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Mexico: the new China?

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  • Mexico: the new China?

    Yet more evidence of a changing economic world order

    “AlixPartners Introduces New Outsourcing Tool that Determines ‘Best-Cost Countries’”

    Mexico Surpasses China and India in the Analysis; China’s Total Costs Just 6% Below U.S.’s

    Download a PDF of this case study.

    SOUTHFIELD, Mich. (May 14, 2009) – AlixPartners LLP, the global business advisory firm, today unveiled a unique new tool designed to give company managers and owners a much more precise understanding of which locale in the world is not just a low-cost country (LCC) for various manufactured components in today’s fast-changing global economic environment, but the best-cost country, or “BCC.” The AlixPartners 2009 Manufacturing-Outsourcing Cost Index(SM) shows that within just the past six months there has been significant change in aggregate LCC manufacturing rankings, with Mexico now surpassing both China and India for the components studied, and that China’s total, fully landed costs for the market basket of components studied are just 6% lower than the cost of manufacturing those same parts inside the United States. Perhaps more important, for individual manufactured items the AlixPartners tool shows that cost advantages can vary widely across LCCs, perhaps dispelling the notion that any one country can be the be-all and end-all LCC for everything.

    Stephen Maurer, a managing director with AlixPartners and a leader of the firm’s Lean Manufacturing practice, said, “This new index solves what is usually a mystery for virtually every manufacturing company today: Given fast-moving changes in cost drivers like exchange rates, labor and shipping, which country is, really, the lowest-cost source for a given part or component?

    “Outsourcing is a whole new ball game today,” continued Maurer. “Gone are the days when companies could see cost savings of 30% or more by making ‘no-brainer’ manufacturing-footprint and outsourcing decisions, to China in particular. Today, a whole new level of both quantitative and qualitative analysis and modeling is demanded, even though the data for such analysis and modeling are often dated or incomplete. With this new tool, however, AlixPartners is able to offer clients exactly that kind of in-depth modeling, so that particular products can be matched to exactly the right point of manufacture from a total-cost point of view.”

    The AlixPartners index analyzes a variety of manufactured components and simple assemblies, from small DC (direct-current) motor assemblies to complex machined aluminum die-castings, and compares the cost to build these items in China, India, Brazil and Mexico, versus the cost of doing so in the United States. It also tracks changes in seven key cost drivers (exchange rates, labor costs, transportation costs, raw materials costs, inventory costs, capital equipment/overhead costs and duties), by part and by country.

    In an initial analysis, AlixPartners looked at the relative costs for its market basket of parts over the past three years. The index showed that China, once the lowest-cost supplier for this market basket, has now dropped to #3 in LCC rankings, behind India and the new #1, Mexico – as China’s total landed costs are now 94% of US costs for the same parts. The index also predicts that while China’s cost position will probably improve in the latter half of this year, in part due to declining ocean freight costs as a result of moderating oil prices and the global recession, it probably will not improve enough for China to overtake Mexico and India this year.

    Meantime, while the US has become more competitive in recent years, manufacturing plants and suppliers here also still face a significant cost disadvantage in most cases, the index finds.

    “Our research shows that the cost structure of individual components strongly influences the savings potential of LCC manufacturing, and also that that the key drivers can change quickly,” said Maurer. “Manufacturing and supply-chain alternatives need to be rigorously analyzed to get to the right answer for today’s reality, not yesterday’s.”

    About AlixPartners
    AlixPartners is a global business advisory firm offering comprehensive services to improve corporate performance, execute corporate turnarounds, and provide litigation consulting and forensic accounting services. The firm’s specialty is urgent, high-impact situations when results really matter. It was the recipient of a record four awards from the Turnaround Management Association in 2008. The firm has more than 850 professionals in 13 offices across North America, Europe, and Asia, and is on the Web at

    Mexico: Chinese Automaker Expanding as Existing Automakers Struggle

    Published Mar 5, 2009

    Poor So-So Pretty Good Good Excellent PoorSo-SoPretty GoodGoodExcellent0 Ratings 0 RatingsMEXICO CITY — Chang'an Auto, the Chinese partner of Ford and Suzuki, has not slowed down in its plans to enter North America. The company has publicly disclosed the name of its Spanish-Mexican partner, with which it will be building a new assembly plant in Mexico: Grupo Hispanoamericano Autopark.

    In the midst of the worst recession the automotive world can remember, and surrounded by ever-worsening conditions, Chang'an will soon begin building compact vehicles in Mexico as it inches closer to its ultimate plan of a debut in the U.S. market.

    The company has recently become a relevant player in China, not only manufacturing cars for its joint-venture partners, but also as an independent automaker. Chang'an markets its own cars under the Chana brand and is expected to incorporate three of its small models that are currently sold in China: Benben, Zhixiang and Yuexiang.

    Last month, Chang'an President Xu Liuping and Autopark President Juan Manuel Vinos signed an agreement in Mexico to build a plant, most likely in central Mexico, with annual production of 50,000 vehicles.

    Initially, the venture will serve Mexico and Latin America, and eventually when the cars pass U.S. regulations, it intends to sell its products in the United States. By the end of this year, while the plant is still under construction, Chang'an will begin exporting finished units from China to Mexico. It has not been reported when the first cars will come off the assembly line from the Mexican facility.

    Chang'an joins other two Chinese automakers with similar plans: First Auto Works (FAW) and Geely. The Mexican government requires new automakers to invest at least the equivalent of $100 million and produce at least 50,000 units. So far, only FAW is selling cars in Mexico, through its alliance with its Mexican partner, Ricardo Salinas Pliego, media mogul and majority owner of bankrupt Circuit City. Import records show that approximately 5,000 cars have been imported from China since last year.

    Inside Line says: Will Chang'an be a major threat to U.S. automakers, or a future employer of U.S. automotive talent? — Loriana Marietta, Correspondent
    Source:Mexico: Chinese Automaker Expanding as Existing Automakers Struggle

  • #2
    unlikely, Mexico's Cantarell Field oil field is on a steep decline, so its entire energy export is going down. It really hasn't developed that much of an manufacturing industry. Outside of US tourists coming, what else does Mexico have going for it?


    • #3
      Originally posted by tphuang View Post
      what else does Mexico have going for it?
      A solid Narcotics smuggling industry?