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Page 1: SupplierBusiness The Mexican Automotive Supplier Report · IHS Automotive SupplierBusiness | The Mexican Automotive Supplier Report Chapter 2: Mexican automotive industry The automotive

SupplierBusiness

The Mexican Automotive Supplier Report

2014 edition supplierbusiness.com

Regional Report

IHS Automotive

SAMPLE

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2014 edition 2 © 2014 IHS

IHS Automotive SupplierBusiness | The Mexican Automotive Supplier Report

COPYRIGHT NOTICE AND LEGAL DISCLAIMER© 2014 IHS. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage or expense incurred by reliance on information or any statement contained herein. For more information, please contact IHS at [email protected], +1 800 IHS CARE (from North American locations), or +44 (0) 1344 328 300 (from outside North America). All products, company names or other marks appearing in this publication are the trademarks and property of IHS or their respective owners.

IHS AutomotiveSupplierBusiness

ContentsExecutive Summary ........................................................................................................................................................ 7

Chapter 1: The Mexico advantage ................................................................................................................................ 8Key economic indicators ............................................................................................................................................ 8

GDP ............................................................................................................................................................................. 8Consumer demand ...................................................................................................................................................... 9Consumer confidence .................................................................................................................................................. 9Remittances from US ................................................................................................................................................. 10Industrial production ....................................................................................................................................................11International Trade ...................................................................................................................................................... 14Infrastructure .............................................................................................................................................................. 16Inflation........................................................................................................................................................................17

Political environment................................................................................................................................................. 19Business atmosphere ............................................................................................................................................... 19

Legal framework ........................................................................................................................................................ 19Tax system ................................................................................................................................................................. 20

Stock market .............................................................................................................................................................. 22

Chapter 2: Mexican automotive industry ................................................................................................................... 23Vehicle parc and density ........................................................................................................................................... 23Light vehicle sales ..................................................................................................................................................... 24Leading automakers .................................................................................................................................................. 26Vehicle segments ....................................................................................................................................................... 28Vehicle production gathering momentum .............................................................................................................. 29An export-oriented market ....................................................................................................................................... 31Auto parts exports ..................................................................................................................................................... 33Weak Mexican Peso giving impetus to exports ..................................................................................................... 34Investments by automakers ..................................................................................................................................... 35

Investments by Japanese automakers........................................................................................................................ 36Investments by European automakers ........................................................................................................................ 37Investments by US automakers .................................................................................................................................. 38

Chapter 3: Supplier industry in Mexico ...................................................................................................................... 40Rising exports and imports ...................................................................................................................................... 42Foreign suppliers dominates auto parts production ............................................................................................ 43Mexico-based suppliers ........................................................................................................................................... 44Investments ................................................................................................................................................................ 44R&D capability in Mexico .......................................................................................................................................... 46OEM-Supplier relations ............................................................................................................................................ 46Continuing focius on localisation ............................................................................................................................ 46Increasing powertrain production ........................................................................................................................... 47

Customer and competition ......................................................................................................................................... 48Fuel price and economy ............................................................................................................................................. 48

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Urbanisation ............................................................................................................................................................... 49Evolving emission regulations ..................................................................................................................................... 49

Supplier parks in Mexico .......................................................................................................................................... 49Automotive clusters .................................................................................................................................................. 50Growth in central Mexico ......................................................................................................................................... 51

Chapter 4: Policies and regulation ............................................................................................................................. 56Maquiladora programme ............................................................................................................................................ 56Temporary import programme for export (PITEX) ....................................................................................................... 56Maquiladora manufacturing industry and export services (IMMEX)............................................................................. 56Sector promotion programme (PROSEC) ................................................................................................................... 56Automotive decree ..................................................................................................................................................... 57

International trade agreements .............................................................................................................................. 57NAFTA ...................................................................................................................................................................... 57Mexico-Mercosur FTA ............................................................................................................................................... 58

Emission norms in Mexico ....................................................................................................................................... 60Programme to incentivise OEMs ............................................................................................................................ 62Vehicle safety ............................................................................................................................................................. 62

