STE Opens Modification Center To Serve Ford Truck Plant in Mexico

For those who can't always get what they want (at least on the new Ford F-650 and F-750), the STE Modification Center may have the answer.

STE (Scherer Truck Equipment) opened the facility to coincide with the introduction of these two models-the heaviest F-Super Duty models that Ford offers. The F-650 and F-750 are built at Ford's plant in Cuautitlan, Mexico, on the north side of Mexico City.

"Ford wanted zero complexity in this plant, which means offering a truck without a wide range of options," says Walt Thomas, president of STE. "But they also knew that the market wanted those options. Someone had to fill the gap between what Ford wanted and what the market needed. They approached us about opening a modification center in Mexico to do that."

Negotiations began in the fall of 1998, and STE was given a five-year exclusive contract as the modification center for the Cuautitlan plant.

STE Mexico was formed, a partnership between Thomas; Tom and Jim Moser, co-presidents of Omaha Standard; and Hector Carrillo Gonzalez, director general of Cargo Profesional, a truck equipment distributor in Guadalajara.

"Tom, Jim, and I provide financial and technical support, and Hector oversees the day-to-day operation," Thomas says. "Hector has been an Omaha Standard distributor for 12 years and helped pioneer the acceptance of liftgates in Mexico. His company has a solid reputation, and he is familiar with the rules, the regulations, and the language. For us to come here without a business partner like Hector would have been lethal."

The partners began looking for a site and found one that Ford approved in March 1999. The company began construction in the former cornfield and completed it in August. STE Mexico started production in September.

"Location was important for all concerned," Thomas says. "It had to be close enough to be convenient to the plant, yet removed enough to where we could maintain a separate identity."

The result of the search is STE of Mexico, a 20,000-sq-ft facility located seven miles from the Ford plant. The operation currently performs an estimated 65 chassis modifications. These include engine recalibrations, frame alterations, 4x4 conversions, alternatives to factory seats, changes to the brake system, and rerouting of the exhaust.

The partners also had to build a team. They hired Manuel Maria Tadeo to serve as production manager; Jose Julio Bustos Garibaldi, general manager; Hilario Juarez, purchasing manager; Luis Martinez, quality control manager; and Hugo Carera, working foreman.

The company now has 26 employees, including technicians trained by such companies as Allison, Bendix, Caterpillar, Cummins, and Marmon Herrington.

Like other truck modification centers, STE Mexico receives standard truck chassis from the plant, performs the required modifications, and then sends the vehicle back into the chassis manufacturer's freight system for delivery to the local dealer.

One unusual aspect about STE Mexico is the international nature of the operation. Although the F-650s and F-750s are produced in Mexico, Ford currently sends 100% of production back into the United States. As such, STE Mexico is geared to serve the US market. Communications from dealers, truck equipment distributors, or end users flow through STE headquarters in the Kansas City suburb of Riverside, Missouri. Calls directly to Mexico should not be required. Jasen Thorsen heads up sales for the operation.

Getting Ford F-650s and F-750s with STE modifications is an eight-step process that begins and ends with the Ford dealer.

1. The Ford dealer requests a quote from STE Mexico sales. 2. STE Mexico receives the request and issues a quote. 3. Assuming the quotation is acceptable, the Ford dealer issues a purchase order to STE Mexico. 4. The Ford dealer orders the chassis from Ford with the specified STE ship-through code. 5. The chassis is built and shipped to STE Mexico. 6. Modifications are performed according to the specifications on the purchase order. 7. The truck is returned to the Ford traffic system for delivery to the dealer. 8. The dealer receives the truck and pays STE Mexico for the modifications.

A complete list of options from STE Mexico is available from local Ford dealers.

Despite the North American Free Trade Agreement that was designed to make such operations easier, moving goods into and out of Mexico is a complicated process.

Much of the Ford F-650 and F-750 consists of components that were manufactured in the US and shipped to the Cuautitlan plant. To the extent that the list of these components matches the list of components imported into Mexico, they can come in and out duty-free.

"This is the classic definition of a maquiladora operation," Thomas says. "We are maquiladora-even though we are hundreds of miles from the border. The days of locating on the border, in effect, are over. Land and labor there have become too expensive. The deeper into Mexico, the less land and labor cost-at least until you get to Mexico City. That is why manufacturers that need to be close to Mexico City locate in outlying areas such as Cuautitlan. There are advantages to being close. Of all the trucks sold in Mexico, 52% are bought in Mexico City."

The process of matching components that come into the country with those installed on completed trucks can create an interesting scenario for a truck modification center. If STE Mexico replaces an OEM mirror for a heated or remote control mirror, for example, what happens to the OEM mirror? For a number of reasons, Ford does not want the factory component returned. Therefore, STE Mexico must package the originals and send them to the border where customs officials can inspect them.

Proper accounting of components is important to Ford, Thomas says. Automotive corporations such as Ford are considered "terminal companies"-those that are the final destination of assembled components.

Special agreements between terminal companies and customs officials enable products such as cars and trucks to clear customs more easily. Instead of being inspected individually, the vehicles are inspected at random.

"If an audit at the border uncovers an inconsistency, it can jeopardize Ford's status as a terminal company," Thomas says. "We don't want to be responsible for that."

In contrast to a terminal company, STE Mexico expects to qualify as a PITEX (Programa de Importaci-n Temporal para Exportaci-n) company by the end of March. Currently STE Mexico pays duties and then is credited for the products it imports and subsequently exports. By qualifying as a PITEX company, duties and value-added taxes would be waived.

STE Mexico is off to a fast start. From the beginning of production in September until the end of January, the facility processed 450 trucks. Not all were major modifications, however. Some simply involved performing predelivery inspections.

"We inspect trucks that are not delivered to the local dealer," Thomas says. "They could be for fleets or leasing companies that do their own truck equipment installations. We also perform predelivery inspections for truck body and equipment manufacturers such as Altec that receive chassis shipments directly from the factory."

STE Mexico is strictly a truck modification center. The company does not mount truck bodies and equipment for delivery on a ship-through basis. However, it plans to serve as a local truck equipment distributor when Ford makes the F-650 and F-750 available for sale in Mexico.

"We can't effectively sell US-built truck bodies here in Mexico City," Jasen Thorsen says. "Freight and import duties would make them too expensive. But we are in the process of identifying Mexican manufacturers that we might represent."

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