Bulletin 381 - Friday, August 8, 2008

Ford will export diesel engines from Chihuahua

Mexico City- Ford de Mexico will soon start producing at Chihuahua Plant diesel engines for light and medium size trucks in North America, as part of the benefits of the recently announced US$3 billion investment to be made by the Company in Mexico. If we add this announcement to investment made in Hermosillo, Ford and its suppliers have announced investments in Mexico for over US$5 billion in the last five years, Ford de Mexico pointed-out in a press release. Meanwhile, in Guanajuato, thanks to a strategic alliance with Getrag, Ford will build a new transmissions plant. This investment will generate around four thousand 400 direct jobs, which added to the jobs generated by Ford's suppliers, the number is expected to reach 30 thousand jobs. The investment is expected to increase Ford Mexico's annual production to close to 700 thousand engines, 500 thousand vehicles and 300 thousand transmissions by 2012, with around 80% of all vehicles and almost all engines assigned to the North American market. Under Jesus Tirado's lead, Ford's Engines Plant at Chihuahua - just like other production plants Ford Motor Company has in Mexico - has received several awards, including Clean Industry Certificate granted by the Mexican Environment Protection Agency (Profepa), ISO 9000, 9001, 14000, 14001 certifications, the highest mark in QS9000 and Shingo Award 2002, among others.

Volkswagen de Mexico reports positive production figures

Puebla, Pue,- Volkswagen de Mexico informed that upon closing last July, they reached a production volume of 42 thousand 433 automobiles, which is a 6% increase when compared to July 2007. From January to July 2008 this assembler has produced 264 thousand 844 automobiles, which represents a 22% increase when compared to even term last year. 83% of Volkswagen de Mexico's production is exported, equal to 222 thousand 029 units. The model most widely manufactured by Volkswagen is Bora, with 117 thousand 635 units; followed by SportWagen with 65 thousand 168, Jetta with 47 thousand 866, and Beetle in its two versions with 34 thousand 215 units. From January to July 2008 109 buses and chassis for buses were also assembled, not included in the figures above.

Eaton integrates services in Mexico

Eaton, manufacturer of components for energy control, announced in Mexico the convergence between their distribution and quality branches, through the opening of new facilities. "The integration in one sole offices complex was the obliged step, allowing for a total solution in material resources and considerable time savings", he informed. To date, the Company has 14 industrial plants that generate 18 thousand direct jobs in Mexico, according to ProMexico. Last year Eaton had international sales for US$13 billion.

ArcelorMittal to build a new factory in Mexico

Mexico City,- ArcelorMittal, the largest iron and steel company in the world, announced today they will invest US$600 million (€385 million) in Mexico to build a steel factory, and that they will purchase a coke plant in the USA. The Company said they are still analyzing the possible sites to establish the steel factory in Mexico, which will produce around 500 thousand metric tons (551 thousand tons) of carbon steel and steel bars every year, to be sold to automotive and construction companies in Mexico. ArcelorMittal also said they will pay US$160 million (€103 million) to purchase from Koppers their premises Monessen Coke Plant in order to increase their supply of fuel required for their ovens. The Company purchases all of the coke it uses from Monessen facilities at the State of Pennsylvania, but they want a larger control over key ingredients for to produce steel, i.e. metallurgic coke and iron ore, taking into consideration higher prices.

Electronic industries show off expansions

The veil that covered many expansion projects by high technology companies in Jalisco was removed during the congress held by this sector at Nuevo Vallarta last week, where several companies talked about 100% growth in sales and labor force. Freescale Semiconductor is already building its new premises in Guadalajara, an offices building and labs, to triple the size of their current facilities, reaching 6,500 square meters (around 70,000 square feet) near ITESO. German Hernandez, the Company's Director, said that this year the labor force will reach 350 employees, while next year, in their new headquarters, they will have 150 workers more, to reach 500 people, of which seven out of ten are engineers. However, the plan is reaching 900 jobs within the next four years. Ernesto Sanchez Proal, Jabil Circuit Director in Mexico, announced they are about to complete the refurbishing of what will be the second plant of this electronics manufacturer in Jalisco, in a building that will have 6,500 square meters (70,000 square feet) at Zapopan Technology Park, where, as previously informed, close to US$120 million are being invested. The Company will hire 2,500 people within the next two years, in addition to the five thousand already working at their first production plant. Mr. Sanchez said that all the workers are hired directly by Jabil, without resorting to outsourcing, and that is why they have the lowest personnel rotation index in the industry, almost 1% per month. Another company that finally opened to the media and as a matter of fact gave their first interview to a newspaper in Jalisco, was Hydra Technologies, which President said that the 100 employees company already has two models of unmanned aircraft in operation both in Mexico and abroad, but they have three other models in the test stage and another one under design, the Cuculcan, which will be able to fly for 16 continuous hours without being detected and "loaded with information and data input equipment, just like Ejecatl", the first model which is already frequently used by Jalisco Government.

Intermodal Mexico opens distribution center

With a MEP$20 million (US$2 million) investment, Intermodal Mexico, a subsidiary of Ferrocarril. Mexicano, will start operating a Distribution and Fiscal Consolidation Center, a logistics center that will cut down time and cost in goods delivery. Hilario Gabilondo, the Group's President, said that this project's purpose is to increase competitive advantages for users with the distribution of their products from this center, located in Pantaco, Mexico City, as well as cutting down three days in products delivery. The cost for this service will be between US$150 and US$200 per container. Gabilondo said that in addition to this project they are planning to build a plastics distribution center in Silao, Guanajuato, as well as in Monterrey, with a US$10 million investment. Mr. Gabilondo said that these services are only provided in sea ports and in Mexico City International Airport, and therefore this railway will be first one to offer them.

EDITORIAL

U.S. Customs Reconciliation US Customs Value Maquiladoras Standard Cost Value Added

Overdeclared would be the case where the total Declared Value Added is higher than total actual foreign expenses. This is unusual, but it happens. This happens when the Value Added standard cost is higher than it should be. There are two reasons for this, 1) the actual foreign expenses incurred decrease during the year in relation to the forecast at the beginning of the year when the value added standard was set, or, 2) the value added standard cost has built-in costs that should not be in there. The latter happens when instead of using just the costs incurred in Mexico, in other words actually booked in the Maquiladoras own accounting books, the U.S. importer or the Maquiladora incorporate costs into the value added standard cost that are incurred in the USA in support of the maquiladora. For example, U.S.-based personnel working in the USA and U.S. based personnel working in Mexico, even though they are supporting the Maquiladora; these costs should not be included in the Value Added standard cost. Other costs that may be included, but does not belong there, are U.S. based distribution costs, U.S. based building rents, U.S. based after-import marketing costs, Etc.

With the exceptions of Assists , explained below, U.S. support costs should not be included in the Mexican Value Added Standard cost.

[We find that one of the reasons this happens is that the U.S. company may create a U.S. Ledger account to account for all maquiladora-related costs, including U.S.-incurred costs. At the time of calculating the Mexican Value Added Standard Cost, they use the U.S. Ledger account, instead of the Maquiladoras own ledgers as the basis for the value added cost.]

PART TWO OF THREE...
Alex Romero
AFRomero & Co., Inc
General Manager

• » Demand to volkswagen Mexico 1,200 fixed employments
• » Industry wastes 30 % of his logistic investment
• » Japanese Jatco produces a million transmissions for vehicles in Mexico
• » Manufacturer of trucks japanece will construct new plant in Mexico
• » Government will stimulate aerospace industry