Navistar International Corp. is opening a new plant in Mexico and putting together a Mexican dealer network from scratch as part of a plan to greatly expand its presence in Latin American markets.
The truckmaker is also using its new assembly plant in Escobedo, Nuevo Leon, near the industrial center of Monterrey, as a test bed for new assembly methods. The $167 million factory is designed for modular assembly of trucks, and calls on suppliers to play a bigger role in final assembly.
Navistar plans to build buses and three different models of International-badged Class 6-8 trucks at the Escobedo plant. Initially, almost all of the production will be devoted to trucks, the company said.
At the outset, Navistar will build about 20 trucks per shift, but the plant is designed for a capacity of 65 vehicles per shift, or 195 per day. Pilot production began in February.
The trucks will be equipped with Navistar's International diesels built at the company's Melrose Park, Ill., engine plant. Body stampings will be shipped in from Navistar's Springfield, Ohio, truck assembly plant.
LATIN AMERICAN MARKET ON THE MEND
Production at the 700,000-square-foot Escobedo plant is targeted to the Mexican market and Latin American countries. Sales of medium- and heavy-duty trucks in Mexico are rebounding from depressed levels that followed the peso devaluation in late 1994 and the resulting economic crisis.
'It's clearly on a recovery mode,' said Don DeFosset, president of Navistar's truck group.
Navistar is also using Escobedo to try out new assembly processes and supplier relationships. Some of the innovations are likely to find their way into what the company refers to as its next-generation truck and bus program, which is under development for a mid-2001 introduction.
At Escobedo, Navistar laid out the flow of truck production in a Y-shaped configuration. At the base of the Y, the company located its body shop and paint facility. After leaving the paint shop, medium- and heavy-duty trucks are diverted onto separate assembly lines that branch out from the paint shop. From the opposite direction, the truck chassis moves toward the cabs. Roughly at the middle of each assembly line, along the upper branches of the Y, a cab is mated to a chassis, and the finished truck is driven out of the facility.
Navistar also designed the plant so suppliers could deliver parts directly to the point on the assembly line where the components are needed. The company and its suppliers are pushing for greater levels of modularization to simplify the assembly process. Axles, for example, will arrive at the line - at one of the 96 loading docks - already built up with brakes, drums and hubs.
Suppliers will manage their own inventory, a move that has allowed Navistar to eliminate warehouses at Escobedo.
But DeFosset said suppliers would not actually have personnel on the Navistar assembly line, a move he characterized as 'a step too far' for the truck industry now. Still, he said, suppliers that can deliver modules to Escobedo will improve their chances of keeping and growing their overall business with Navistar.
The company has also had to build a Mexican dealer network from the ground up.
For 30 years, Navistar has had a supply and technology agreement with Consorcio G Grupo Dina SA, the Mexico City-based truck and bus maker. Dina assembled Navistar trucks and sold the vehicles and service parts through its dealer network. Navistar, which has a small stake in the company, wanted to expand in Mexico, but could not persuade Dina to sell a bigger share of its business. The Navistar-Dina agreement is scheduled to end in June.
In the past two years, Navistar has signed 42 dealers in Mexico, some of them former Dina dealers. By the end of the year, Navistar hopes to have 48 dealers, a number it estimates will give it coverage in about 90 percent of the Mexican market.
EYES ON THE PESO
The resurgence of the truck market in Mexico is tied closely to the country's recovery from the peso crisis.
Mexico's economy is expected to grow 5 to 5.5 percent this year, according to an estimate from the Organization for Economic Cooperation and Development, a Paris-based group. Last year, the Mexican economy expanded by 7 percent, the biggest surge in 16 years. The easing of economic growth in 1998 was attributed by the organization to a drop in oil prices. Mexico is a major oil-producing country.
In 1994, before the peso was devalued, truckmakers were selling about 2,300 vehicles a month. That number declined to fewer than 400 per month in 1995.
Last year, sales of medium- and heavy-duty trucks totaled 13,053 units, more than double the 6,196 trucks sold in 1996, according to Anpact, a Mexico City trade group. DeFosset said Navistar is looking for Class 6-8 sales in the range of 30,000 to 35,000 trucks this year in Mexico.
Still, the Mexican market is dwarfed by the combined U.S. and Canadian market, where Navistar is forecasting total 1998 industry sales of 220,000 vehicles in the Class 8 category alone.