Mazda's challenges in crucial Mexico plant ramp-up

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SALAMANCA, Mexico -- Some of the biggest challenges for Mazda Motor Corp.'s first factory in Mexico came from the smallest details.

Consider the tiny metal brackets used to secure wire harnesses.

Those brackets are made by a Mexican subsidiary of a trusted Japanese supplier. But they are plated by a wholly unknown local supplier further down the chain.

"At first, it was no good," recalls Norio Murakami, a plant manager who oversees vehicle electronics in the Mazda3 compacts being made at the new $770 million assembly plant. "The plating quality was low, so we needed to improve it."

That was but one stumbling block as Mazda went solo, without a partner, for its first overseas factory since building a plant in Flat Rock, Mich., almost three decades ago.

For a small carmaker with a tiny international manufacturing footprint, a lot could have gone wrong in setting up shop. A lot still could, as Mazda slowly ramps up output, expands local parts procurement and begins consignment production for Toyota Motor Corp.

"There are a lot of unexpected things that can happen when you have a new plant, new employees and a new product," warns Tatsuo Yoshida, an auto analyst at Barclays Securities Japan. "You have to be able to fix them before they snowball."

The new factory deploys some of Mazda's most advanced manufacturing technologies, including a new stamping process that can simultaneously stamp four sheets of high-tensile steel and deliver more parts from a single sheet. But many challenges lie ahead

Chief among them is the quest to build local content to the 62.5 percent level required under NAFTA to continue shipping cars duty-free to the United States. Mazda's local content stands at around 50 percent now; it has five years to reach the 62.5 percent mark.

Mazda will add engine machining in October to bring it closer. But it still will need to import key components such as crankshafts, transmissions and advanced electronics.

Only a third of Mazda's Mexican workers have any background in manufacturing, let alone the automotive field, says Keishi Egawa, CEO of Mazda's Mexico operations.

In Mexico, the average worker undergoes at least one month of training, compared with two weeks in Japan. Mazda has already sent 160 of the most promising of its 3,000 employees to Japan for a deep-dive orientation. But over the next year, Mazda must hire another 1,600.

A lot gets lost in translation, even though the plant keeps 27 interpreters on hand.

"English doesn't even work," says Egawa, who spent nearly eight years working at Flat Rock.

Complexity will only increase when Mazda starts producing the Mazda2 subcompact derivative for Toyota sometime before March 31, 2016. Protecting quality is part of the reason Mazda is conducting a slow ramp-up to 230,000 units then, from 140,000 today.

Speaking in Japan last month, Mazda CEO Masamichi Kogai said: "We need to absolutely assure the initial quality of those products and commit resources to that."

You can reach Hans Greimel at hgreimel@crain.com. -- Follow Hans on Twitter


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