Chapter 5: Outlook and challenges ............................................................................................................................ 65Vehicle sales in Mexico to grow marginally amid high used car imports........................................................... 65Suppliers poised for growth .................................................................................................................................... 66Powertrain production .............................................................................................................................................. 68Mexico to become largest vehicle exporter to US ................................................................................................ 69New international trade agreements ...................................................................................................................... 69Growing protectionism ............................................................................................................................................. 70Labour cost to remain competitive in short term ................................................................................................. 70Availability of skilled labour ..................................................................................................................................... 71

Chapter 6: Interviews ................................................................................................................................................... 73Thomas Karig, vice-president, Corporate Relations, VW de Mexico ................................................................. 73Mike Jackson, Director, IHS Automotive ............................................................................................................... 76Alejandro Furas, technical director of Latin NCAP ............................................................................................... 78Eugenio Madero, CEO SANLUIS Rassini North America ...................................................................................... 81Herman Morfin, director, Corporate Communications, Nissan Mexico ............................................................. 83Corporate Communication - Gestamp Mexico ...................................................................................................... 86Sachin Lawande, president, Infotainment, Harman International ...................................................................... 88Oscar Albin, executive president, Industria Nacional de Autopartes (INA) ....................................................... 90

Chapter 7: Supplier survey .......................................................................................................................................... 93Has an increase in investments made by several automakers and suppliers put strain on Mexico’s available infrastructure? ............................................................................................................................................................ 93Many global automotive suppliers are following their OEM clients and opening plants in Mexico. Are local suppliers taking enough measures to improve their efficiencies and R&D expertise to keep pace with the global ones? ........... 93Is political instability affecting automakers’ and suppliers’ decision to expand their manufacturing and R&D footprint in Mexico? ..................................................................................................................................................................... 94Do you think that private investment is not growing enough to support economic development in Mexico? ............... 94Mexico drew a record USD35.2 billion in foreign direct investment (FDI) in 2013. Do you think the country will continue to attract huge FDI in the mid-term? ........................................................................................................................... 94Vehicle emission norms in Mexico are at par with the US but mandatory safety norms are not. What impact does this have on vehicle demand in the domestic market? ...................................................................................................... 95Is the Mexican government taking sufficient steps to implement the mandatory safety norms for vehicles? ............... 95By when do you anticipate cars sold in the Mexican market to have mandatory safety norms? .................................. 95Vehicle sales returned to pre-recession levels in 2013 of 1.09 million units, three years earlier than previously expected.

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IHS Automotive forecasts total market sales in Mexico will reach 1.14 million units in 2014. Do you think this is attainable? ................................................................................................................................................................. 96IHS forecasts the Mexican automotive market to continue with modest growth between 3.4–4.5% for the next five years. Do you agree with this? .................................................................................................................................... 96Mexican vehicle production broke through the 3 million milestone in 2013. Production in 2014 is forecast to increase 9.1% y/y. In quarter 1 this year, production was up 6.5% y/y. Do you agree with this projection? ................................ 96Mexican exports and production are expected to see positive gains in 2014, given the massive influx of FDI in the country from Japan in particular. Do you agree with this prediction? .......................................................................... 97Demographics of respondents: Poisition in the supply chain ..................................................................................... 97Demographics of respondents: Area of operation ..................................................................................................... 97

Supplier Profiles ............................................................................................................................................................ 98ABC Group .................................................................................................................................................................. 98Aisin Seiki ................................................................................................................................................................... 99Alcoa .......................................................................................................................................................................... 102Alfa ............................................................................................................................................................................. 104Autoliv ....................................................................................................................................................................... 107Benteler ......................................................................................................................................................................110BorgWarner ...............................................................................................................................................................113Bosch .........................................................................................................................................................................117Brembo ...................................................................................................................................................................... 120Bridgestone .............................................................................................................................................................. 124Brose ......................................................................................................................................................................... 129Calsonic Kansei ....................................................................................................................................................... 133CIE Automotive ........................................................................................................................................................ 136Condumex Automotive ............................................................................................................................................ 138Contiental ................................................................................................................................................................. 139Cooper-Standard ..................................................................................................................................................... 141Dana .......................................................................................................................................................................... 144Delphi ........................................................................................................................................................................ 147DuPont ...................................................................................................................................................................... 150Dura Automotive ...................................................................................................................................................... 153Faurecia .................................................................................................................................................................... 154Ficosa ........................................................................................................................................................................ 158Flex-N-Gate .............................................................................................................................................................. 162Gestamp .................................................................................................................................................................... 166GKN ........................................................................................................................................................................... 169Grammer ................................................................................................................................................................... 172Grupo Bocar ............................................................................................................................................................. 175Grupo Industrial Armas ........................................................................................................................................... 176Grupo Industrial Saltillo .......................................................................................................................................... 177Grupo Quimmco ....................................................................................................................................................... 179GST Autoleather ....................................................................................................................................................... 183HBPO ......................................................................................................................................................................... 185Hella ........................................................................................................................................................................... 187Hutchinson ............................................................................................................................................................... 189Iochpe-Maxion ......................................................................................................................................................... 191Johnson Controls .................................................................................................................................................... 193Key Safety Systems ................................................................................................................................................. 199Lear ............................................................................................................................................................................ 201Le Belier .................................................................................................................................................................... 205Leoni ..........................................................................................................................................................................208Linamar ..................................................................................................................................................................... 211Magna ........................................................................................................................................................................ 214

