TMASC
News, Events and Updates from the Texas-Mexico Automotive SuperCluster Region
Caterpillar Hydraulic Excavator at Work
Just over a week ago, Caterpillar announced the expansion of its U.S. operations with the construction of a new 600,000-square-foot state-of-the-art facility in Victoria, Texas, that will manufacture hydraulic excavators. Since 2008, Caterpillar has announced separate new Texas manufacturing facility investments in Seguin and Waco as well. Taken together, these three projects represent a total of nearly 2,000 direct jobs, well over $300 million in capital investment, and product lines from specialized work tools and diesel engines to hydraulic excavators. Moreover, they reflect a strategic cluster of investments in the Texas-Mexico Automotive Super Cluster (TMASC) region to serve a growing North American market and to balance the global supply chain of the world-wide leader in construction and mining equipment, diesel and natural gas engines, and industrial gas turbines.
Victoria is Caterpillar’s “Ideal Site” for New Excavator Manufacturing Facility
Victoria’s new hydraulic excavator facility is expected to create over 500 direct jobs and generate an estimated $120 to $150 million in new capital investment.
Incentives utilized for this project included:
- $1.175 million investment from the Texas Enterprise Fund (Texas Office of the Governor)
- 320 acres of free land (Victoria Economic Development Corporation [Victoria EDC])
- 10-year tax abatements (City of Victoria and Victoria County)
- $2 million worth of site and infrastructure improvements (City of Victoria and the Victoria Sales Tax Development Corp.)
While Victoria ultimately used an effective variety of state and local incentives, it did not attract one of the world’s premier manufacturers overnight. In fact, the Victoria EDC has long recognized the importance of regional development strategies, as evidenced by their participation in the inaugural Texas-Mexico Automotive SuperCluster conference in 2008, as well as the 2004 Golden Crescent Regional Economic Development Summit which, fittingly, included a presentation titled “Prepared Communities Win.” Victoria EDC President Dale Fowler said of the project that, “We are excited to welcome the new Caterpillar manufacturing operation to Victoria,” and, “[t]his expansion will help create jobs in Victoria and will also help strengthen the economic engine of our community and this region.”
The Victoria plant will deepen available talent in the area workforce, as positions such as accountants, engineers and managerial experts will be needed along with assembly line workers. Meanwhile, area educational institutions such as Victoria College will provide training for the plant’s workers.
Overarching Impact for TMASC
With the selection of Victoria, Caterpillar gains both local and regional advantages. Victoria’s access to rail and good highways, as well as to its own port and nearby Port Lavaca’s port with direct deep-draft access, were all significant attractions to Caterpillar.
Gary Stampanato, Caterpillar vice president with responsibility for excavators said, “Based on our comprehensive review of possible locations, Victoria’s proximity to our supply base, access to ports and other transportation, as well as the positive business climate in Texas made this the ideal site for this project. (…) Caterpillar is committed to maintaining its global leadership position in the excavator industry, and this new facility in Texas will play an important role in our long-term plans to provide customers in every region of the world with the products and solutions they need to help them with their businesses.”
Selected Caterpillar Sites in Texas
Caterpillar’s investments indicate that TMASC is important to the company’s global strategy to ensure that its “supply chain is world class” and that its “distribution system is a competitive advantage.” TMASC is the region where the world’s most successful companies are choosing to capitalize on the advantages of NAFTA, both through bilateral trade with Mexico, and by strategic positioning to serve North and South American markets. In the case of Caterpillar’s Victoria facility, the company will be tripling its U.S.-based manufacturing capacity to produce hydraulic excavators in order to supply customers in North and South America.
The announcement in Victoria is clear evidence of the cluster strategy successfully at work. The plant in nearby Seguin is building engines that will be assembled into Caterpillar’s excavators at the Victoria plant. Just a few hours’ drive away in Waco, Caterpillar’s addition of a 75,000-square-foot precision manufacturing center for additional work-tool production means more area capacity in precision machining, controlled testing, heat-treating and assembly. Moreover, the work-tools manufacturing facility has production lines for hydraulic excavator buckets and quick couplers—components which will supply the Victoria plant. Caterpillar Logistics Services, Inc. operates two parts distribution centers in Waco as well, which together comprise over 1,700-square-feet.
Future Opportunities
Caterpillar’s growth and increasing investments in the region demonstrate the caliber of customer that TMASC’s varied infrastructure assets, affordable and skilled workforce, and production capacity are able to attract.
But more significantly for the region’s future, Caterpillar’s growth brings new supply chain demand, increased exports, and upgraded logistics and distribution activity utilizing TMASC’s roads, rail and ports. It also provides opportunities for professional services firms in cities located throughout Texas and Northern Mexico to sell to a Fortune 100 client. Moreover, increased employment related to Caterpillar’s facilities creates new outlets for the talented graduates of the region’s many educational institutions.
