The Volkswagen name signifies an expansive group that produces internationally embraced and distinctive compact vehicles. Within Latin America, the global corporation established one of North America’s largest automotive plants: Volkswagen de México. Rachel Hartman provides a portrait of a branch that not only addresses domestic market needs but capably exports product. Recent growth and latest models underscore a strong foothold in a complex, 21st century automotive market.
By July 2010, Volkswagen de México produced the highest number of vehicles in all of North America. The news came as no surprise to company officials. “We have the Volkswagen Group’s largest plant outside of Europe, and we’ve demonstrated the capacity to produce 2,100 autos each day,” notes Thomas Karig, vice president of corporate affairs and strategy at Volkswagen de México.
For years, the Mexican Volkswagen plant has been a large enterprise, but the company has made recent investments to make it even bigger. “During the last three years we’ve invested one billion dollars in Mexico to expand the plant and prepare for the launch of our new product,” says Karig.
That new product is the latest model of the Volkswagen Jetta. The company recently launched the Volkswagen Jetta 6 in Mexico and the model is scheduled to soon hit the United States market.
The company anticipates increased production needs for the Jetta 6 model and, appropriately, it has expanded its manufacturing area to accommodate both current and future production rates.
The company’s plant and headquarters are located on the outskirts of Puebla, the capital of a central Mexican state that bears the same name. The facility sits upon a 741-acre area, and the buildings occupy 550,000 square meters of the property.
As a result of plant expansion, Volkswagen de México recently hired more than 1,000 workers. This brings the total number of employees to approximately 14,900. Of these, 11,100 are technical workers that toil in the production area.
Volkswagen’s presence in Mexico dates back to 1954, when its Beetle model was sold through an independent importer. In 1964, Volkswagen de México was founded as a subsidiary of Volkswagen AG. Plant construction quickly followed. Production began in 1967.
Here’s a bit of history to consider: For many years, Volkswagen de México produced the Classic Beetle. The first one rolled off the assembly line in Puebla in March 1967. The world’s last Classic Beetle was produced in Mexico on July 31, 2003. During the years that it manufactured this distinctive model, the Puebla plant built and delivered as many as 1,691,542 Classic Beetles, contributing to a total of 21,529, 464 “Bugs” sold worldwide since 1946.
When Volkswagen de México was first established, it produced vehicles for the Mexican market. It focused its operations on the manufacturing of the classic Beetle, often referred to as the “Vocho” in Mexico. During the second half of the 1980s, the company began exporting to the United States. Today, cars manufactured at Volkswagen de México are exported around the world, but the enterprise focuses on the Mexican and North American markets.
A key to Volkswagen’s recent success in Puebla lies in the free trade agreements established between Mexico and many other countries. Mexico is the only country in the world that has free trade agreements with North America, the European Union, Japan and Mercosur (the Regional Trade Agreement established in South America in 1991), Karig points out. “While this provides Mexico a significant competitive advantage, it has also advanced the Volkswagen strategy to manufacture products in Mexico and then send them all over the world,” he adds.
In 1997, Volkswagen began producing models exclusively at its Mexico plant. One of the first models was the New Beetle, in both the sedan and convertible versions. After coming off the assembly line in Puebla, this vehicle was shipped to destinations around the globe.
Today the company also produces the fourth generation Jetta for the Mexican and Latin American markets. In 2007 Volkswagen de México added the Golf Variant to its exclusive product mix. In April 2010, it began producing the sixth-generation Jetta. In August 2010, it launched the model in the Mexican market. Currently, all products made in Puebla are categorized as compact vehicles.
“Volkswagen de México has two main functions,” says Karig. “One involves running the Puebla factory and exporting vehicles throughout the world. The other involves overseeing sales of products from the Volkswagen Group in Mexico.”
That second responsibility not only involves representing Volkswagen but also SEAT, Audi, Porsche, and Bentley in Mexico.
The Volkswagen brand has been firmly established throughout the country: 165 dealerships reside within Mexico. In addition, 48 dealerships proffer the SEAT brand while 28 exist for Audi, seven for Porsche and one for Bentley.
In 2009, approximately 118,000 autos were sold in Mexico, making the country the ninth largest market for the Volkswagen Group worldwide.
Volkswagen de México is the generating engine for much of the economy of the entire state of Puebla. In addition to providing jobs for more than 14,900 individuals, the company works with more than 50 auto parts suppliers within the plant’s 50-kilometer radius. Of these, 20 suppliers are located in industrial parks neighboring the plant, facilitating just-in-time delivery to the assembly line.
Employees at Volkswagen de México can enroll in the Volkswagen Institute, a school that offers courses for workers. The institution’s main objective is to provide workers with technical training based on the German dual education system. Technicians at the plant receive three years of training. Also, the institute allows workers to enroll in language courses. These educational programs are open to employees at the Volkswagen plant as well as other interested companies, mainly suppliers.
Karig underscores the significance of this effort: “On an international level, Volkswagen is very involved in the issues relating to corporate social responsibility, not only in the aspect of the creation and preservation of jobs but also in matters pertaining to the communities where we have a presence.”
For instance, in Mexico, Volkswagen created a program to support investigation efforts and biodiversity conservation in Mexico. Each year, the company issues a $100,000 grant toward this project.
Further, Volkswagen is mindful of the environmental problems – and the potential solutions – that will impact both regions and the entire world. For instance, in 2008, Volkswagen de México began funding a long-term reforestation program in the Puebla area with the goal of conserving the region’s water reserves. The company also donates regularly to community causes. During the last eight years, the company and its employees have donated more than $1.5 million to sponsor social projects for children in need in the state of Puebla.
With the new addition that was inaugurated in July 2010, company officials expect to soon take advantage of new capacity levels. “In 2008 we produced 450,000 vehicles, which was the highest number of cars the plant had manufactured in its history,” notes Karig. The following year, as the world economic crisis took effect, the plant produced fewer vehicles but still remained intact. “Now in 2010, with the demand recovering, we’re in a good position with a new product and new capacity levels to seize market’s opportunities.”
Volkswagen plans to open a new production plant in Chattanooga, Tenn. next year. “With the new plant, we’re planning to create a supply chain and manufacturing network between the plants in the United States and Mexico. This will lead to a stronger Volkswagen presence in both countries.”