DEVELOPMENT AND INNOVATION FOR THE INDUSTRY
Industrial clusters carry the triple propeller model in their DNA: working together with schools, government and private industry.
Development in Mexico of the aerospace industry owes much of its momentum to a network of regional clusters. These partnerships often work in the same confined space—such as an industrial park—, and sometimes in scattered sites within the same states, where they offer companies support and attract foreign investment. Moreover, they streamline the business through cooperation and quality assurance, while training and developing human talent through educational institutions.
With the North American Free Trade Agreement (NAFTA), exports to the USA have increased, and USA companies have found in Mexico an ever more reliable partner in the supply chain, from components to maintenance, repair and operations (MRO).
Among the clusters in the Mexican aeronautical sector, several stand out: Baja California (with 80 companies), Sonora (with 64), Chihuahua (30), Nuevo León (23), Querétaro (34), Tamaulipas (11) and the Federal District (11). In total, clusters affiliate and shelter more than 300 companies that have facilities in several regions that produce components for all types of manufacturers.
Thus, hundreds of aerospace companies operate in 18 states in Mexico, generating exports amounting to more than 6 billion dollars annually. In 2006, only 109 companies were registered in this sector in Mexico, but by 2014 the figure had increased to over 300.
In this accelerated growth phase of the aerospace industry, it is essential to include and develop Small and Medium-sized Enterprises (SMEs) that—with few technical resources and human talent—are striving to become suppliers of large companies.
But for SMEs—which represent 85% of the businesses in Mexico—to join the production chain, a number of challenges need to be resolved.
1. Increase the production capacity.
2. In a context of strong competition and asymmetries, deploy collaboration of SMEs with leading companies and, in turn, the latter with unions.
3. Develop regional institutions that can disseminate innovations and provide frames of reference and new capabilities.
Skilled labor is relevant, so training is a vital endeavor. Consequently, the development of local suppliers (to reduce imports) and the attention of Tier 1 and Tier 2 Original Equipment Manufacturers (OEMs) have a positive ripple effect: they create jobs that strengthen the development of talent and innovation.
Many schools are forming engineers and technicians who are hoping and desiring to work in this sector. The triple propeller model (schools, government and private enterprises), which is in the aerospace cluster DNA, is conducive to working together.
THE BAJA CALIFORNIA AEROSPACE CLUSTER
Baja California has been in the aerospace industry for almost 50 years, although in the beginning it did not have a comprehensive support system. The start of the cluster goes back to 2003. Thirteen years ago the first steps were taken to form a body that could identify these companies, what they manufactured and where were located.
Tomás Sibaja, Executive President of the Baja California Aerospace Cluster, explains that this conglomerate services five different specialties: aeronautics, space, defense, UV (drones) and MROs.
The cluster is primarily made up of companies that manufacture parts and components within the aeronautical value chain, mainly serving the commercial aviation industry. The defense segment consists of companies regulated by the International Trade on Arms Regulation (ITAR), which operate in Mexico through a Manufacturer’s License Agreement (MLA). Their sole customer is the USA Department of Defense.
In the space segment, efforts are coordinated with the Mexican Space Agency to link industry with space projects, in addition to encouraging the development of skills and knowledge on the subject among children and youth.
Regarding UV (drones), the cluster is sheltering leading global companies, working with a groups of experts in the innovative applications for their commercial use and applications. Additionally, they work with the General Directorate of Civil Aeronautics in Mexico to regulate their use in the country. Finally, as for MROs, the talent gathered in Baja California “has a high level of technical expertise that supports MRO operations nationwide,” says Sibaja.
Baja California harbors OEMs such as Gulfstream and Tier 1 companies such as Honeywell and UTC Aerospace Systems. There is a wider base for Tier 2 companies, such as Eaton, Esterline, GKN, TE, CST-Kavlico and Cobham, to name a few. And Tier 3 include Zodiac, Triumph, Hutchinson, CPP and Lockheed Martin, among others.
Several manufacturers devoted to precision machining and special processes are classified as Tier 4. “The pyramid is still inverted. We require more Tier 4 companies to support the industry. Hence the emphasis we’ve placed on the development of local suppliers and specialized—mainly technical—talent,” says Sibaja.
To reduce costs, delivery times and develop a healthy industrial ecosystem, the region, in order to meet the demand of the industry, is requiring more certified and committed SMEs. Sibaja anticipates challenges that are reflected in their Strategic Plan 2025. “The outlook is positive. There are many milestones to address. Moreover, our work is constant and we cannot lose sight of where we want to go,” he says.