As for TMASC’s vehicle manufacturing, Caterpillar stands to drive growth in that activity as well, through NC2, Caterpillar’s joint venture with Navistar. NC2 was formed to serve the global commercial truck market and represents a strategic area of new growth for both companies. Navistar and Caterpillar are working to design and develop a new heavy-duty CAT vocational truck for the North American market. The trucks will be manufactured in Navistar’s Garland, Texas facility, and will be sold and serviced through the CAT North American Dealer network. These trucks are scheduled for full production in mid 2011. The new production line creates new Tier 1 and upstream supplier opportunities and will serve as an attractor for additional investment and support services.
The TMASC region continues to develop as a strategic location for the world’s premier manufacturers. As a region, we identify with the statement by Caterpillar CEO Doug Oberhelman: “The only way we can maintain our leadership position is by helping our customers be more successful with us than they can be working with anyone else.” Just as Caterpillar aims to serve the needs of its customers, TMASC aims to serve the needs of Caterpillar and other global OEMs.
Contact Bexar County Economic Development at (210) 335-0872 for market and industry details, and for connections to regional partners to begin evaluating how TMASC can support your long-term business success.
Links of interest:
- 08/12/10 Caterpillar Press Release on New Hydraulic Excavator Facility in Victoria, Texas (pdf)
- 06/28/10 Caterpillar Press Release on updated Vision 2020 Strategy (pdf)
- 05/05/10 Caterpillar Press Release on Changes to Corporate Structure (pdf)
- Texas Enterprise Fund Press Release on Victoria Caterpillar Project – Office of the Governor
- Victoria Economic Development Corporation
- Victoria Advocate Editorial on Caterpillar Project and Incentives
- Victoria Advocate Article on Educational Institutions Partnering with Caterpillar to Provide Workforce Solutions
- Victoria Advocate Article on VEDC President Dale Fowler and Patiently Courting Caterpillar
- Port of Victoria Website
- Port of Lavaca – Point Comfort Website
- Associated Press Article on Caterpillar CEO’s Economic Outlook
- McCallum Sweeney Consulting Speaking Engagements (2004)
- Navistar and Caterpillar Announce Global Truck Joint Venture NC2
- NC2 Website
Toyota Expands in TMASC Region
Toyota’s reinvestment and expansion in the TMASC region is one of several recent signs that TMASC’s strength as an advanced manufacturing platform continues to grow. As OEMs work to implement new strategies to compete for larger market share, firms are expressing their commitment to the region in the form of additional investment, employment and product lines.
One such example is Haldex, who is expanding its facility in Monterrey Mexico in order to consolidate North American production of its Consumer Vehicles Systems. Meanwhile, since 2008, Caterpillar has announced separate new manufacturing facility investments in Seguin, Waco, and now Victoria, Texas, representing a total of nearly 2,000 direct jobs and well over $200 million in capital investment. Caterpillar’s new projects represent product lines from specialized work tools and diesel engines to hydraulic excavators.
Increase in Toyota OEM Investment in San Antonio, Texas
On August 6, 2010, Toyota Motor Manufacturing, Texas, Inc. (TMMTX) held a special “line-off” ceremony to mark the beginning of Tacoma pickup truck production in San Antonio. The consolidation of all of Toyota’s U.S. production of Tacoma trucks in San Antonio represents significant growth within the TMASC region, with the addition of 1,000 jobs to the TMMTX facility and an additional $100 million investment to enable production alongside the Toyota Tundra pickup line. Total investment in the TMMTX plant now reaches $1.4 billion.
Beyond direct Toyota investment and new hires, Tacoma production will have a critical impact on the area’s broader automotive industry. New sourcing demands created by Tacoma production will secure the efficient operation of the 21 on-site suppliers and is expected to grow the local supplier workforce by over 800 jobs. Meanwhile, the Tacoma line will increase the capacity and overall strength of the supply chain capacity in the region.
Atsushi “Art” Niimi, Executive Vice President and member of Toyota Motor Corporation’s board of directors, as well as new TMMTX president Chris Nielsen, the first non-Japanese plant president, were on hand for the event. Before an audience of hundreds, Niimi said “We are investing in the future, and the future is now.” Niimi added that TMMTX’s response to the difficult events of the past year had “prepared this plant for the best of times, which we celebrate today.”
Nielsen said that he hopes the plant will reach its peak production level of 200,000 trucks per year by the end of August, with additional volume possible should market demand increase.
Opportunities for Ongoing Investment
The addition of new production such as the Tacoma line and Caterpillar lines reflect new demand for Tier 1 suppliers as well as production further upstream in the supply chain. Moreover, the processes and positions required by these plants mean further attraction of related workforce and skills – an opportunity for education organizations to boost technical and professional programs with local private partners.
Logistics services, such as warehousing and distribution, which support these latest investments also now will have greater capacity to serve additional operations seeking to take advantage of TMASC’s efficient manufacturing platform.
It’s important to keep in mind that many companies operating in the TMASC region, such as the Chrysler Fiat 500 plant, are planning for exports to emerging Latin American auto markets. Export activities require professional services from translation and creative to strategic marketing and sales. These ancillary activities are growth opportunities for professional services firms in cities such as Austin, San Antonio, Houston, Monterrey, and San Luis Potosi.
The TMASC region continues to develop as a strategic location for the world’s premier manufacturers. Contact Bexar County Economic Development at (210) 335-0872 for market and industry details, and for connections to regional partners to begin evaluating how TMASC can support your long-term business growth.
