On the floor of the Guanajuato Gear & Axle plant are the heavy machine tools that make drivetrain parts for General Motors.
Workers, some of them farmers from the surrounding broccoli and cauliflower fields, cut, grind and mill heavy axles for the hot-selling Suburban, Tahoe, Yukon and Yukon XL sport-utilities. American Axle & Manufacturing Inc. chose to build its plant in the highlands near Silao, 200 miles north of Mexico City. Here, farmers still till their fields as they did 400 years ago. But the factory uses the latest information systems, and tooling has been imported from Germany, Switzerland and Japan.
Company Chairman Richard E. Dauch wagered an estimated $500 million that he could produce high-quality truck axles in Silao. Despite Mexico's reputation as a low-wage haven, Dauch came to Mexico because he had to follow his largest customer, General Motors. Formed in 1994 from GM's sale of five shabby factories, American Axle makes parts for GM's pickups and sport-utilities.
But adding a Mexican operation was not an easy decision. In early 1997, Dauch had launched a $1.7 billion effort to renovate his U.S. plants. 'But we had to be there for the launch' of GM pickup production in Mexico. The company was going into the global phase, and Mexico was a natural extension of our charter.'
The risks were great. Some feared Dauch would not be able to recruit skilled workers. He also needed a new highway to ship parts seven miles to the Silao plant. But Dauch was familiar with Mexico. In the 1980s, the former Chrysler executive guided the turnaround of Chrysler's Mexican plants. On first touring those plants, he said, 'I could see that we were in deep --,' according to his book, A Passion for Manufacturing. He changed every manufacturing system and installed Mexicans to run every plant.
He also befriended Vicente Fox, governor of the state of Guanajuato. Last year Fox became president of Mexico, and Dauch attended the inauguration. The friendship helped Dauch cut red tape. The government quickly OK'd his land purchases, built a highway and installed electrical and gas lines.
Today, American Axle's Mexican plant builds 1,300 axles per day. Soon, production will reach 2,000 per day. The company is positioned to supply automakers who invested $3.6 billion in Mexican assembly from 1997 through 2000. (See chart on Page 25.) The new plant 'put me in the catbird seat for GM, Volkswagen, BMW, Ford and DaimlerChrysler,' says Dauch. 'I was looking for broader distribution, not just for today, but for tomorrow.'
E-mail writer Robert Sherefkin at [email protected]