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Mahle ......................................................................................................................................................................... 220Martinrea .................................................................................................................................................................. 224Meritor ....................................................................................................................................................................... 226Metaldyne ................................................................................................................................................................. 230Metalsa ...................................................................................................................................................................... 232Michelin ..................................................................................................................................................................... 235Mitsuba ..................................................................................................................................................................... 237Modine ...................................................................................................................................................................... 240Molex ......................................................................................................................................................................... 243Montupet ................................................................................................................................................................... 244PEASA Autopartes ................................................................................................................................................... 246Plastic Omnium ........................................................................................................................................................ 247PPG Industries ......................................................................................................................................................... 252Progress-Werk Oberkirch ....................................................................................................................................... 255Remy International .................................................................................................................................................. 257SABIC Innovative Plastics ...................................................................................................................................... 259Sanden ...................................................................................................................................................................... 260SANLUIS Rassini ...................................................................................................................................................... 263Schaeffler ................................................................................................................................................................. 267Stoneridge ................................................................................................................................................................ 271Takata ........................................................................................................................................................................ 273Tenaris ....................................................................................................................................................................... 275Tenneco ..................................................................................................................................................................... 277ThtyssenKrupp ......................................................................................................................................................... 280TI Automotive ........................................................................................................................................................... 284TMD Friction .............................................................................................................................................................288Toyoda Gosei ............................................................................................................................................................290TRW Automotive ...................................................................................................................................................... 293Valeo .......................................................................................................................................................................... 297Visteon ...................................................................................................................................................................... 301Vitro ........................................................................................................................................................................... 304Webasto ....................................................................................................................................................................306Yazaki ........................................................................................................................................................................308ZF ............................................................................................................................................................................... 312

FiguresFigure 1: Mexico’s GDP Per Capita and GDP Growth ................................................................................................ 8Figure 2: Mexico's Per Capita Income ......................................................................................................................... 9Figure 3: Mexico Consumer Confidence ................................................................................................................... 10Figure 4: Remittances from Mexican Nationals Working in United States ........................................................... 10Figure 5: Industrial Production in Mexico .................................................................................................................. 11Figure 6: US Industrial Production and Mexico’s GDP ............................................................................................. 12Figure 7: Total FDI in Mexico ....................................................................................................................................... 12Figure 8: FDI by Origin Country ................................................................................................................................... 13Figure 9: FDI by Sector ................................................................................................................................................. 13Figure 10: Mexico – Global Exports and Imports ...................................................................................................... 14Figure 11: Mexico – Major Export Partners ............................................................................................................... 15Figure 12: Mexico – Major Import Partners ............................................................................................................... 15Figure 13: Mexico’s Infrastructure .............................................................................................................................. 16Figure 14: Mexico’s Population versus Unemployment Rate .................................................................................. 17Figure 15: Movement of Bank Interest Rate with Inflation ...................................................................................... 18

