Snook’s Look: A manufacturing homecoming?

You’d have to be living under a rock to be unaware of the supply chain issues that have plagued virtually every industry on the planet over the past few years. The combination of tensions between the U.S. and China, Russia’s invasion of Ukraine and the severe supply chain disruptions that occurred throughout the COVID-19 pandemic (and continue to impact operations today), have pressured and persuaded many companies into embracing near-shoring practices. Large corporations like General Motors, Tesla, Ternium, Deere and Terex have announced major investments in new manufacturing taking place in the U.S. and Mexico, as the companies look to secure their supply chains for the North American market.

How does this impact the equipment rental market?

During Conexpo this past March, Terex CEO John Garrison announced that the company would move 10 production lines to its manufacturing facility in Monterrey, Mexico, including Genie scissor lifts being assembled in China. In June 2022, Deere announced an agreement with Wacker Neuson to design and manufacture John Deere compact excavators in the zero- to five-metric-ton range at its facility in Menomonee Falls, Wisc. and Linz, Austria, largely to supply the North American market. Deere also recently invested tens of millions into its operation in Thibodaux, La., so the facility could build medium-chassis cotton harvesters that are currently being built in China (not rental equipment, I know, but interesting to note). Over the last few years, Schneider Electric also announced significant investments in multiple facilities across the U.S., as well as Mexico, totalling more than $100 million as part of its reshoring efforts moving production operations away from China.

One doesn’t need to look farther than Mexico’s annual exporting reports to see the impact near-shoring is having on the country. This past June, Mexico’s total exports experienced a 5.8-per-cent increase compared to the previous year, totalling $52.9 billion. The June report stated that Mexico’s sale of manufactured goods comprised 88.6 per cent of the country’s total exports for 2023 (up until that time).

This past June, Ternium announced in a press release that its new $2.2-billion steel slab mill would be built in Pesqueria, Nuevo Leon, Mexico. In the release, Ternium’s CEO stated, “This decision is a significant milestone for our company as we continue to integrate our downstream manufacturing capabilities. The value chain in Mexico is rapidly addressing and responding to the growth opportunities presented by the nearshoring of manufacturing capacity. We are confident that the skilled workforce and supportive business environment in the country will enable us to achieve our ambitious goals.” There appears to be no argument that Mexico is hands-down the short-term winner in North American-based companies’ decisions to embrace near-shoring, but their long-term victory isn’t guaranteed. There still appears to be some challenges to address to ensure long-term success for Mexico and all of its corporate allies – the biggest one being energy. According to the Mexico Business News, the country’s “uncertain energy supply” could hinder Mexico’s current economic boom.

As for the companies investing billions upon billions of dollars in bringing their manufacturing close to home, only time will tell if this strategy pays off in the long run. In the shorter term, we can hope to see shorter lead times and stable availability as the ultimate source of our parts and machinery moves one ocean closer to home. 

Andrew Snook is the former editor of Rock to Road, Crane and Hoist and On Site.