The cluster maintains a close relationship with academia. Several initiatives are underway concerning training and development in technical schools. The major requirements of the industry deal with precision machining, welding and painting, among other specialties. And there are specific milestones achieved for the creation of the Technical Superior University (TSU) degree at the technical level in aerospace manufacturing in the Tijuana Technical University (UTT). Furthermore, they already inaugurated in Tijuana in 2014 the University of Advanced Technologies (UNIAT) with several majors serving the aerospace sector.
Examples of this fruitful relationship are found at companies like Honeywell, UTC, Zodiac and Hutchinson, where engineers are being prepared to develop specific projects in the aerospace sector. “Our challenge is to migrate and multiply knowledge in an area that will have exponential growth and higher value,” according to Sibaja, who ensures that the cluster he heads has adopted a five-propeller model, which includes government, academia, industry and leadership organizations, as well as society.
“We’ve been working under this model for four years already, and it’s working. The key to success is sharing information on our achievements, involving all parties and having them take part in the decision-making process. The secret is to work in a coordinated manner. That’s why—Sibaja concludes—clustering is here to stay. It is a useful specialization tool, and a proven path to success. Therefore, we must take advantage of it.”
THE CHIHUAHUA AEROSPACE CLUSTER
The Chihuahua Aerospace Cluster (CACh) is integrated by five OEMs such as Textron Aviation, including the companies Cessna and Beechcraft, Textron International Mexico – Bell Helicopter, Honeywell Aerospace and EZ Air. It also includes more than 36 certified world class companies like Safran Labinal Power Systems, Safran Engineering Services, Zodiac Aerospace with nine different divisions, Fokker Aerostructures, TIGHitco, Kaman Aerospace, Metal Finishing Co., Lisi Aerospace, Nordam, SOISA Aerospace, Altaser Aerospace and many others.
This cluster represents a success story of the triple helix working together, where the alignment of industry with Government and the Academia has benefited the achievement of objectives of its members in the fields of technology, education, supply chain, infrastructure and promotion.
“We have strategic projects: we are working with each of our companies in order to fulfill specific requirements, we are planning the establishment of a Maintenance, Repair and Operations (MRO) center near the airport and create a wide range of aviation services around this site,” says Mónica Vega Ocaranza, manager of the cluster.
The CACh has a relevant number of large companies. “In Chihuahua we are linked with different organizations, companies and research centers, we strongly believe in global alliances, triggering joint efforts to deploy growth strategies for all parties involved,” she says.
Chihuahua is strong in different capabilities like turbines, aerostructures, wiring harness, composites, special processes and treatments, high precision machining, sheet metal, engineering and design.
Among the companies that have been successful, Vega mentions Soisa Aerospace as a local success story, which distributes seat covers to more than 60 airlines around the world and has a significant market share. Altaser Aerospace from Copachisa Group (better known in the construction sector) is another local company that has invested in the aviation industry and all foreign companies who established operations in the state and have been transferring new processes and expanding their companies throughout this time.
CACh has grown steadily and step by step. The most recent OEM that arrived (in 2013) is EZ Air, a company that incorporated from the merger of Embraer and Zodiac Aerospace, and is focused on aircraft interiors with composite materials (panels, floors, galleys and overhead compartments, among other products), now producing the 100% of interiors for some of the Embraer aircraft models.
THE EDUCATIONAL CHALLENGE
In Chihuahua, a technological road map was traced and in 2014 they aligned all the requirements demanded by the leading companies. They conducted an educational study and defined 24 competencies as a guideline for the Academia and training centers. Some of them are general in nature, and may apply for the automotive and metalworking industries, among others.
Within the CACh each company has different approaches for recruiting talent. For training, the Government of the State created a High Technology Training Center (Cenaltec). “Without a strong labor force we can’t achieve our planned objectives.” The Cenaltec, for example, offers tailored courses, with 120 to 240 hours of specialized training according to the needs of each industry. Another option that the CACh has explored is a “train the trainers” program and share of best practices among its members.
The cluster also participates in the design of the curricula and programs, focused on senior high schools. In fact, the National College of Technical Professional Education (Conalep) has completed three projects ready to implement for technical careers. “The first generation has already been admitted, and by 2018 we’ll have the first graduates with skills focused on aeronautics,” says Vega.
