TMASC
News, Events and Updates from the Texas-Mexico Automotive SuperCluster Region
Caterpillar Announces New Manufacturing Plant in Waco
While the TMASC region continues to attract new investment in commercial vehicle production, two recent news stories highlight the corridor’s strength in military vehicle and industrial equipment manufacturing.
First, the Government Accountability Office (GAO) recently asked the U.S. Army to reexamine a contracting decision that improperly omitted performance and experience in evaluating manufacturers bidding for Family of Medium Tactical Vehicles (FMTV) production. This is an affirmation of the 17 years of expertise BAE Systems has producing the FMTV in Sealy, as well as a testament to the quality and diversity of vehicles produced within TMASC. We discuss the GAO decision in depth here.
The second piece of recent news concerns Caterpillar’s decision to locate a new $30 million manufacturing plant in Waco, TX. According to the Waco Tribune-Herald, Caterpillar “will place a 75,000-square-foot facility” in Waco, “where crews will make work tools, specifically large hammers that can be attached to machines and used like jackhammers. This plant will sit next door to a Caterpillar plant that makes excavator buckets and quick couplers.” This news comes on the heels of Caterpillar’s 2008 announcement of a $170 million assembly, paint, and testing facility in Seguin, TX. Clearly the industrial equipment giant understands the benefits of locating manufacturing operations amid a cluster of complimentary industries, extensive logistics and transportation networks, and a large and talented workforce.
The advantages of operating in Texas were highlighted by Caterpillar representatives:
“Waco and the state of Texas offer a very positive business climate for globally competitive companies like Caterpillar,” said Larry Pillers, Waco work-tools project manager for Caterpillar. “We have developed a very strong working relationship with the community and its leaders, and we look forward to opening this new facility in Waco.”
Caterpillar’s new facility in Waco will take advantage of higher-skilled labor; more from the Tribune-Herald:
Caterpillar is calling this new plant a “precision manufacturing center” because creating the hammers will require more engineering input than [its existing operations in Waco].
“This really is exciting because it is Caterpillar’s fourth facility in Waco, and this one will have a larger design and engineering presence,” said Sarah Roberts, senior vice president of economic development at the Greater Waco Chamber of Commerce. That presence, she added, will translate to higher wages.
The TMASC region is proud to host Caterpillar and eight other world-class original equipment manufacturers (OEM).
BAE Systems and its 3,000 employees in Sealy, TX received good news this week. The Government Accountability Office (GAO) declared the Army’s recent decision to manufacture the Family of Medium Tactical Vehicles (FMTV) under a new contract with a Wisconsin-based manufacturer flawed based on disproportionately weighting price over other factors such as performance, expertise, and existing capacity. As one of the anchor original equipment manufacturers (OEMs) in the TMASC region, BAE Systems’ plant in Sealy helps strengthen supply chains and lower costs for complimentary manufacturing operations throughout Texas and Northeastern Mexico. The announcement from the GAO will lead to reconsideration of BAE’s proposal; from the Houston Chronicle:
The contract appeals division of Congress’ watchdog GAO set aside the Army’s decision to move a potential $3 billion, five-year contract for up to 23,000 trucks and trailers from the Sealy-based division of BAE Systems to Oshkosh Corp., a 92-year-old firm in Wisconsin that bid roughly 10 percent below BAE Systems.
Michael R. Golden, the GAO’s associate general counsel for procurement law, said his agency upheld protests lodged by Britain-based BAE Systems and Illinois-based Navistar Defense because “the Army’s evaluation was flawed with regard to the evaluation of Oshkosh’s proposal.” [...]
The GAO recommended that the Army re-evaluate proposals by the three rival bidders for tactical combat vehicles and “make a new selection decision.” [...]
The GAO decision is “potentially good news” for over 3,000 BAE Systems’ employees in Texas and Michigan who have built more than 56,000 (tactical) vehicles since 1992, said Bob Murphy, president of BAE Systems Land & Armaments group. “We look forward to working with the Army to agree (on) a way forward.”
