Passing Zone

Trucking Inside Mexico

Motor carriers face some unique challenges south of the border, but their drive to succeed is no different than that of U.S. and Canadian truckers.

December 14, 2015

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Ramón Medrano, Alex Thiessen, Stefan Kürschner and Miguel Gómez, in Puerto Vallarta, Mexico. Photo: David Cullen
Ramón Medrano, Alex Thiessen, Stefan Kürschner and Miguel Gómez, in Puerto Vallarta, Mexico. Photo: David Cullen

It’s long been said that England and America are two countries divided by a common tongue. In much the same way, nowadays it could be said that the United States of America and the Estados Unidos Mexicanos are two countries divided by a common border. That’s especially true when the talk turns to trucking.

Of course, the language spoken south of the border is different. More to the point, so is the country’s history and culture, which together shape the rhythms and customs of everyday life.

Yet the challenges inherent to running a successful motor carrier year after year in the nation that boasts the world’s 15th largest economy are not all that different from those dealt with north of the border. In many cases, the differences are a matter of degree. On the other hand, there are some distinctions that are starkly different.

That was the takeaway from top executives of three leading Mexico-based fleet operations who made up a panel assembled on Dec. 10 in Puerto Vallerta, JA, by Stefan Kürschner, president and CEO of Daimler Vehículos Comerciales México, for the benefit of a contingent of American, Canadian and Mexican members of the trucking press corps.

Speaking ahead of the panel, Kürschner presented an OEM’s take on the state of the Mexican economy and the truck market there. He said the economy is growing, but too slowly. He pegged annual growth at 2.6 to 2.8 percent. While that would be acceptable in the U.S., he told HDT that as a developing nation, Mexico’s economy should be enjoying growth more in the range of 4 to 6 percent.

Kürschner said various factors are constraining economic growth. These include the global oil glut, which is depressing the price of that key Mexican export. The country’s oil slump has even brought down the value of the Mexican peso. Back in August, after the government cuts its economic forecast, the peso posted the biggest decline among 16 of the world’s major currencies tracked by Bloomberg.

He also said the unpopularity of President Enrique Pena Nieto’s administration is a drag on the economy. That’s due in part to various reform measures that have fallen flat.

Kürschner noted the failure of one such program aimed at improving both the safety and fuel efficiency of Mexico’s truck fleet. The average age of Mexican trucks now stands at 17.9 years. That includes 173,000 trucks that are at least 21 years old. The government launched a “scrapping” program with the aim of getting 6,000 old trucks off the road— but so far just 536 have been scrapped.

Underscoring the importance of the Mexican trucking industry, he noted that the vast majority of goods are transported by truck. He also pointed out that truck manufacturing contributes to export activity. The country builds 35 percent of the commercial vehicles sold in North America and is the fourth largest exporter of commercial vehicles worldwide.

According to Kürschner, Mexico’s Class 4 to 8 truck market is expected to score 2015 sales of 30,000 units. As for Daimler’s performance, he said that thanks to the succesful rollout of a marketing strategy tailored to the Mexican market,the Freightliner brand is on track to attain 30 percent market share in 2015.

“We’re confident we’re going to close the year with market share above 30%, so we think we are well on our way to our target” of being the Class 4-8 market leader,” he stated.

As of November, the OEM’s Mexico year-to-date market share vs. 2014 for Class 8 stood at 28.4 percent (up 7.2 percent); for Class 6-8 at 30.6 percent (up 7.0 percent), and for Class 4-8 at 29.1 percent (up 6.7 percent).

Kürschner attributed the Freightliner brand’s higher numbers to the OEM “focusing on becoming the undisputed truck market leader here” over the last two years. He said key elements of the strategy included introducing the Cascadia with DD15 power, which he called “a winning combination;” making “the game-changing move” to pricing in pesos, which reduces customer uncertainty caused by fluctuating exchange rates; and increasing the level of dealer performance, including by offering 24/7 parts support.

Fleets Speak

Each fleet panelist addressed the audience one by one and then they fielded questions together, often courteously replying alternately courteously in Spanish and English (giving the on-site bilingual translator a real workout).

Taken together, their presentations and Q&A replies provided a thorough and candid insider perspective on what concerns these top fleet executives the most about trucking-- an industry that’s as critical to economic growth south of the border as it is north of it.