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Figure 16: Movement of peso with US dollar and euro ............................................................................................ 18Figure 17: Parameter Rankings for Ease of Doing Business in Mexico ................................................................. 21Figure 18: Comparative Movement of MEXBOL and Dow Jones ............................................................................ 22Figure 19: NAFTA Light vehicle parc 2009–2013 ....................................................................................................... 24Figure 20: NAFTA Light vehicle density 2009–2013 .................................................................................................. 24Figure 21: Annual light vehicle sales in Mexico ......................................................................................................... 25Figure 22: Annual light vehicle sales by country ...................................................................................................... 26Figure 23: Light vehicle sales market share by automaker, 2009 and 2013 .......................................................... 27Figure 24: Light vehicle sales by automaker ............................................................................................................. 27Figure 25: Light vehicle sales market share by segment, 2009 and 2013 .............................................................. 28Figure 26: Light vehicle production in Mexico .......................................................................................................... 30Figure 27: Light vehicle production in Mexico and BRIC countries ....................................................................... 30Figure 28: Light vehicle production market share by automaker, 2009 and 2013 ................................................ 31Figure 29: Share of light vehicle sales and exports in total production ................................................................ 31Figure 30: Exports by automakers .............................................................................................................................. 32Figure 31: Country/region share in total LV exports from Mexico .......................................................................... 33Figure 32: Auto parts exports from Mexico ............................................................................................................... 34Figure 33: Mexican peso, Brazilian real, Japanese yen and euro against the US dollar ..................................... 34Figure 34: Auto parts production value in Mexico is expected to reach USD94.7 million by 2019 ..................... 40Figure 35: Higher auto parts production is resulting in greater employment opportunity in Mexico ............... 41Figure 36: Breakup of auto parts production by segment ...................................................................................... 41Figure 37: Mexico’s export markets for auto parts .................................................................................................. 42Figure 38: Mexico’s import markets for auto parts ................................................................................................. 43Figure 39: Auto parts export and import in Mexico in 2013 ..................................................................................... 43Figure 40: FDI in Mexico’s auto parts industry ........................................................................................................ 45Figure 41: Engine Production in Mexico..................................................................................................................... 47Figure 42: Tranmission production in Mexico ........................................................................................................... 48Figure 43: Mexico’s three major automotive clusters .............................................................................................. 50Figure 44: OEM Cluster Map ....................................................................................................................................... 52Figure 45: Supplier Cluster Map ................................................................................................................................. 53Figure 46: Mexico, Canda and Rest of World’s vehicle/parts import and export with the US ............................ 58Figure 47: Mexico’s vehicle export to Brazil and vehicle imports from Brazil ...................................................... 59Figure 48: Mexico’s vehicle export to Argentina and vehicle imports from Argentina ........................................ 60Figure 49: Deaths by road-user category in 2009 ..................................................................................................... 63Figure 50: Forecast for LV sales in US, LV production in Mexico .......................................................................... 65Figure 51: Light vehicle sales and production outlook for Mexico ......................................................................... 66Figure 52: Market potential of some key process in Mexico ................................................................................... 67Figure 53: Engine production in Mexico ................................................................................................................... 68Figure 54: Transmission production in Mexico ......................................................................................................... 68Figure 55: Source of Vehicle Imports for US by Country ......................................................................................... 69Figure 56: Average Annual wages by Country .......................................................................................................... 71Figure 57: Number of Graduates in Mexico ............................................................................................................... 72

TablesTable 1: Ease of Doing Business Rankings ................................................................................................................ 20Table 2: Recent Investments by OEMs ...................................................................................................................... 38Table 3: Supplier Presence by Location ..................................................................................................................... 53Table 4: Recent investment by suppliers ................................................................................................................... 54Table 5: Mercosur member countries (as of June 2014) .......................................................................................... 59Table 6: Passenger vehicle emission targets (CO2 g/kg) ......................................................................................... 61Table 7: Light-duty truck emission targets (CO2 g/kg) ............................................................................................ 61Table 8: Credit values for model year 2013 through 2016 listed in NOM-163: CO2 emissions in grams / km (equivalent in km/l) ....................................................................................................................................................... 62

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Chapter 2: Mexican automotive industryThe automotive industry is at the core of Mexico’s manufacturing prowess and economic prosperity. The automotive industry currently accounts for around 4% of the country’s GDP and 20% of all manufacturing. The increasing investments by vehicle manufacturers and parts suppliers in Mexico reflect the country’s growing importance as a frugal and efficient automotive production base for exports.