THE MONTERREY AEROCLUSTER
Nuevo León is a state with lineage and industrial tradition, particularly in the metalworking segment. “The work culture is very similar to the USA. The people are very hardworking and employers and their employees can easily adapt to the aviation industry,” says Pauline Medori, CEO of the Monterrey Aerocluster (ACM).
The state also ranks fifth in the number of companies and jobs in the aviation sector (after Baja California, Chihuahua, Querétaro and Sonora), and third in investment in aeronautics research and development.
Maintenance, Repair and Operations (MRO) in this sector is equally important: the state ranks second in terms of the largest fleets in Mexico. It houses 22 MRO workshops certified by the General Directorate of Civil Aviation (DGCA), two MRO workshops certified by the Federal Aviation Administration (FAA), 1,600 direct jobs in the MRO segment, and 50 technicians certified by the FAA, among other assets.
In Monterrey, companies affiliated to the ACM (founded in 2009) do not necessarily work in the same space. “What we need is an OEM or Tier 1 fully devoted to the aviation industry,” says Medori.
Only one company is dedicated exclusively to aerospace manufacturing; the rest are suppliers of various industrial sectors. Today, the administration of this cluster is working on finding a good OEM or Tier 1 candidate. They are calmly looking at several candidates. “We will bring the one that suits us best,” says Medori.
The skilled and competitive workforce, along with the fact that Mexicans are proactive, results in great advantages. “The Mexican ability of changing jobs is remarkable. Manufacturing is of good quality and cost competitive,” says the CEO of ACM. “To this we must add the location of the country, the NAFTA market, the dollar zone, the proximity to the USA and our infrastructure.”
The most important challenges for the ACM have been attracting foreign investment and developing local businesses. “In the aerospace sector, training, certification, specialized software, customer audits, and purchasing orders are required. It is a sector that creates earnings in the medium term. But first we have to invest heavily,” explains Medori.
The ACM has 26 affiliated companies, of which only three are foreign, along with four universities, a technical school, a research center and two state government institutions. In 2014 it created more than 3,000 direct jobs with sales of over 900 million dollars, while exporting 99% of its production.
Medori stresses that the ACM is not a maquila operation. “We develop suppliers. All companies that we affiliate are of Mexican capital and the vast majority are SMEs. Only two are large organizations,” she says.
The main challenge is for companies in the region to supply large aerospace organizations. Ten years ago, the Mexican supplier did not meet the requirements of the aerospace industry. Today things have changed. “In Nuevo León—she exemplifies—there are companies with 30 to 35 employees that are selling directly to Boeing.”
THE QUERÉTARO AEROCLUSTER
The first notable advantage of Mexico on the global aerospace industry map is its location. It is not only next-door to the USA—the main exporter of the sector—, but it is also close to Canada and Brazil, positioning it as a viable competitor in the market. “Mexico functions as a bridge between the three most important areas for the sector in the world: North America, South America and Europe,” says Claude Gobenceaux, President of the Querétaro Aerocluster.
Apart from the geographical advantage that Mexico offers to the aerospace market, Gobenceaux also mentions another vital aspect: the workforce. “The country trains many top-level engineers, allowing the industry to develop very quickly. In fact, we have everything it takes to discover talented people and make them grow. This is achieved through both educational institutions—such as the Technological Institute of Monterrey for Advanced Studies (ITESM), the National Autonomous University of Mexico (UNAM), the National College for Technical Professional Education (Conalep), and the Aeronautical University in Querétaro (UAQ), among others—, and the companies themselves, which implement courses tailored to the necessities of each case.”
For Gobenceaux, the talent of a worker can proceed or can be discovered in two ways: “Talent can be found at school, or during the worker’s development within a company.”
During the national election campaign in 2012, the current President of the Republic, Enrique Peña Nieto, signed before a notary public 266 campaign promises that would translate into action during his administration. Promise number 17 referred to the construction and operation of the National Center for Research and Certification of Composite Materials for the Aerospace Industry in Querétaro. Gobenceaux says that this commitment—which will become a reality in the coming months—will give a new and very positive dimension to the aerospace sector in Mexico.
DEMAND FOR TIER 2 AND TIER 3
The President of the Querétaro Autocluster foresees a great development of the aerospace sector in Mexico, thanks to the combined work of businesses, academic institutions, government and research centers. In his view, the current challenge lies in the supply chain. “Today there are many Tier 1 OEMs, but what we need most are Tier 2 and Tier 3, that is, small and medium enterprises (SMEs) willing to venture in aerospace,” says Gobenceaux.