Analysts weighed in on the GAO’s decision:
“This outcome is not surprising, because the Army conducted a superficial comparison of company capabilities to perform the contract,” Loren Thompson, an analyst at Lexington Institute, in Arlington, Virginia, said in a phone interview. The Army treated Oshkosh as if “it had in place the same skill, supplier relationships, tooling, design drawing that BAE already possessed,” Thompson said.
Although this is a positive development for BAE and the many people who work at the assembly plant in Sealy and supporting firms across the region, the GAO’s decision is by no means a guarantee that the Army will make a wise decision. From the San Antonio Express-News:
“While the ruling is welcome news, the process is still ongoing and the fight is not over,” cautioned Rep. Pete Olson, R-Sugar Land, a member of the state’s 34-member House-Senate delegation that has been working to salvage the lost Army truck contract.
Learn more about BAE Systems’ objections to the FMTV contract process and recent developments at WeAreFMTV.com and defendtexasjobs.org.
Automotive Outlook in Mexico
Our friends at the law firm of Cacheaux, Cavazos & Newton recently released the December edition of their Mexican Automotive newsletter (to subscribe to the free online newsletter, click here). It is well worth a read for all interested in the TMASC corridor and automotive manufacturing in Mexico.
Among other stories, the newsletter notes Motor Trend’s selection of the made-in-Mexico Ford Fusion as 2010 Car of the Year and highlights a Mexican government initiative similar to the Cash for Clunkers program that created a sales boost in US auto markets. Importantly, the editors of the newsletter also sound an optimistic note about the future of automotive manufacturing in Mexico, even in the midst of a “grim economic scenario.”
[T]he automotive industry has not lost its characteristic resilience and momentum. With a clear outlook that the current difficult economic conditions are only temporary, the automotive companies that have selected Mexico as a recipient of their investments continue with their plans to expand and implement technological innovations. All companies now seem committed, without exception, to sustainable development, protection of the environment and the development of new models that reduce or eliminate vehicle emissions. Such developments augur a promising future for Mexico’s automakers and auto parts industries, in spite of Mexico’s lackluster macroeconomic statistics.
This outlook is neither naive nor anecdotal; one need look no further than the headlines of Maquila Portal to see the continued investments in Mexico by automotive giants. In November alone we learned that Tier I supplier Magna would double the workforce at its Saltillo plant and that Nissan would spend US$200 million to prepare its Aguascalientes, Cuernavaca, and Morelos plants (locations just West and South of the TMASC region but certain to enjoy the benefits of proximity to the corridor) for new mini-car production.
Without a doubt, times are tough in Mexico. But continued foreign investment demonstrates the power of regional industry clusters like TMASC to help sustain and grow existing and new enterprises even amid economic turmoil.
TMASC Update
The following is the slideshow presentation given by Bexar County Economic Development Executive Director David Marquez to the Free Trade Alliance Mexico Group breakfast on November 13, 2009. The slides incorporate new data on the region’s competitiveness and resiliency amid difficult economic times. The presentation also highlights continued corporate investment in the region broadly and the automotive sector specifically.
We’d welcome feedback on the data presented here, and the continuing evolution of the TMASC strategy. If you’d like to forward the presentation to others, you can link to this blog post or this page on SlideShare. We expect to post video of David’s presentation soon.
The full presentation (.pdf, approximately 14.8 MB) is available for download on the Resources page.
Defend Texas Jobs in Sealy
BAE Systems’ plant in Sealy, Texas faces a very real and frightening threat of closure based on the U.S. Army’s recent decision not to renew a contract for the Family of Medium Tactical Vehicles (FMTV) manufactured at the Sealy plant since 1992.
The Army recently announced a new contact with Oshkosh Corporation in place of a renewed contract with BAE Systems and the 3,000 experienced Texas workers currently manufacturing the FMTV. BAE is protesting the contract decision, citing a faulty bid process. You can learn more here.
Through 17 years of production experience on the FMTV, BAE has incorporated supply chain and manufacturing efficiencies that lower the production turn-around time without compromising quality: the vehicles produced by BAE Systems earn the Army’s “ultra reliable” descriptor.