Mexico’s automobile industry dates back to 1925, when Ford set up assembly lines in the country. In 1935, GM entered the country followed by the Automex Company in 1938, which later became Chrysler. Nissan opened its first manufacturing plant in Mexico in 1964. VW and Chrysler also invested in manufacturing facilities in the country in the same year. In 1986, Ford and Mazda jointly opened a plant in the country. Toyota entered Mexico in early 2002, with the Camry and Corolla. Suzuki arrived in Mexico in 2005 due to the free trade between Japan and Mexico.

Chinese automaker FAW was introduced in Mexico in January 2008 through Grupo Salinas’ store called Elektra. GM was the sales leader in Mexico until 2009, but Nissan overtook the US carmaker since then. Mexico accounted for about 18% of North American automotive production in 2013; this share is expected to increase to 25% by 2020 driven by increased investments by automakers in the country. Automotive production in Mexico is driven by the country’s free-trade agreements and export push to Europe, the United States and Latin America. The country also boasts of a highly skilled workforce, automotive parts supply chain, and a stable economic and political environment.

The country’s location makes it an ideal manufacturing base to serve key markets in North and South America. Mexico’s 44 key free trade agreements (FTAs) with major countries and regional trading blocs enable hassle-free access to almost all major automotive markets worldwide. Currently, the Mexican auto industry boasts presence of as many as 19 automakers who produce both light vehicles (LVs) and medium and heavy-duty commercial vehicles (MH&CVs). Besides, more automakers are considering options for setting up manufacturing facilities in the country to cater to surging vehicle demand in North America, especially in the United States, the biggest vehicle market in the region.

Compared with 2012, Mexican light vehicle sales rose about 7.6% year-on-year (y/y) to 1.06 million units in 2013, and from 756,555 units in 2009. Light vehicle production came closer to the three million units milestone in 2013, at 2.92 million, an increase of 2% over 2012, due to a recovery in the key US export market. In 2013, light vehicle production more than doubled from 1.49 million units in 2009. The new assembly plants built by automakers such as Nissan in Aguascalientes, Honda in Celaya and Mazda in Salamanca in Mexico will further increase vehicle production in Mexico in the coming years. In terms of annual light vehicle sales in Mexico, Renault-Nissan has increased its market share in Mexico from 22% in 2009 to 27% in 2013, and has been able to maintain its market leadership since 2009 (see Figure 19 and 20). GM and VW have also been able to maintain their strong sales positions in the country over the past five years.

Vehicle parc and densityVehicle parc refers to the total number of registered vehicles in a region or market. Parc is usually used to estimate the capacity within a market or region for aftersales and tells the number of currently owned and operated vehicles. Vehicle density is used to assess penetration rates of vehicle ownership among specific population density, and is expressed in the number of vehicles per thousand of a country’s population. Areas with high growth ownership rates are attractive markets for automakers.

In Mexico vehicles are generally driven and maintained for a longer time in the country. This means that the average age of the Mexican vehicle parc is among the highest in the world. This scenario is unlikely to change as long as a large number of used cars continue to be imported into the country from the United States. At 31.8 million units, Mexico’s light vehicle parc is much lower than United States’ 242.7 million units or Brazil’s almost 40 million units, but higher than Canada’s 23.1 million units.

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Figure 19: NAFTA Light vehicle parc 2009–2013

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Figure 20: NAFTA Light vehicle density 2009–2013

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In 2013, Mexico’s light vehicle density at 271 units (per thousand population) was much lower than Canada’s 658 units and United States’ 766 vehicles. Mexico’s low vehicle density makes it an attractive market for automakers. In comparison, Canada’s passenger car market is highly mature, with the passenger car density among the highest in the world.

Light vehicle salesMexico’s light vehicle sales increased 7.7% y/y to one million units in 2013 from 988,000 units in 2012. Vehicle demand was boosted by availability of credit and an aggressive push by the OEMs. Year 2013 was a significant year for the Mexican automotive industry considering light vehicles sales crossed the 1 million units mark for the first time after 2008 – light

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vehicle sales had fallen to 756,555 units in 2009 and remained under the one million mark for the following three years. Guido Vildozo, automotive analyst, IHS Automotive, says, “Particularly reflecting what we have seen in the United States, there is a close relationship between both the markets as we had a US economic recovery; industrial production in Mexico has a high co-efficient with US GDP. And that feeds into the Mexican economy and has helped to boost vehicle demand back to pretty much normal levels at this point of time.”

