Delphi Mexico: a major force in the autoparts sector.

With auto manufacturers occupying the top three slots among non-state-owned Mexican exporters, it's certainly no surprise that an autoparts producer comes in right behind them on the list.

Like others in the autoparts field, many of them European, the Delphi Automotive Systems Corporation took advantage of the Mexican automaking boom in recent decades to supply the big carmakers with parts--from electronic technology to radiators. Unlike the others, however, Delphi Mexico took off to become Mexico's top exporter of autoparts.

Delphi Mexico had the advantage then of being part of the world's largest autoparts manufacturer. It still has that advantage. Now known simply as Delphi Corporation, the Troy, Michigan-based global parent comprised the parts division of General Motors before spinning off on its own in 1999. By that time, the Mexico operation had already passed the US$8 billion total sales mark.

Delphi Mexico is considered part of the company's North American operations and does not break out its sales separately. The company estimates that about one-third of its global sales represents product which at one time in the production process was in Mexico

Delphi got the jump on its competition in Mexico by getting into the game early. Its presence in Mexico dates back to 1978, when it first began manufacturing wiring systems on the south side of the U.S.-Mexico border at a plant in Ciudad Juarez.

Delphi Mexico is no poor relation in the parent company's global structure. It has been estimated that the nearly 70,000 employees in Mexico make up more than one-third of all Delphi employees worldwide. With more than 50 plants in nearly a dozen states--concentrated mostly in the border area--it's one of the largest private employers in Mexico.

Delphi's growth in Mexico is as much about selling abroad as it is about supplying the Mexican automotive industry. Even as national autoparts production dipped a bit in 2002, autoparts exports from Mexico passed US$10 billion that year, according to statistics from the National Autoparts Industry association (INA). Despite much competition, Delphi Mexico's share under the category of exports in 2004 was US$3.4 billion.

Lean And Mean

Size and seniority aren't the only factors that have helped Delphi Corporation grow its Mexico operation into such a major force. One obvious advantage that jumps to mind is the cost of labor in Mexico. It still runs far below U.S. standards, as much as 75 percent below at some skill levels and locations. Thus a traditional approach has been to run labor-intensive operations.

[ILLUSTRATION OMITTED]

But Delphi Mexico leaders say labor costs are not as huge a factor as many think. After all, the costs are much lower in other parts of Latin America, as well as in a number of regions around the world. Also, they point out, Delphi plants are increasingly "high-tech," with a capital-intensive approach having taken over as the predominant strategy.

What they do point to, however, is a strong emphasis on cost efficiency, with an almost maniacal focus on "lean" operations. Of course, rare is the company that brags about its "fat-saturated emphasis on inefficiency," but Delphi Mexico walks its lean talk in a big way.

For example, the autoparts trade press recently reported that a Delphi Mexico plant slashed overheads by cutting back its supply of materials so much that it often kept just a day's worth of materials on hand, re-supplying on a day-to-day basis. This just-enough-and-no-more approach didn't affect product quality one iota.