Here are the three fleet speakers and a thumbnail description of how they described their operations:

  • Alex Thiessen, director of logistics solutions for FEMSA Logística, based in Monterrey, NL. FEMSA Logística is a subsidiary of FEMSA, the  largest  Coca-Cola  bottler worldwide  and  the  second-largest  shareholder  of  Heineken  Beer. As a multinational company, the logistics firm offers “integral logistic solutions” in Mexico, Panama, Brazil,Columbia, Costa  Rica  and  Nicaragua.  Its extensive roster of brand-name clients includes GlaxoSmithKline, Johnson & Johnson, Fiat, Nestlé, Purina and Whirlpool. Employing over12,000. FEMSA Logística is ranked as the largest freight-logistics company by sales in Mexico. 
  • Ramón Medrano, director general of Frio Express, based in Aguascalientes, AG. The company specializes in reefer freight. Launched in 1980 with two trucks, its all-Freightliner fleet now run some 400 tractors on 1300 routes. It hauls domestic and cross-border freight. Maintenance is handled in-house and GPS helps ensure guaranteed delivery. Per Frio, the company owes its success to its strategic location, sophisticated operations, experience and to “positioning itself as one of the best.” 
  • Miguel Gómez, president of Fletes México, based in Juárez, CH. Started as a family business in 1988, the general-freight hauler now fields a fleet of 750 trucks, all Freightliners, distinguishing it as one of the largest fleets in Mexico. The company’s top customers include Chrysler, Colgate, Daimler and Walmart. According to Fletes México, its stated goal is to provide “a top-class freight transportation service.”

In their remarks, the fleet executives said key issues facing Mexico’s truckers are the country’s antiquated and inadequate highway infrastructure; the ever-aging fleet; high diesel prices; uncertainty about future vehicle emissions rules; negative consequences of ineffective or nonexistent government reforms; the need to “professionalize” some customers or not do business with them; operating safely and ensuring cargo security; and, just like here, a driver shortage.

According to FEMSA’s Theissen, the subsidiary was launched in 1988 and is now the leading provider of integrated logistics services in Latin America, offering transportation, fleet maintenance, warehousing and international services. In Mexico alone, the fleet operates 1900 tractors, 2300 trailers, 30 operations centers and 140 central maintenance shops.

FEMSA Logística is ranked as the largest freight-logistics company by sales in Mexico. Photo: FEMSA
FEMSA Logística is ranked as the largest freight-logistics company by sales in Mexico. Photo: FEMSA

He said the company is distinguished by its “strong focus on safety and accident prevention,” noting that FEMSA Logística has won Mexico’s National Safety Award 10 years in a row. He pointed out that while in 2014, private fleets in Mexico recorded 0.369 accidents per million kilometers and those in the U.S. 0.258, the company attained a rate of 0.156.

“We operate following a quality management model backed by specialized technology," Theissen said. The company is the first Mexican corporation certified in ISO 39001with a Road Safety focus. “We expect this will decrease by more than 25% the accident rate in primary distribution by 2020.”

On the other hand, he said logistics performance in Latin America lags the U.S. due to the lack of road, rail and marine infrastructure as well as the aging truck fleets common to the region.

Theissen called trucking in Mexico a “complex market” and detailed how the industry differs from the U.S. in terms of costs, regulations and operations: 

  • The cost of diesel at 40% higher than in the U.S. 
  • Highway speed is limited to 55 mph in Mexico. 
  • Given the proportionate size of the neighboring countries, the U.S. has six times the paved roads that Mexico does. 
  • Highway tolls are higher due to the number and cost per mile, compared to the U.S. 
  • The average salary of Mexican truck drivers is five times less than that of their U.S. counterparts. 
  • Like in the U.S., 80% of fleets are small or owner-operators. 
  • The cost of vehicles and maintenance is similar to the U.S. That’s because while new vehicles cost less in Mexico (mainly due to operating EPA04 vs EPA13 engines), maintenance is higher due to fleet age. He noted that ultra-low-sulfur diesel fuel is not even available in Mexico. 
  • Truck weight/size laws are more liberal in Mexico, allowing 10% more weight per axle and a 166,000 GVW limit on major highways along with double trailers. 
  • While safety, including out-of-service criteria, regulations are very similar to the U.S., but there are no hours-of-service limits in effect. 
  • Similar to the U.S., 70% of cargo is transported by road. 
  • There are only two railroads, compared to the nine operating in the U.S., and there is little investment in new rail infrastructure. 
  • Loading and unloading is slow and “customers are not used to paying for delays.” 
  • While Mexican carriers do focus on reducing costs, there is “poor technological integration with customers.” 

“My father and I started the company in 1980, both to haul fresh produce and frozen products for both the domestic and import/export market," said Frio’s Medrano. He noted the carrier has “learned a lot over the years from our U.S. [interline] partners."

Frio Express hauls reefer and dry freight domestically and for cross-border interlining. Photo: Frio Express
Frio Express hauls reefer and dry freight domestically and for cross-border interlining. Photo: Frio Express

Medrano said keeping customers’ reefer and dry-van freight secure is the carrier’s highest priority. He said the fleet’s truck equipment, dispatching/monitoring capabilities and telecommunications systems are all selected for how they can help improve efficiency and productivity.

He said Frio deploys Qualcomm in-cab communications as well as Cargotrack and Encontrack cargo-tracking solutions to keep tabs on its trucks and their customers’ shipments. The carrier is planning to add two new terminals, in Aguascalientes and Nuevo Laredo, next year.

“We’ve enjoyed steady growth since 1995,” Medrano pointed out, “and we expect to grow by 15% in 2016."