The presence of BAE Systems in Sealy creates a ripple effect of manufacturing activity and job growth that extends beyond the estimated $500 million that FMTV production contributes to the Texas economy. The Sealy plant lies at the heart of the strong and growing Texas-Mexico Automotive Supercluster (TMASC) region, where nine global consumer, industrial, and military vehicle producers and over 200 parts suppliers manufacture almost 900,000 vehicles per year and employ over 151,000 workers. BAE Systems is one of the anchor original equipment manufacturers (OEMs) in this cluster; losing the Sealy plant would have a detrimental effect on other manufacturers who rely on common suppliers and economies of scale for competitive pricing.
Saving the Sealy plant would obviously and directly benefit the thousands of hard working Texans who have assembled these vehicles with pride for almost two decades. But the Sealy plant is also extremely important to vehicle manufacturers and suppliers across the TMASC region that face negative “ripple effects” if this contract decision stands.
Please do your part for Texas workers and our region by contacting military and congressional leaders through DefendTexasJobs.org.
Image Credits: Defense Industry Daily and GlobalSecurity.org
Mexican Government Considers Amendments to 2003 Automotive Decree
According to the latest CCN Mexico Report (an excellent resource; sign up for free monthly updates here), the Mexican government is reviewing proposed changes to the 2003 Automotive Decree. CCN explains that the 2003 decree “provides incentives to foreign automotive assembly companies operating in Mexico, so long such companies meet certain investment requirements, notably the annual production of at least 50,000 units within Mexico.” The proposed amendments–currently under review by the Federal Commission of Regulatory Improvement–would target incentives at companies meeting the following criteria:
- Producing new, light vehicles
- Producing at least 50,000 units in Mexico during any of the previous 3 years
- Producing at least 30,000 units in Mexico during the previous year
- No suspensions of production lasting more than 3 consecutive months in the previous year
- No decrease in production larger than sales declines in domestic markets (where at least 90% of units are sold)
CCN reports that prospects for passage of the changes looks good:
The automotive industry has expressed its approval of such amendment, thus, the expectation is that the Executive Power will approve the proposed amendments and announce their immediate implementation in the Official Gazette of the Federation (”Diario Oficial de la Federación”).
These changes could help attract additional foreign investment in the TMASC region and strengthen the network of OEMs and suppliers on both sides of the border.
Texas Income Growth Counters National Trends
Growth in the Lone Star state continues, as the population swells with new arrivals seeking business opportunities and an economic environment that has weathered the recession remarkably well.
One recent arrival pens a telling tale of Texas’ relative stability and prosperity in decidedly difficult economic times:
Our new home in Dripping Springs, about 25 miles outside of Austin, may be the “Gateway to Hill Country”— to the stunningly beautiful rolling countryside that extends from Austin down to Kerrville, Junction and beyond— but it’s also in the heart of what I’ve called “Dal-Antonio.”
That’s the developing megopolis of Dallas, Austin and San Antonio. This area is to Texas as “Bos-Wash” is to the Northeast or “Chi-Pitts” is to the Midwest. [...]
It also accounts for three of the six major metropolitan areas with the fastest growing personal income in the United States. Add Houston, which is first on the list, and Texas is the heartland of growth in America in a year of shock, misery and loss.
Energy contributed, but it isn’t the whole story.
In case you haven’t seen the Bureau of Economic Analysis list of Personal Income for Metropolitan Areas, here’s how major cities compare. While Houston, Austin, San Antonio, and Dallas experienced personal income growth of 6.3 percent, 5.4 percent, 5.4 percent, and 4.6 percent, respectively, in 2008 the average U.S. metropolitan area was growing personal income at only 3.3 percent.
In fact, while the energy sector remains an important part of the Texas economy, many of the “Key Industries” identified by the Governor’s office are fueling Texas’ rapid growth in development, jobs, and wealth creation.
Among these industries is, of course, advanced automotive manufacturing. One need look no further than this map (courtesy of this GIS tool) to see the saturation of automotive manufacturers and suppliers throughout the state of Texas, forming part of the TMASC supply chain:
