Mario Fabián MÉNDEZ/ Grupo Etsa Mexico

Mario Fabián MÉNDEZ, Grupo Etsa, Mexico With Mexico being one of the fastest growing regions in the world for heat treating we had to interview Mr. Mario Fabián Mendez operations manager of Grupo ETSA the largest commercial heat treater in Mexico. February 23, 2017

Mario I believe you ended up in the heat treating industry for the same reason that many of us did namely that heat treating runs in your family. Can you please give us the background?

“When my father founded ETSA in 1979, he was a former Plant Manger of a large German commercial heat treating shop in Mexico City; eager to cover a market opportunity for maintenance of captive furnaces meanwhile also starting commercial heat treat services with salt bath & shaker furnaces. The commercial division ended up to be much more active and finally covered the whole scope of the company. I started working as an occasional operator Saturdays and Summers since I was a kid; I was also driver and other small duties before starting my engineering studies, during my university studies; I was able to have a broader exposure into quality and maintenance, once I finish my college I began to add value in those areas where my father was not that much interested, such as quality, information technology, human resources and sales. I was easily engaged through my small successes in such uncovered company areas.”

My impression is that your company is the largest commercial heat treater in Mexico-would you consider this a fair statement?

“Yes we are; specially if you consider capacity and number of plants allocated in Mexico”

Maybe you can elaborate on your company, number of employees, sales, processes offered etc.?

“Our company has now 38 years on business, with 254 employees total, we have vacuum, integral quench, continuous & salt bath furnaces for nitriding, carburizing, neutral hardening and some other additional surface technologies; plus we have other value added activities such as assembling, cleaning, packing, measuring and transportation capacities. On the other hand, we are very pleased to announce that recently we had re-launched the maintenance and refurbishing services for heat treatment furnaces due to a very large contract we were awarded to bring, refurbish and reinstall, several furnaces currently in the USA that must be restarted in Mexico.”

What type of heat treating does ETSA concentrate on? I have seen very successful commercial heat treaters who concentrate on large volume small margin heat treating, I have also seen commercials which only go after very high end, high margin heat treating who are also successful-how would you describe ETSA?

“We have plants focused especially on automotive for larger volumes and some other plants focused on smaller markets for the tooling specialties, oil, appliance and aerospace industries; covering both markets but focusing plants to each specific market scale”.

I have to confess that as a Canadian I am rather jealous of the amount of new investment which Mexico is seeing these days-what sort of growth are you seeing in the heat treating industry both commercial and captive?

“For the last 10 years heat treating growth in Mexico has been tremendous, and will continue to be like that due to our worldwide competitiveness increase.”

The common perception is that the number one reason for growth in Mexico is the abundant supply of cheap, unskilled labor which is certainly not a real compliment. What do you have to say in response to this?

“Mexican industrial growth could be divided within three main reasons: labor + agreements + proximity” “As you mentioned, we have cheap labor costs but not always unskillful. In the last two decades Mexico has invested in having stronger polytechnic and technical institutions building young technicians and engineers eager to work on forging, casting, machining and some other “industrial environments” that are no longer interesting for young people in developed countries; so we also have very good technicians and engineers at lower costs. Mexico is one of the countries with more international free trade agreements worldwide. We can import materials cheaper, manufacture and export with less duties than any country in the world. As an example if a US company wish to buy components in Asia or Europe, manufacture in Mexico and Export to Russia; the company could save more than 20% in duties comparing it to US manufacturing. Finally, Mexico has a more easy-going working culture than some other developing countries. For instance if an American company has operations in Mexico, its working force or supplier base can definitely react faster and more effective to problems and new opportunities than its counterpart in India or China due to culture affinity and proximity”.

This question is very closely related to the one above and it has to do with costs. Percentage wise what is your largest cost if it is not labor? What are energy costs like in Mexico?

“Mexican energy costs are 20% higher than US or Canada; and transportation costs 15% higher due to lack of infrastructure and higher highway tolls; so I will consider these two costs must be watch out at all time”

Correct me if I am wrong but my impression of the Mexican heat treating market is that it is mainly in house heat treating with a relatively small % being commercial. Have you ever run across any figures to back this up or do you have a “gut” feel about the relative percentages?

“I will consider that captive is 80% and 20% commercial, nevertheless probably 10 years ago it was 90/10, meaning that commercial heat treating infrastructure is growing at a faster pace due to higher confidence of customers on available commercial heat treating services reliability”

Recently there have been a few `foreign’ commercial heat treaters who have entered the Mexican market including ones from Germany, Japan, Canada and the UK. Do you feel that your very long presence in the market gives you an advantage over these newer competitors?

“Yes, in sports and in business, being local is always an advantage. We understand better the authorities and institutions, the working culture, the risks and the opportunities than a foreign company. The big advantage we acknowledge foreign commercial heat treaters have is that usually they come to attend big multinationals or follow companies they already service in their countries; so in order to continue exploiting our local player comparative advantage we are working very hard to attract and be promptly informed of those international companies willing to be established in Mexico.”

Looking forward what new technologies do you see your company adding?

“We are adding more process and material tracking control into all our plants. As for new equipment, we want to continue our growth and expansion on aluminum heat treating, austempering salt bath quenching, continuous mesh belts and high pressure vacuum furnaces”

Mario you know I have to ask this question even if the whole world is asking the same question. Are you worried about a new administration in the US drastically slowing down the amount of business the US does with Mexico and if so will you be changing anything about the way you do business?

“No, I am not worried about Mr. Trump’s decisions against Mexico, I think his actions had gave our country worldwide exposure and awareness for the sole reason that the world will continue its trend of giving more and more recognition to color people, different religions, women and immigrants as a reality that boost the economy not the opposite. I think he will ultimately is going to do America and the world a service by becoming the vehicle that will finally take down extreme right-wing conservative politics, so that the world politics will continue its change to the left. On the other hand, changing current automotive supply chain inertia would be slow and difficult. Finally, European and Asian companies had reacted on the opposite by recently accelerating its investment pace in our country”

In the short terms let’s say the next year what is going to change at your company care to give us a prediction or even a prediction about the Mexican heat treating for that time period?

“I think as any other mature industry the challenges we must continue to work this year are: One, we need to speed up our internet technologies coverage on process control, material tracking and marketing, to be more and more interconnected to the rest of our systems. Two, energy usage, its impact and our green consciousness must be day to day better and better. And three, we must get used to global competition”