Gómez said Fletes México started as a family business in 1988 and now, in light of company growth and market needs, is being reorganized as a corporate entity. He said the carrier aims to provide customers with “freight services that keep to their delivery and cargo-security requirements.”

Fletes México, a general freight hauler, operates one of the largest fleets in Mexico. Photo: Fletes México
Fletes México, a general freight hauler, operates one of the largest fleets in Mexico. Photo: Fletes México

He said that just shy of 50 percent of Fletes México’s sales are derived from hauling automotive freight, followed by retail (nearly 20 percent) and consumer goods (almost 16.5 percent).

Along with its 750 Freightliners, the carrier operates 1800 53-foot, 200 40-foot and 200 interchangeable trailers. The company launched an express cargo outfit in 2013 that consolidates freight for cross-border shipments.

Gómez said Fletes México relies on its 24/7, 365-day central dispatch operation located in Ciudad Juarez (across the Rio Grande from El Paso. Tex.) to serve customers 24/7, 365 days a year. “We have cutting-edge GPS and logistics technology in this tactical center. We monitor  units  on  the  road through  Qualcomm  to  comply  with  cargo  delivery and use satellite  communication  to  provide  support  to  our  on-route drivers.

He also related how seriously the carrier takes the security of cargo and facilities, noting that Fletes México has been certified to BASC, C-TPAT and NEEC requirements. Security measures on its premises are extensive, running the gamut from enclosed perimeters to arrival and departure inspections as well as truck inspections by the driver and repair shop to the use of high-security seals and drug tests of critical employees.

And once seals are checked on shipments arriving at its terminals near the U.S. border, a second “K9” inspection is performed. Just in case a seal had been changed along the way, drug-sniffing dogs make sure the shipment was not contaminated with drugs.

“Our fleet grew by 26% between 2014 and 2015,” said Gómez. “Our competitive advantage   is   provided by   our   people, equipment and cutting-edge technology. We have a single objective in mind— complete customer satisfaction.”

Q & A

During the Q&A, the panelists commented on everything from driver pay to why they don’t seek operating authority north of the border.

Frio’s Medrano touched on how cultural traditions can impact doing business in Mexico, even for Mexicans. “I’ve been working at this for 30 years and it is painful for us to have to lose a customer who is not operating efficiently. We get very mad when a driver has to wait a whole day.”

On the other hand, he said the carrier finds that “efficiency is contagious— we want to work with those customers and they want to work with us.”

Medrano pointed out that Mexico is “very far from where we should be with infrastructure.” FEMSA’s Thiessen agreed that is a key issue going forward, for the industry and the country.

As for all those older trucks mentioned frequently, the panelists concurred that they have to go as drive up accidents and maintenance costs, not to mention blackening the industry’s image.

“We have to improve the age of the fleet to be safer and more efficient,” said Thiessen. He said to do that would require “FEMSA and others” to push OEMs to establish a secondary truck market in Mexico. “A single truck operator could buy a newer truck if more were available.” Frio’s Medrano said there is no question that “maintenance costs increase exponentially with aging trucks.”

Then there’s the matter of government regulation. In the panelists’ view, there is such a thing as too little of it being imposed. FEMSA’s Thiessen called having no hours-of-service rules “difficult” because his company wants to compete safely. “Lots of truck drivers are driving more than the hours they should, which makes them more competitive,” he said, adding that “the playing field isn’t level as it is in the U.S.”

Fletes México’s Gómez noted that Mexico “does not have an agency that tells us what a driver’s record is. Each time we hire a driver, we have to call every company” he worked for.

None of the panelists is planning to seek U.S. operating authority. “We’ve done trailer interchange for the last 20 years and are very happy with it,” said Gómez. He added that not having cabotage rights in the U.S. takes all the interest out of [cross-order trucking] for me.”

While driver pay is much lower than in the U.S., FEMSA’s Thiessen pointed out that being a trucker in Mexico is “still a high-paying job, but it’s still hard to find them.” Frio’s Medrano said that “drivers make less [here], but they spend less. Our drivers are able to send their children to college.”

The panelists blamed the growing driver shortage on several factors, including a dearth of driver-training schools and, yes, drivers jumping ship for the higher pay offered by U.S. carriers.

There’s another cause similar to what’s been happening demographically in the U.S. As the growth in manufacturing continues to grow Mexico’s middle class, young adults are finding more career opportunities to explore.

“The driving profession was highly valued at one time,” pointed out Fletes México’s Gómez. “Today, it has taken on a bad image. Families do not want their children to become drivers now. The old school of fathers and uncles teaching sons and nephews how to drive a truck is over. Now, we must teach them from the beginning. And even if it is a well-paying job, it no longer has the right image to attract new drivers." 

 

 

 

Comments

  1. 1. Tony [ August 13, 2016 @ 05:35AM ]

    cómo obtener la licencia de camiones en México?
    En Europa, yo era un conductor del autobús.
    Actualmente estoy en México. y yo quiero trabajar allí.

 

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