CCL Industries, a specialty label and packaging company, will invest $35 million in its facility in Guanajuato, Mexico over the next three years, Packaging Business Review reported. The new facility will be equipped to manufacture plastic laminate tubes for global home and personal care customers in Mexico.
Additionally, a new plant will be built at the site to cater to the needs of major global automotive OEM and Tier 1 customers in the country. CCL plans to transfer its existing manufacturing and distribution operations in Meridian, Miss. to its existing facility in Tijuana, Mexico by the middle of 2016.
CCL will also build a low-cost binder manufacturing plant near the Guanajuato location. The plant will export its entire output to the U.S. and Canada, The Worcester Business Journal Online reported.
According to CCL CEO Geoffrey Martin, cost savings were the primary offshoring advantage taken into consideration when the company decided to expand in Mexico.
"Once the expansion completes, Mexico will become our second largest country in the world after the United States in terms of infrastructure and employees," Martin said to The WBJ Journal. "The decision affecting Meridian is very regrettable but offshore competition has made the consumer price point for binders unaffordable with domestic manufacturing, especially for retail channels in the United States and Canada."
Packaging Business Review noted that according to Martin, CCL hopes the new structure will support global customers operating across the North American Free Trade Agreement region, and have a positive impact on the local community.
Rapid growth of automotive manufacturing
CCL's expansion in Mexico, especially its new plant focused on the global automotive industry, is a significant nod to the rapid expansion of Mexico's automotive sector. As more companies move to Mexico to take advantage of close proximity to the U.S., participation in NAFTA, convenient supply chains, excellent infrastructure and low-cost labor, the automotive sector there will continue to grow. In fact, the International Business times reported Mexico hit record numbers in auto production and exports last year, producing 3.2 million automobiles and exporting 2.6 million.
Take Nissan for example. Currently, Nissan comprises 25 percent of Mexico's vehicle production. According to the International Business Times, Nissan shipped roughly 538,000 of its vehicles from Mexico to other markets last year and sold the most new cars in the country. Combine that figure with a new joint-venture with Mercedes, and both Nissan and Mexico are going to benefit from major growth in the sector.
Even the current happenings surrounding the automotive manufacturing sector in Detroit speak volumes to the point that companies are unable to deny the benefits of moving their operations to Mexico. According to The Motley Fool, a new contract between the United Auto Workers and Fiat Chrysler resulted in an agreement that the cars it makes in the U.S. will be shifted to factories in Mexico. The only vehicles that will continue to be manufactured in Detroit will be trucks and Jeeps.