar screen.

"There is no doubt in my mind that if we stay focused the way we are now ... that (Mexico) can do the same as we do in Canada or Europe or the United States," said Real Gervais, director general of Bombardier's Mexican operations.

However, industry experts are what you would call dubious, with some calling Bombardier's talk of building aircraft in Mexico a ploy to keep Canadian unions in line.

But if it all comes to fruition, Mexico would be one of the few developing nations doing final assembly of sophisticated planes.

"This is the great objective that we all have, not only Querétaro, but the nation," said Renato Lopez Otamendi, secretary of sustainable development for the State of Querétaro.

Mexico's aerospace industry includes about 125 companies and 16,500 workers. From once being known as little more than a low-cost job shop for US aerospace suppliers, the country's workers are conducting increasingly sophisticated tasks.

US imports of Mexican aerospace products totaled nearly $178 million last year, up 60 percent from 2000. Total aerospace exports topped $500 million in 2006, according to Mexico's Economy Secretariat.

Government officials want to keep Mexico moving up the supply chain. While the country has no ambition to launch its own national program like China, it is looking towards more high-value tasks from large companies, including structure and design work and final assembly.

"The big challenge for our country is to move toward a technology economy, toward a knowledge-based economy," said Eduardo Solis, head of investment promotion for Mexico's Economy Secretariat.

Because Mexico is fast losing basic industries such as textiles to nations with cheaper labor, the country is looking to take advantage of its success at building products such as automobiles.

Aerospace's special niche is a huge draw for other industries such as electronics and metallurgy.

"It's a big deal," said consultant John Walsh of Maryland-based Walsh Aviation. "But there are a lot of hurdles to getting into the big leagues."

Developing countries produced less than 10 percent of the aerospace parts imported by the US last year, according to US government figures.

The industry is capital-intensive and highly regulated, noted Richard Aboulafia, aerospace analyst at Virginia-based Teal Group.

He said the world's plane builders produced fewer than 3,600 turbine-powered aircraft last year -- little incentive for new businesses to enter the market. And existing companies don't require cheap labor; what they require are highly-skilled factory hands, because quality demands are relentless.

"This industry doesn't favor mass production with lots of workers," Aboulafia said. "Productivity is the name of the game."

The Bombardier- Mexico connection began with former Mexican President Vicente Fox, who persuaded company officials to consider including Mexico in its global manufacturing network.

After a lengthy search in late 2005, Bombardier chose Querétaro, an industrial center of 1.6 million people, 140 miles northwest of Mexico City, and home to a number of research centers and multinational companies attracted by the city's solid universities and educated work force.

Its international airport, which opened in 2004, was a particular attraction for Bombardier; that is where Bombardier is building its new complex, part of the company's plans to invest $200 million in Mexico by 2016.

Meanwhile its temporary plant, running at full capacity, has workers producing wiring harnesses for CRJ 700 and CRJ 900 regional jets, and for Challenger 300 and Global Express executive jets.

Plans are for Mexico to become the main producer of electrical components for all Bombardier planes.

And although it's not unusual for labor-intensive work to be outsourced to lower-cost countries, Bombardier's Mexican employees have proven capable of more complex jobs. Workers build the center fuselages for Challenger 850 executive jets and flight controls for the Q400 turboprop regional aircraft. They'll be assembling aft fuselages for Global Express business jets when the new facilities open.

Plant manager Gervais said that although managing those high expectations are a challenge, the company has attracted many qualified workers, some of whom left better paying jobs for Bombardier.

Gervais did note that although their enthusiasm is first-rate, their productivity and leadership abilities aren't - at least not yet.

With the steep learning curve to build planes, Gervais said it will take years for his team to acquire the needed experience.

Mexico still must guarantee a safety agreement with the US so that Mexican-made aircraft made would be approved by American aviation authorities. And suppliers would have to commit to join Bombardier in Querétaro; the company currently imports most of the components it needs -- a time-consuming endeavor.

"We need to build the base of the aerospace industry (in Mexico) before we start designing planes and manufacturing complete planes," Gervais said.

Querétaro officials are on board to make that happen.

A local university created a technician program within weeks of Bombardier's commitment to Querétaro and the State is building a $50 million aeronautic training center, which recently hosted 20 potential suppliers in a pro-active effort to convince them to establish shop there.

Consultant Walsh is skeptical about Mexico's chances, however, saying Bombardier has a history of shifting work around as a bargaining tool in labor talks.

Workers such as Maribel Rojas Morales hope he's wrong.

"We're improving every day," said the 24-year-old wire harness worker. "We can do it."

FMI: www.aerospace.bombardier.com, www.queretaro.gob.mx

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