Caterpillar’s Continued Expansion in TMASC Region Serves Global Strategy

Caterpillar Hydraulic Excavator at Work

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:

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

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:

August 24, 2010 | No Comments »

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 2009, 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 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.

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:

August 23, 2010 | No Comments »

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

August 6, 2010 | No Comments »