Judith Camacho is Business Development Manager for Pertek-Erler in Guadalajara, a supplier of decorative plastic parts to the automotive, electronics, and appliance industries. Over the 20 year history of the company, she has helped it grow from start-up to become one of the leading providers of high quality, painted automotive components in Mexico. With a degree in International Commerce from the ITESO University and 23 years industry experience, Judith has been successful in developing, and growing, business with a broad range of international and national customers in a demanding and quality focused industry. We caught up with Judith for an update on the cautious reopening of manufacturing in the automotive sector in Mexico post-pandemic.
EMSNOW: Would you provide our readers with a general overview of your business in Mexico?
Pertek-Erler (a subsidiary of Erler Industries Inc.) is dedicated to the decoration of plastic for a broad range of industries, including interior automotive, domestic appliances and consumer electronics. This year is our 20th anniversary in Mexico, with a steady growth from the past 10 years mainly caused by the increased demand of decorated components for the automotive export industry. Our robotic lines produce one million parts per month (prior to Covid-19 ). With this capacity, our expertise, and quality certifications, we consider ourselves as a leading provider of contract painting services in North America, working with many of the leading Tier 1´s and OEMs of the region.
EMSNOW: What impact is the Covid-19 crisis having on your business?
This global pandemic had an impact in every aspect of our lives, we never before experienced the shutdown of the worldwide economy. It is hard to predict an optimistic forecast which could represent anything better than several months of losses for our business. Our biggest challenge has been to protect our personnel resources, from keeping them safe, avoiding contagion and transmission, to supporting the families that live from their income. With essentially zero government economic support, the costs have been high to implement contingency plans in order to support minimal customer demand.
EMSNOW: Are you continue to operate, have you had to make major changes?
We have been able to operate with a small number of employees to support a couple of customers classified as part of essential industry. This gave us the opportunity to implement strict health and safety procedures related to Covic-19 inside the factory and during transportation to and from work. We have received strong support from automotive global companies, following their recommendations from expert organizations and governments, and their own experiences with Covid-19 in China and Europe, allowing us to implement protocols to be strictly followed by our staff and personnel inside our facility and pass it along to our employees families.
This new reality has been a major cultural and educational change within the company, whether it be the use of additional PPE equipment, regular handwashing, social distancing, home office, and a whole array of protocols, some of which can be uncomfortable for those involved. Minimizing the spread risk is a priority of our new company culture.
EMSNOW: The automotive industry has been particularly hard hit. Do you see your demand coming back? If so, when?
Automotive industry represents the backbone of many countries’ GDP. T-MEC region was flying with significant growth forecast, developing electric and autonomous vehicles, focusing on environmental, etc. The spread of coronavirus across the globe has forced plants to shut down, disrupted supply chain and quarantined workforce. It has been a major brake.
The future is hard to predict for the automotive industry, demand is affected, in my opinion, for automotive buyers by a global recession leading to loss of consumer confidence, that will be an impact in automakers revenues. Also, OEM´s will slow down R&D activities to inject financial resources to operations, future investments could be seriously affected especially for new platforms. Suppliers liquidity could disrupt manufacturing.
By the other hand, market has change, consumer will prefer to buy a vehicle instead of using public transportation as it is all about safe distancing now, US government will put a major economic subsidies to incentive consumer to reactivate purchasing an automotive product. Keeping ourselves positive, we think demand will ramp up slowly but surely by Q4 and during 2021.
EMSNOW: How will your business adjust to this supply chain disruption? Where are you getting your raw materials, etc.?
We need to strategically adapt to new market conditions; our supply base is critical to survive this temporary slowdown and re-open with slow ramp up. We need to get creative, identify and prioritize cost out measures, cash flow will be key to monitor within our industry. Closer review of customer forecast and communicating our forecasts to the supply chain becomes more important. We are lucky that most of our raw materials are produced in the T-MEC region, but our trend will be to further localize our main prime materials to reduce inventories and keep just in time within the supply chain.
EMSNOW: Has your supply chain been impacted? If so, how?
In Manufacturing as well as other industries, we had a big challenge to protect and maintain our partners-suppliers: the lack of visibility in regard to when the demand is getting back and if so, predict which is the level of the new demand going forward. It is a high risk; you do not want to impact your supplier with shortages of raw materials neither with an excess of inventories sitting on warehouse. Typically OEM´s pricing contract is based on volume, cost drivers could be significantly impacted by suppliers, this could be one of our biggest concerns and also the need to cut trained and dedicated workforce if volumes keeps low.
EMSNOW: What has been the impact of the change in the government on your business? On the overall industry?
Mexico´s industry is badly hit. Since last year recession started, peso being the worst performance currency in the world (according to the Washington Post) and now with Covid-19 economic activity has dropped, especially tourism, oil, and trade. Expectations are not looking great when you read 22 million additional people may be at poverty levels this year. Mexico´s government is offering almost no stimulus to help private industry over this crisis transition, compare with other countries we are alone in this battle. Companies like ours that has been solid financial and contract wise are able and willing to support our team by keeping paying salary of the entire staff, but can not been sustained for months, we are assuming a business scenario with risk but trusting that we can administrate low sales for few months. We have positive expectations as Mexico is the largest trading partner to the USA, good relationship between our presidents provide us confidence that the automotive industry, a pillar for both countries, will be one of the priority industries to protect and to re-activate under the international health and security procedures.
EMSNOW: What are the unique opportunities for growth in Mexico, once the crisis is over? How do you see the long term prospects for manufacturing in Mexico?
Mexico certainly has opportunities and we will look to re-invent ourselves to become stronger as a company, as a team, and as an industry. We see customers will require more business flexibility, effective communication will play a major role to estimate customers forecast and to exceed customer satisfaction, lean manufacturing is a key tool to maintain the company in positive finance numbers.
Prospects in the automotive industry sees Mexico not only as a low cost country, they see attractiveness in the skills of labor with mature systems in place and supply diversification in a global economy.
EMSNOW: Anything else you´d like to share with our readers.
Opportunities for automotive industry to recover from this major pandemic will be there, as consumers will demand a healthier environment inside their vehicles. Material technologies has to evolve to become safer to consumers; connectivity will play a major role now that consumer would rather own a smart vehicle and drive rather than fly for business or pleasure trying to avoid expose to airports. Our industry is shifting towards health and wellness solutions and Pertek-Erler is getting prepare to embrace the new business scenario, to play it well, and become an even stronger and attractive company to do business with.