Figure 21: Annual light vehicle sales in Mexico

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Historically, while vehicle sales in Mexico have not recorded a consistently high growth rate, sales reached the one million units mark in 2004 and remained above that level until 2008, before the global financial crisis caused a steep y/y decline of 26.9% to 756,556 units in 2009 (see Figure 21).

One reason for higher sales in 2013 was higher taxes on imports of used cars. Joining the NAFTA opened up the Mexican market to imports of used vehicles from other NAFTA members. As a result, used vehicle imports lured consumers away from new vehicles. To provide a background, Mexican President Felipe Calderón issued an Automotive Decree in March 2008 stating that at least 62.5% of the imported vehicle’s components should be manufactured in a NAFTA country. It also said that an imported model had to be exactly 10 years old.

In July 2011, Calderón brought new guidelines to regulate the used vehicle imports from the United States. Under the new rule, any car newer than eight years old and assembled in the United States or Canada was allowed to enter Mexico without paying duties. Vehicles that were eight or nine years old paid a 10% duty, in addition to a value-added tax. Ten years or older cars paid a 50% duty. With this decree, Mexico came into compliance with NAFTA’s provisions on imports of used cars. Under the provisions of NAFTA, starting from 2009, Mexico, on a staggered basis, had to permit used automobiles from the United States and Canada to enter without restrictions. Starting 2009, Mexico could not adopt restrictive policies on imports from Canada or the United States for used vehicles that were at least 10 years old. Every two years from 2009, the age of the used automobiles decreases by two years, so that by 2019 there will be no restrictions on the import of any used car from the United States or Canada.

Mexico’s Automobile Dearlership Association, or AMDA, has pushed aggressively to have an equal playing field for new and used-car imports. The Mexican government and AMDA are looking at alternatives to control used car imports; one could be the used cars’ emissions levels and second is that they meet the requirement of 60% NAFTA content. Dealers are pushing for 60% content being NAFTA built, but local content percentage is almost impossible to measure for a used car. The local content percentage can be measured for a new car because the dealer has the certificate of origin or an export template, but IHS’s Vildozo says that they are trying to replicate it for used car imports. Mexico is expected to come up with some reasonable means of controlling some of the used car imports to boost demand for new vehicles.

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Grupo QuimmcoAxles, crankshafts & moulds

AddressGrupo Quimmco, S.A. de C.V.Torre Quimmco Piso 11Ave. Roble 701Col. Valle del CampestreSan Pedro Garza García, N.L.Mexico 66265

Tel: +52 (81) 8368-7500 Fax: +52 (81) 8368 7575 Web: http://www.quimmco.com

Company Type: Private

Senior OfficersJosé Canales, CEO Jesús Barrera Lozano, Managing DirectorJorge Martinez, Corporate CommunicationsExecutiveCarlos Vargas, Head, Purchasing &Materials, SisamexAntonio Navarro, Head, Manufacturing,Sisamex

ProductsAluminium Castings, Brake Systems, CastedGray And Ductile Iron Components, ForgedCrankshafts, Forged Front Axle I-beams,Front And Rear Axles, Molds And Fixtures,Precision-machined Crankshafts, TrailerAxles

PlantsMexico [8]

Grupo Quimmco is a group of companies with businesses in the automotive components,chemicals and construction industries. In automotive the company supplies axles,crankshafts and aluminium casting components. The company generates 40% of its salesfrom exports.

Grupo Quimmco was founded in 1994 and is based in Monterry (Mexico). The company organises its business intwo divisions : Metalmechanics and Chemicals.

The Metalmechanics Division is the group’s biggest operating division. It manufactures components such as axles,brake and driveline components, forged i-beams and crankshafts. It also manufactures grey & ductile iron castings,aluminium castings, and moulds, fixtures & cutting tools apart from providing machining services to the automotiveindustry.

The group’s other two divisions have their manufacturing bases in Mexico.

Quimmco production base is largely located in Mexico while the company supplies to several OEMs and componentsuppliers in the NAFTA region. The company operates seven companies under its Metalmechanics Division. Sevenof the eight companies of Quimmco’s Metalmechanics Division have their manufacturing bases in Mexico with theonly exception to it being GreenEville Casting, which operates a manufacturing unit in Greeneville, Tennessee (US).The company is engaged in the foundry & machining of aluminium cylinder heads and other components to cater tothe North American market.