The entry of these companies in the sector would speed up the market in the country. Growth today is due to Tier 1 OEMs (large companies). “But tomorrow, these companies will require more resources for Maintenance, Repairs and Operations (MRO) or engineering,” he says.
THE ECONOMIC DEVELOPMENT COUNCIL OF SONORA
Unlike clusters in other states, Sonora decided to concentrate its efforts on one segment of the aerospace industry. Through the Economic Development Council of Sonora (Copreson), it set the path for suppliers specializing in turbines. “The Council is an agency in charge of attracting investment in this field,” says Enrique Ruiz, General Director and Technical Secretary of Copreson.
Founded in 1997, Copreson is a decentralized public agency dependent on the state’s Secretariat of Economic Development, integrated by companies, unions, state government and academic sector. Its primary function is to promote foreign direct investment, but also has the task of attracting investment from Mexican companies to Sonora.
Copreson has offices in Ciudad Obregón, Hermosillo, Navojoa, Nogales and San Luis Río Colorado. As part of its activities, the organization also encourages the growth of companies, by helping them acquire new processes or technologies, or by expanding their facilities. “We also invite companies with specific capabilities to enrich the business range in Sonora,” says Ruiz.
Companies specializing in the manufacture of turbine parts have come together in Sonora. For example, companies devoted to casting and machining metal parts. Recently, other specialized firms have also joined the supply chain for essential turbine components.
A successful association
In Sonora there are 64 companies based in cities like Ciudad Obregón, Guaymas, Hermosillo, Navojoa and San Luis Río Colorado, and each has specific capabilities and certifications. While there are no aeronautical OEMs in the state, there are more than 60 Tier 1 and Tier 2 companies, each with more than 300 employees. The largest is Williams International—a manufacturer of turbines for private jets—located in Guaymas since 2007.
In April 2012, Rolls Royce opened an office that brings together the largest group of companies that tend to the supply chain in Mexico. Among those 64 companies at least 10 are SMEs that are suppliers to Tier 2 companies. They are located in Guaymas, Hermosillo and Nogales.
One of the advantages of Sonora, in addition to the companies based there, is a workforce of over 10,500 in the aeronautical industry alone. The business fragmentation in the state generates low employee turnover, and it is rich in certifications, materials, equipment and processes.
Located 1.5 hours from the uncongested border of Nogales, it is linked to the state of Washington, where Boeing is based. It is also close to Wichita in Central USA (where Boeing’s pre-assembly operations are located), or South Carolina in the Southeast (the site of Boeing’s assembly line). Sonora is also a privileged location for Airbus, which is building an assembly plant in Alabama.
Since 2009, the Council has been looking for companies that meet the specific requirements of the supply chain. For example, in the aerospace structures segment, they need to expand capabilities for wing parts (made in Guaymas), and hatches (made in Hermosillo) for Boeing’s 787 aircraft. “We want to attract companies for machining operations as well as surface treatment for aerospace structure parts. In Sonora we assemble, detail and send components directly to Boeing’s assembly line,” says Ruiz.
Copreson also covers the field of aircraft maintenance. The state government, in conjunction with a Canadian-Mexican joint venture, built a hangar in Ciudad Obregón to offer this specific service. The site has already been certified by the Federal Aviation Administration (FAA) and has been operating as an aircraft maintenance station for over a year and a half.
Copreson is working with Tier 1 and Tier 2 companies in aligning Mexican SMEs to become able suppliers. “It has been a long and complex path, but very positive,” says Enrique Ruiz. Once these companies achieve certification, they can fulfill their ulterior objectives.
In Sonora there is excitement on behalf of the local entrepreneurs that are seeking to link up to the supply chain. “We must solve the funding,” says the official.
Copreson designed a program to train young people who are on the Secoder assembly line, a French company that manufactures aircraft hatches for Boeing assembly lines in Washington and South Carolina. The training focused on technological processes, with results that exceeded the expectations of both companies in terms of delivery timing, quality and redesign of the assembly process. “It was a tailored suit made in Sonora,” says Ruiz.
The Council competes with companies in England, where there is a large installed capacity, and with others located in the state of Ohio in the USA—where GE is based—, as well as with companies in Singapore, Thailand, France and Italy, that are linked to the Rolls Royce and GE programs.
Copreson wants to be recognized by its installed capacity. Its challenge is to convince companies that operate in other parts of the world that Mexico is a competitive alternative and that Sonora is a privileged place to operate.