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).

December 17, 2009 | No Comments »

BAE Successful in the First Stage of its Contract Appeal

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.

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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.

MagnaNissan

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.

December 3, 2009 | No Comments »