The Metalmechanics Division caters to both automakers and suppliers. The Division’s major customers includeMeritor, Axle Alliance, Chrysler, CNH Global, Daimler Trucks, GM, Hendrickson, John Deere, Mack Truck, RenaultTruck, Teksid, Volkswagen and Volvo.

The group has around 5,000 employees

Corporate Strategy

Grupo Quimco is following a three-prong strategy to ensure its growth. The company is focusing on facilitatingorganic growth, improving operating efficiency and identifying new business opportunities. The company is investingin its current business to further strengthen its market position. Grupo Quimco is also concentrating on improvingmanufacturing efficiency and reducing costs to improve its profitability. In addition, the company continues to look fornew areas of growth. Grupo Quimco leverages its expertise in its existing three core businesses of automotive,chemical and construction to enter new markets, which offer high growth prospects.

Presence in Mexico

Grupo Quimmco’s Metalmechanics Division operates seven companies in Mexico. In 1990s, the Mexicangovernment sold its ownership stake in CNH Global to Quimmco. The company later entered into a settlementagreement with New Holland NV (Fiat subsidiary with stake in CNH) to restructure the shareholding in CNH Global,moving from 60:40 to 50:50 ratio.

In January 2003, Quimmco and Meritor restructured their Mexican joint-venture company which manufactures axles,brakes and related components for commercial vehicles. The company located in Monterrey, which was earlier calledDirona SA, was renamed Sistemas Automotrices de México. In 2008, Grupo’s subsidiary Blackhawk de Mexico madean USD1m equipment expansion, adding a 65-tonne holding furnace, CNC automatic grinders and new mouldinghandling equipment which helped to provide greater flexibility in lot sizes and grades of ductile iron, in turn, enhancedproductivity.

Quimmco operates the following affiliates in Mexico:• Sistemas Automotrices de México (Sisamex) is a 50:50 joint-venture of Quimmco and Meritor. The company(previously called Dirona SA) manufactures axles, brakes and related components and assemblies for medium andheavy-duty commercial vehicles. Sisamex operates two production plants in Escobedo, Nuevo Leon employing astaff of around 2,000. The company’s clients include Freightliner, Kenworth, Mercedes-Benz, Daimler Trucks, JohnDeere and Volkswagen. The company also supplies to tier one suppliers such as Dana and Meritor. The companycaters mainly to the Truck market (accounts for 70% of 2010 sales), Buses (5%) and other applications (25% of 2010sales).• Sudisa is a wholly-owned subsidiary of Sisamex. The company is a leading manufacturer of non-traction axles andcomponents for heavy-duty trailers in Latin America. Sudisa supplies its products to OEMs and independent trailersand semi-trailers manufacturers. The company sells its products, through Meritor, to the original equipment (OE) andaftersales markets. Production plant of Sudisa is located in Guadalajara, Jalisco. The company has approximately145 employees.• Manufacturera de Cigüeñales de México (Macimex) is a company engaged in precision-machining of crankshafts.The company machines casted and forged crankshafts for engines and braking systems. Macimex operates twomanufacturing plants in, one in Tenango del Valle, Estado de Mexico and the other in Ramos Arizpe, near Saltillo,Coahuila. Macimex has installed capacity of over two million crankshafts per year. The company caters to customerslocated in North America, South America, Europe and Asia, exporting 50% of its production. The company generated85% of 2010 sales from automotive market, 10% from agricultural and the remaining 5% from others. Customers

