Intran CEO Juan Cintrón On Trump’s Trade Policies, NAFTA, And More

Earlier this year, Aftermarket Business World interviewed our CEO, Juan Cintrón, on why the United States should continue outsourcing auto parts from Mexico. Cintrón provides a positive outlook on the future relations between the U.S. and Mexico, but he drives home some realistic and insightful points.

Key Takeaways

• A renegotiation of NAFTA’s terms could be a good thing, leading to reduced costs and better ties between Mexican and American manufacturers.
• There are many benefits to the US when manufacturers outsource to Mexico instead of China:
  • Improvements in the Mexican economy reduce migration from Mexico to the US, and increase demand for US goods and services in Mexico
  • Many Mexican manufacturing companies – including Intran – source supplies, services, equipment, and raw materials from the United States. According to the LA Times, 40 cents of every dollar spent on Mexican goods come back to the US.
  • Mexican manufacturing is often less expensive than Chinese manufacturing, saving US consumers money.
• A reduction in trade between the US and Mexico would only hurt consumers and workers in both countries. Mexico is the 2nd or 3rd largest US trade partner (depending on the data you check), running neck-and-neck with China and Canada.

The Interview

Q: Given the comments and actions of President Donald Trump regarding automotive imports from Mexico, how do you see the outsourcing-to-Mexico prospects of American auto parts manufacturers changing under the Trump administration?

A: It may diminish, but it also could increase under the right renegotiation of NAFTA (the North American Free Trade Agreement). It seems to us that Mexico and the U.S. have too much to lose by not creating a constructive framework; it seems that there may be a greater willingness to listen on the U.S. side.

Q: What do you see happening if the terms to NAFTA are renegotiated?

A: My expectation is that there will be changes in the origin of raw materials and the percentage of these that will have to be used within the three countries. That would be positive in the long term for all countries. I tend not to take the negative view on these things since it serves no purpose.

We have to continue to reduce our costs and expand our markets within the United States, within Mexico, and in other parts of the world. We hope that it is renegotiated in a way that it doesn’t make our parts or American parts more expensive. We do source from other countries, like all auto parts manufacturers do, and when restrictions get implemented, the result may be increased cost to the consumer.

All in all, I would expect that there would be a clarification of rules for many sectors and the incorporation of other sectors that were not contemplated in the original 1994 agreement.

Q: What are some of the main categories of auto parts being manufactured in Mexico?

A: All categories are being made in Mexico, but electronic and electrical components, engine components, engines, wire assemblies, filtration components, and fuel systems components are the main categories.

Q: Are these mostly labor-intensive components, or are other more sophisticated products produced there?

A: It varies, but at the Tier 1 and 2 levels, there are plants in Mexico with little labor and a lot of automation, just as in the United States. Automation is what has caused the most impact in terms of the number of jobs available in the U.S. and Mexico. As an example, we have reduced our labor force through automation by 20 percent over the last two years.

Unfortunately, to remain competitive in this world, it is a necessity and a requirement from a repeatability standpoint. We try and grow other opportunities within our company in order to keep our good labor force since Mexico needs jobs.

The worst thing that can happen is for trade to stop flowing between the United States and Mexico, because there will be more people wanting to cross the border looking for opportunities. That would have the exact opposite effect desired by President Trump, and jobs would be lost in the United States.

Q: How do Mexico’s labor costs compare to other nations, such as China?

A: Our labor costs are close to China’s, depending on how you measure it. We are more stable in labor costs today, and China’s labor costs are rising. However, labor is not the only cost driver for any component. Logistics, proximity to the market, and appreciating the needs of our American and Canadian customers are other important factors. We have been successful not due to our labor costs, but because we look to create value for our customers, deliver their needs on time, and make quality our main driver.

Q: Are there logistical advantages to manufacturing products in Mexico?

A: Absolutely. We are much closer to the United States than China. Freight is less per unit in our category, and this proximity also gives us the advantage to visit our customers if they have a specific need and be there the same day if required. Our customers can also visit us the same day. We are a two- to four-hour flight from most parts of the United States, compared to being 14-plus hours away from China.

We are also able to handle reduced inventories. We can ship with one- to 20-day lead times, and we will build inventory buffers for a week. With China, you need to handle two to three months’ worth of inventories.

Q: What are some other key advantages obtained by manufacturing auto parts in Mexico?

A: A good base of engineers – a bilingual team in our case – and proximity to the United States, where we buy up to 40 percent of our components. If you think about it, we are actually helping provide jobs in the United States much more than other countries do. In that sense, we were the first country to say, “America first!” We always look to the United States first to find raw materials, equipment and expertise, as do so many other Mexican manufacturers.

Q: What are some questions that American executives should be asking before contracting to manufacture in Mexico?

A: If they are making a choice between contracting in Mexico and China, for example, I would look at closeness to the market, stable labor force and a good engineering base.

They should also consider the local manufacturing quality standards. We are ISO-TS16949 and ISO 9001-2008 quality certified. You also need to consider the legal and financial strength of the company, who are their local suppliers, the quality of their management team, and their ability to meet commitments.

Q: What are some key points to consider if an American company is thinking of building a factory in Mexico?

A: Finding the right partner is key. Just as I would look for someone with experience to open a factory in the United States, someone who would know the labor laws, regulations and general business customs, the same should apply for U.S. companies doing business in Mexico. We have had many successful partnerships over the years with U.S. companies, and they are built on honesty, trust and a shared set of values.

About Intran

Visit our about page to:

• Learn more about Intran’s humble beginnings
• Read all about our mission and principles
• Find out why Cintrón takes great pride in manufacturing quality products