With its high production rates and successful global strategies, Volkswagen de México, the North American branch of the Volkswagen Group, plays a vital role in the German-based international automotive company. Rachel Hartman reports.For more than 165 years, Walworth has represented the summit of valve technology. But when Mexican businessman Salomon Waisburd purchased the business in 2002, the company was virtually bankrupt. The turnaround that Waisburd subsequently engineered is one of the most compelling success stories of the 21st century. Dan Harvey describes how he brought it back from the brink of extinction.
No matter where you are in the world, if you see a Volkswagen New Beetle, it originated in Puebla, Mexico. This model has been produced exclusively at Volkswagen de México since 1997. After they roll off the assembly line at the factory in Puebla, these cars are sent to markets around the world.
The New Beetle has set the pace for a new approach at Volkswagen. “About 10 years ago, Volkswagen de México implemented a production strategy that focuses not only on North America, but on global markets as well,” explains Thomas Karig, vice president of corporate relations and strategies at Volkswagen de México. “The first of this new generation of global vehicles was the New Beetle, which officially entered the market in 1998.”
Under this plan, cars like the New Beetle are manufactured in just one plant, and then distributed throughout the globe. Karig notes that this allows Volkswagen to “look for a place of production where it can make one investment for one vehicle, and from that factory send it to all the global markets where Volkswagen has a presence. Generally speaking, all the models produced in Puebla are only produced here.”
Currently, several different types of vehicles are manufactured at Volkswagen’s factory in Mexico. “The models made here are ones that are especially important to the market in the United States,” Karig says. “We make the New Beetle, which is known as the fifth generation Jetta in the United States and is called Bora in Mexico. We continue to make the fourth generation Jetta for the Latin American markets.” The plant also produces the Jetta station wagon, known as the Sport Wagon. Since 2007, it has also manufactured the Jetta Variant and exported it to Europe, where it is known as the Golf Variant.
In addition to these models, the Puebla plant also produces engines and axles. Some of these are used at the factory for internal consumption, while others are sent to plants in different countries that are part of the Volkswagen Group.
MORE THAN 50 YEARS IN MEXICO
Volkswagen first entered Mexico in 1954, when it imported the Beetle. The company decided to establish a branch in the country, and in 1964, the Volkswagen de México plant was founded. On March 23, 1967, the first Beetle rolled off the assembly line in the Puebla factory.
The Volkswagen Beetle has been one of the most successful vehicles ever, according to Karig. The model was produced for almost four decades in Mexico. During this time period, 1,691,542 Beetles rolled off the assembly line in Puebla. On July 31, 2003, the last Beetle was manufactured. To celebrate the end of this era, Volkswagen de México presented the “Final Edition” of the Beetle, which was limited to 3,000 vehicles.
Volkswagen de Mexico’s plant and headquarters are both located in Puebla, approximately 120 kilometers southeast of Mexico City. The plant covers an area of 300 hectares and has around 480,000 square meters of building space. The company employs around 16,000 workers and produces 1,800 vehicles on a daily basis. In 2007, Volkswagen de México produced 410,000 vehicles. More than 80 percent of these were exported to other countries.
Karig mentions the advantages of having a plant in Mexico. In addition to its proximity to the United States, the country has favorable export agreements. “From Mexico, we can send vehicles to the United States and Canada, to the European Union, to most of the countries in South America, and to Japan without the burden of high taxes,” notes Karig.
For the Volkswagen Group, Mexico is the company’s ninth largest market. In 2007, sales of all brands reached 156,000 cars. “Fifty percent of the cars that we sell in Mexico come from the Puebla plant,” Karig explains. “The other 50 percent are products that we import from other plants in the Volkswagen group.” These plants operate under the same strategy that Volkswagen de México has, producing only certain vehicles and then exporting them to other markets. “This allows us to have a wide selection of vehicles in Mexico.” Volkswagen brands in Mexico range from lowpriced, economic models that come from places like Brazil to luxury models imported from Europe.
A LEADER IN THE COMMUNITY
Volkswagen de México plays an important role in Mexico’s society. In addition to directly employing thousands of workers, the company has many suppliers and distributors throughout the country. Approximately 40 auto parts suppliers are located within a 50-kilometer radius of the plant. About 20 of the most important suppliers are very close to the plant, making it possible to have JIT (just in time) parts delivery possible to the assembly line. In all, the total number of Volkswagen parts suppliers in Mexico is close to 220. From these, the plant receives almost 60 percent of its assembly components.
The company offers a variety of training programs and educational opportunities for its employees. “Because of the high-tech products and processes that we have, we train our personnel right here in the plant,” says Karig. Those interested in becoming specialists can attend the plant’s training school, which offers employees a technical degree after three years of study. The diploma they receive is recognized by the governments in both Mexico and Germany. “We also have shorter programs for people on the production line, and training for those in administrative and managerial positions.”
The city of Puebla, which has a population of more than three million, benefits from many of these programs. That’s because Volkswagen de México opens up its training programs to members of the community as well. “Our providers have the opportunity to train their workers at our institution,” says Karig. “Also, both the German and English languages are important at our company, so we have a language school that we offer to our employees and the public. Many people in Puebla come here to take German and English classes.”
The company takes its role in society to heart. “First and foremost we focus on being socially responsible toward our personnel,” Karig says. “After that, we want to ensure that all of our production processes are as friendly as possible to the environment.” The availability and consumption of water is an important issue, and one that Volkswagen has focused on recently. “During the last few years, we have reduced the factory’s water consumption by half.” To do so, the company installed modern equipment to treat and recycle the water in the plant.
“This year, we decided to adopt an area of 300 hectares in Ixta-Popo, a nearby national park,” says Karig. The company plans to reforest the area, which will help increase the amount of groundwater in the catchment area of Puebla. “Once the area is reforested, the amount of water that it is going to capture is equivalent to the amount of water that the plant currently extracts from the ground for its own use.”
The company has taken on other projects to help protect the environment and improve living conditions in society. “We’re dedicating $100,000 each year to support research and investigative projects related to biodiversity in Mexico,” Karig says. The company has also been involved in projects offering aid to children in lower-class areas of Puebla.
In the coming years, Volkswagen de México plans to continue in its role as a leader in Mexico. “Our headquarters in Germany recently decided to invest heavily in the market in the United States,” notes Karig. With this in mind, the Puebla plant is currently working on expanding and increasing its production capacity. Not only will this help the company penetrate the market in the United States, it will provide more jobs to Mexicans as well.