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include OEMs such as Chrysler, Ford, GM, Daimler, John Deere and Nissan. The company currently employs 950people.• Forja de Monterrey is a heavy forging company located in Escobedo, Nuevo Leon. The company is engaged inforging of components used in production of front axle i-beams for heavy-duty trucks and crankshafts for diesel andgasoline engines. It serves markets such as heavy truck (accounts for 60% of 2010 sales) and passenger vehicles(40%). Forja de Monterrey’s mainly supplies to the NAFTA market and its customers include Meritor, Axle Alliance,Sisamex, Mack Trucks, Volvo Trucks, Renault Truck, John Deere and GM. The company presently employs around300 people.• Blackhawk de Mexico is a foundry of grey and ductile iron for the production of castings for use in heavy duty trucksand agricultural tractors. The company supplies to OEMs and component suppliers in North America. In 2008, thecompany started exporting its products to Europe and South America. Blackhawk de Mexico operates onemanufacturing facility in Monterrey, Nuevo Leon. The company employs 200 people. The company generated 80% of2010 sales from heavy truck market, 15% from farm equipment and 5% from others. Blackhawk’s main customersare Dana, Volvo, John Deere, Meritor and Auburn Gear.• Quimmco Centro Tecnológico manufactures moulds and fixtures for the foundry and forging industries. QuimmcoCentro is located in the city of Saltillo, Coahuila. The company was incorporated in the group in 1997 and caters toclients including GM, Spicer, American Axle, TRW, Ford, Jaguar, Castech and Brembo Rassini. The companycurrently employs 190 people and target markets include heavy-duty truck and auto (accounts for 90% of sales) andother applications (10%).• CNH de Mexico is a 50:50 joint-venture of Quimmco and CNH Global, a subsidiary of the Fiat Group. The companyassembles and markets agricultural tractors in Mexico. The company has an extensive dealer network with morethan 210 agricultural and 120 construction machinery points of sale throughout Mexico. The company exports to morethan 25 countries around the world, including the US, Canada, Central and South America, Africa and Asia. Itsproduction plant is located in Queretaro employing about 1,500 people. The company caters to Agricultural machinery(accounted for 70% of 2010 sales), construction equipment (12%) and Service and parts (18%).

Financial Overview

For the fiscal year 2010, Grupo Quimmco reported total sales of USD700m and earnings before interest, tax,depreciation and amortisation (EBITDA) of USD60m. During the financial year the company made capital expenditureof USD296.5m over USD282.7m in 2009. Grupo Quimco is a privately owned company and therefore it does notpublish details of its financial performance.

Financial Figures - displayed in $

Year Net Sales [m] Operating Income [m] Net Income [m] R&D Expenditure [m] Employees

2010 700.00 - - - -

Outlook

Grupo Quimmco has made a significant presence in Mexico mainly in the automotive and chemical division market.With strong presence in the automotive business, which accounts for nearly 95% of its sales, Grupo Quimco is wellpositioned to benefit from the high growth prospectus of the Mexican automotive industry. The local automotiveindustry has been experiencing strong growth in investment from the global automakers who want to use Mexico as alow cost manufacturing hub to cater to demand in North and South America. Vehicle production in Mexico is forecastto reach 4.2 million units by 2020. This presents tremendous growth opportunities for the local suppliers like GrupoQuimmco in coming years.

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Address: Carretera Monterrey – Colombia km6General EscobedoNuevo LeónLeónC.P66050Mexico

Tel: +52(81)83691200Web: http://www.sisamex.com.mx

Address: Carretera a Laredo #203 NorteAntiguo Ejido a San Nicolás de los GarzaGeneral EscobedoNuevo León C.P. 66050Mexico

Address: Calzada de las Lomas No. 205Col. Álamo Oriente TlaquepaqueJalisco Jalisco Jalisco 45560Mexico

Tel: +52(33)36685500Fax: +52(33)36685530Web: http://www.sudisa.com.mx

Address: Carretera Monterrey Colombia km6.5General EscobedoNuevo León México.Nuevo LeónNuevo León66050Mexico

Tel: +52(81)83050000Fax: +52(81)83050007Web: http://www.forja-mty.com.mx

Address: Km 38.5 Carr. La Marquesa-Tenango, Tenango del Valle, Estado de Mexico Estado de Mexico Estado de Mexico 52300 Mexico

Tel: 52 (722) 276 6500Web: http://www.macimex.com

Address: Morelos Sur 605 Ramos Arizpe Ramos Arizpe Coahuila Coahuila 25900 Mexico

Tel: 52 (844) 866 0900

Manufacturing Plants

SISAMEX

SISAMEX - Carretera a Laredo

SUDISA

Forja de Monterrey

MACIMEX Tenango Plant

MACIMEX Ramos Arizpe PlantSAMPLE

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Address: C. Villa de García Km. 2.5 1-A Santa CatarinaNuevo León.Nuevo León.66350Mexico

Tel: +52 (81) 8151-0300Fax: +52 (81) 8340-4684Web: http://www.blackhawk.com.mx

Blackhawk de México

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