Links of interest:
- Official Toyota Press Release on Tacoma Production
- Speech by Toyota’s Atsushi “Art” Niimi at August Tacoma Line-off ceremony
- Autonews.com article on filling unused TMMTX capacity with Tacoma
- Toyota’s Tacoma photo gallery
- San Antonio Express News article
- Autonews.com article on June pickup sales
- Wall Street Journal Online article on Toyota 1Q financials
Success in Northern Mexico
On Sunday July 25th, an article by Automotive News reported that Japanese automobile manufacturer Nissan plans on spending $600 million in the next three years to upgrade operations at their plant in the city of Aguascalientes. The upgrades will prepare the Aguascalientes plant in Northern Mexico for production of three new low-priced vehicles by 2013. The company expects that 80 percent of these new models will be exported to markets throughout the Americas. Nissan ended 2009 as the top auto company in sales in Mexico and this newest investment re-emphasizes the success that auto companies are having in the region.
This announcement by Nissan is a real testimony to the resiliency of the automotive market in Mexico where the overall economy is still experiencing turmoil. It also speaks to Northern Mexico’s ability to not only sustain an auto company like Nissan, but also provide opportunity for its growth. Aguascalientes lies just outside of the TMASC region, but is close enough to enjoy a mutually beneficial relationship with the cluster. In an article from Bloomberg, Carlos Tavares, executive vice president of Nissan states that “markets in Latin America are booming,” and “most probably [Nissan] will produce 530,000 units in [their] Mexican operations in fiscal 2010, an all-time record.”
Part of the reason for Nissan augmenting their Mexican plants is the strength of the yen. According to the previously mentioned Bloomberg article the yen has “risen against all the world’s major currencies in 2010 and is up about 5 percent against the U.S. dollar and 14 percent against the euro this year.” Consequently, exporting from Japan is no longer as profitable as it once was and Nissan is not the only Japanese car manufacturer affected by the change.
The continued success of the automotive market in Northern Mexico, as exemplified by the Nissan investment, is a critical reminder of how important the TMASC initiative is. Texas and Northern Mexico have abundant opportunities waiting for auto makers everywhere.
Report by: Nathan Tuttle
Building Unique Internships for Leadership Development
The Bexar County BUILD Pilot Program
The BUILD pilot program grew out of Bexar County’s exploration of potential collaboration opportunities between Bexar County’s Texas-Mexico Automotive SuperCluster (TMASC) strategy and area universities and colleges. While the BUILD program has begun with a focus on the auto industry, we anticipate extending it to other area industries, such as creative, that could benefit as well.
In late 2009 and early 2010, several local universities shared with us some obstacles they face in retaining engineers and other skilled graduates in the region. Examples include a lack of recruiters visiting campus, the need for schools to aggressively promote their programs’ graduates to prospective employers, or simply inadequate awareness of existing placement opportunities on the part of schools and their students. When the County met with a sample of automotive suppliers to the Toyota Motor Manufacturing of Texas (TMMTX) plant, executives expressed difficulty in efficiently meeting certain workforce needs.
These conversations revealed an opportunity for the Bexar County Economic Development Department to develop a pilot program which leverages County relationships to benefit the area’s workforce development, colleges and universities, and advanced manufacturing industry.
The BUILD pilot program was created to provide a solution that addresses:
- The challenge Toyota suppliers face to identify and retain local talent as production increases with the new Tacoma line, and to groom and prepare their companies’ future leadership;
- The challenge of local higher education institutions to provide valuable and timely career opportunities for their students; and
- Bexar County’s challenge to promote the growth of professional, higher wage and higher skill opportunities to prevent brain drain of graduates from the County’s colleges and universities, as well as to assure an ample talent pipeline ready to support advanced industry.
The first BUILD internship opportunities are for positions with the On-Site Suppliers to TMMTX, one of the most advanced auto manufacturing complexes in the world and site of all US production of the Toyota Tundra and Toyota Tacoma pickup trucks.
The TMASC blog and TMASC Twitter feed will highlight opportunities. Interested schools or candidates can also contact the Bexar County Economic Development Department-Strategic Initiatives Division at 210.335.0669 for more information.
Texas Stands by Toyota
Texas Governor Rick Perry and Bexar County Judge Nelson Wolff sent a strong message of support for Toyota to the House Committee on Energy and Commerce during the Toyota “sticky pedal” hearings.
Judge Nelson Wolff described Toyota Motor Manufacturing Texas (TMMTX) as an “integral role in the economic vitality of South Central Texas and Bexar County. TMMTX and its associated 21 on-site suppliers employ more than 4,800 workers at the $1.3 billion Tundra plant in Bexar County. TMMTX is also a critical component of the growing Texas-Mexico Automotive Cluster which hosts over 200 tier one parts suppliers that employ over 133,000 workers.“
To read the letters of support please click on the below Adobe Acrobat links:
- Governor Rick Perry (pdf)
- Judge Nelson Wolff (pdf)
Read San Antonio Express News coverage of Texas support for Toyota – “Automaker called good for 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