Hawker Beechcraft Boots Component Build Activity in Mexico

Mexico appears to be readying for take-off when it comes aircraft assembly. Recent expansion of component activity by Hawker-Beechcraft in the city of Chihuahua points to progression of Mexican content in component work.

Rod Holter, Hawker Beechcraft's vice president for aircraft manufacturing has witnessed progress of the component manufacturing in Mexico for his company. During an interview in Chihuahua at MexicoNOW's "Mexico Aerospace Industry Summit", Holter pointed to government support, productivity and total costs of doing business.


HOW MANY PLANTS DO YOU HAVE IN CHIHUAHUA? WHEN DID YOU START, AND WHAT ARE THEY MAKING?

Rod Holter, Vice President and General Manager, Aircraft Manufacturing, Hawker Beechcraft: We have three plants in Chihuahua. We have about half a million square feet total in our three facilities. The first facility was leased in 2006; all of our facilities are leased. Our second facility had a grand opening in the spring of 2011. Our third facility has not had a grand opening, but we are fully occupied since the end of 2010 and the first of 2011.

PLEASE DESCRIBE YOUR PRODUCT LINES IN THE CITY OF CHIHUAHUA?

The product line we build is from the piston aircraft, the Bonanza, the Baron, also the King Air family. We build parts for the Premier, also the Hawker 4000 and the 987 line which is the Hawker jet line -- the business jet line.

YOU DON'T BUILD THE PLANES; YOU BUILD THE COMPONENTS IN MEXICO?

We build detail parts, piece parts, all the way through major sub-assemblies.

WHEN YOU WENT THROUGH THE ROSTER OF PLANES, IS IT TRUE THAT ONE OF THOSE MODELS CARRIES A PRICE STICKER OF AROUND $20 MILLION U.S.?

That is correct, the Hawker 4000 is our flagship and it's a beautiful ride. I've had the opportunity to ride in it several times, and it is absolutely a wonderful airplane. It's one of the best in class.


WHY MEXICO? WHAT ATTRACTED YOU TO THE CITY OF CHIHUAHUA?

I joined Hawker Beechcraft about two years ago and one of the things I was asked to do was develop a strategy for low cost.

We had one plant here and I alluded to it in the presentation. We didn't have a solid strategy of what we were going to do in that plant. We had some previous experience with aviation in other countries but also Mexico and other countries, meaning the Pacific Rim. The time delay in getting answers and working in the Pacific Rim is tremendous.

It is very difficult to move fast and to move along at a brisk rate. We build time machines, we save people time, we move people back and forth all over the world in time machines. Being in Wichita and going to Chihuahua is about an hour and 45 minutes in a Hawker 1000 and I do that every week. To go to China or to go to Europe or anywhere else you might chose to go is a week's time, your travel time and so forth just takes longer.

We are one hour difference in time zone with Chihuahua to Wichita, so we are basically operating at the same hours during the day. If an issue is a 'live issue' you can talk to people real time rather than leaving an e-mail and wait for them to respond the next day.

WHAT ABOUT GOVERNMENT SUPPORT HERE IN CHIHUAHUA?

I've found in both the private and public sector in Mexico from our partners and our shelter organizations are very helpful in making our life easier. The government was great in the lines of training, training dollars, investment in capital and some of that was back through other incentives in land and expansion, just very creative in figuring out ways to soften the cost to move here and not underhanded but creative.


ONE OF THE MORE INTERESTING IS THAT YOUR TEAM SHAVED MUCH TIME AND REDUCED THE TIME TO ACHIEVE A RETURN ON INVESTMENT. WHAT HAPPENED?

First what happens is that you invest wisely -- don't over invest -- by leasing a facility. We're not spending that money up front. We are doing that with a partner so all of our facilities are leased and our partners have been very generous as far as adjusting our lease rate based on occupancy level.

So instead of spending the money on a 200,000 square-foot building, you can get some progressive deals. The second thing is moving quickly. If you move slow and the amount of labor that you hire here is a slower rate your return is slow.

If you move quicker, you go from 400 to a 1,000 employees. If you go from zero to 120 in one plant, those 120 people are producing product at a lower cost base now than what it was before so the return happens quicker. You are talking about a lower base labor rate. The United States and Mexico represent two countries and two economies.

One thing you point to is the issue of just throwing money at labor, Hawker 4000 that there is a time and a place for automation. Please explain. In areas where you can, automate. Humans make mistakes.

So any time you can automate you have the ability to reduce variation in the process. When you do automate, you still have technicians, overhead, maintenance, all those things that go with that automation, and that comes at a cheaper price here too. You get the benefit of automation but you also get the benefit of maintaining and supporting that.

The engineers here for example are about a third of the cost of a manufacturing engineer in Kansas. Having the technical support for automation is absolutely more affordable. In automation it is not only the upfront money, it's then the money to keep it running daily and make sure it's effective.

WHAT ABOUT QUALITY, ESPECIALLY IN THE AERONAUTIC WORLD, WHERE THERE IS NO ROOM FOR 99 PERCENT. WHAT HAVE YOU FOUND HERE?

You can't pull off the side of the road if you have a defect. It's a little more exciting if you have a defect that would cause you to do an unplanned landing. That's one thing we've never jeopardized. We always focused on quality. We set that standard up front and said we are going to produce high quality and we are not going to accept otherwise, even in relation to the schedule. If the schedule was nipping at our heels and the quality wasn't right, we didn't ship. We made sure it was right.

WHY DO YOU PUT SO MUCH TRUST IN THE MEXICAN WORKFORCE, ESPECIALLY SKILLED AND MANAGERIAL?

The workforce here is very trustworthy. What I've found and actually over this last year what I've found is that people are people no matter if they are in Mexico, if they are in the United States, Europe and the Pacific Rim. People are people. If you treat people with dignity and respect, people will respond accordingly.

I find no difference here when you congratulate, reward, handshake, set expectations. Being nice to each other is fine, that doesn't mean we don't work hard. We still work hard, but we are nice and we have fun while we are doing it.

The Mexican culture has responded to that in a very positive way. The leadership here is one that we have to be very careful and train the ability to be able to raise issues and resolve problems promptly. I mentioned in the presentation a little bit about asking for help or raising your hand and saying, "I have a problem," sometimes could be viewed as failure. We view that as success. The sooner you talk about an issue the sooner the issue is behind you.

That's a cultural shift for some of the folks here because they are very proud, very, very proud.

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