Grupo Industrial Saltillo, S.A. de C.V. History

Company Perspectives:

GIS seeks leadership in the industries in which it participates, developing for its suppliers and offering to its clients world-level quality and service. GIS seeks permanent growth of its businesses, obtaining a continually attractive profit for its shareholders. GIS is committed to the growth of Mexico and free enterprise and, therefore, invests in its workforce, creating job opportunities. GIS is committed to seeking the welfare of the communities in which it interacts, encouraging the exercise of freedom.

Key Dates:

1928:

Isidro López Zertuche opens a small plant in Saltillo, making household utensils.

1930:

Business incorporates as Troqueles y Esmaltes, S.A.

1964:

By now a diversified manufacturer, the company begins making engine blocks for Chrysler Corporation.

1967:

The company takes the name Grupo Industrial Saltillo (GIS).

1970:

GIS has 14 units, 7,000 employees, and annual sales of $50 million.

1976:

GIS becomes a public company, selling shares on the Mexico City stock exchange.

1984:

GIS has 13,105 employees and sales of about $258 million.

1996:

Annual sales have more than doubled from the 1984 total, to 4.24 billion pesos ($555 million).

2001:

GIS is second in North America in manufacturing engine monoblocks and cylinder heads.

Company History:

Grupo Industrial Saltillo, S.A. de C.V. (GIS) is a Mexican conglomerate engaged in three lines of manufacturing: construction, motor vehicle parts, and home products. The construction division mainly consists of four subsidiaries that make ceramic tiles, bathroom furnishings, water heaters, and joints to conduct fluids. Subsidiaries in the metal-mechanical division make a variety of molded and galvanized cast-iron and aluminum motor vehicle parts, including engine blocks and cylinder heads. All of this production is exported. The home products division manufactures a diversified line of kitchen utensils and tableware.

Diversified Manufacturer: 1928-76

Isidro López Zertuche, the oldest of eight children, became the breadwinner of the family in 1910, when he was only 18 and Mexico was beginning to be convulsed by a decade of revolution. He opened a store in his home town of Saltillo, Coahuila, with two friends, but it was confiscated by revolutionaries in 1914. With his small savings and a loan of 800 pesos he then opened a hardware store with two of his brothers. Business went well, but López Zertuche, together with one of his employees, also became interested in manufacturing some of the goods he sold, introducing a die to mold iron tubes and joints for stoves and heaters. In 1928 he opened a small plant, under the name Isidro López y Hermanos, S.N.C., in Saltillo for the manufacture of household utensils such as aluminum casserole dishes, and tubs and washbasins of galvanized metal. An early customer was the local telephone company, which hired López to make terminal boxes. He traveled to Michigan to buy a press--the most advanced of its time--from Bliss Co. and after 20 days of persistence succeeded in obtaining one on credit. López's business was incorporated in 1930 as Troqueles y Esmaltas, S.A. (Dies and Enamelwork) and in 1932 as Compania Industrial del Norte, S.A. By this time the plant had added a foundry and had installed capacity of 10,000 metric tons. By the end of the decade this capacity had doubled, and the plant also was turning out grain-milling equipment, iron sheets, dinner pails, and even gas stoves and heaters.

In 1940 the company also began making iron pipe fittings for the conduction of fluids such as water, gas, and electrical conductors. During World War II aluminum was hard to get, so the company began making pewterware that was even exported to the United States for use by the army. By the end of the decade the firm had subsidiaries for making brushes and milling equipment and even owned a bank. Exports began in 1945, originally to Guatemala and El Salvador. The company, in 1950, began making water heaters as well, and later in the decade opened a smelter and a firm that was the first to produce motorcycles in Latin America. López Zertuche died in 1959 and was succeeded at the helm by his son Isidro López del Bosque. In 1960 it added to its production black earthen tableware. Bathroom furnishings were added in 1967 and ceramic tiles in 1970. The company entered the auto industry in 1964, when it began producing monoblocks for Chrysler V-8 engines. In 1964 a holding company, Valores Internacionales de Mexico, S.A., was created for the enterprises that were, in 1967, integrated into Grupo Industrial Saltillo, S.A.

Grupo Industrial Saltillo, in 1970, employed about 7,000 people and had annual sales of 620 million pesos (about $50 million), a growth averaging 24 percent a year over the last five years.

Its 14 units were turning out washing machines, refrigerators, hot-water and -air heaters, and washtubs, plus medicine chests, sinks, commodes, and other ceramic articles for the bathroom. In 1971 the company introduced clothes dryers and tiles. Company units also were turning out milled foodstuffs of various kinds, including cornmeal, potato flour, and applesauce. Other products included parts for diesel engines, refrigerators, compressors, and valves, transmissions for washing machines, galvanized parts for high-tension insulation wires, and conveyor belts for sugarcane refineries and other industries.

Grupo Industrial Saltillo also was producing connecting rods for hoisting machinery, dies, matrixes, calibrators, and fittings, industrial implements, and apparatuses for quality control. In addition it was producing, in partnership with Honda Motor Co., seven types of motorcycles and one three-wheeler under the Moto Islo name. The Compania Industrial del Norte, S.A. (Cinsa) household products subsidiary was accounting for 24 percent of GIS sales, turning out such products as refrigerators, stoves, washers, dryers, and water heaters. Compania Fundidora del Norte, S.A. (Cifunsa) was even more important, its foundry products for the automotive, construction, electrical, and household goods industries accounting for 29 percent of total annual sales. According to the Mexican book El poder de la gran burgesia, the employees of Cinsa and Cifunsa were under the "iron control" of their López del Bosque "potentates," who "didn't hesitate a second to use any means" to repress workers seeking to free their union from management control. Ceramica Vitromex, S.A., established in 1967, was producing five models of commodes, urinals, sinks, bidets, and other ceramic bathroom fixtures. Company exports came to 8 percent of total sales. In 1973 GIS established a subsidiary to develop its technology, augment exports, provide alternatives to importation, and search for new markets, products, and acquisitions.

The Next Quarter Century: 1976-2000

The seven López del Bosque siblings and their spouses held 76.6 percent of the stock of Grupo Industrial Saltillo when it went public in 1976, selling shares on Mexico City's stock exchange. By 1978 annual sales for GIS had reached 2.5 billion pesos ($110 million), with exports reaching almost 20 percent of the total. The group accounted for about one-quarter of the economically active population of Saltillo. In 1980 GIS had 10,274 employees, 4.57 billion pesos ($200 million) in sales, and 280 million pesos ($12.23 million) in net income. By 1984, in spite of adverse economic conditions, these figures had increased to 13,105 employees and sales of 38.69 billion pesos (about $258 million), although net income was only 678 million pesos (about $5 million).

Grupo Industrial Saltillo began making foundry tools in 1983 under a joint venture with General Motors that terminated in 1989. In 1993 the company had 10,098 employees, net sales of 1.2 billion pesos (about $385 million), and net income of 113.35 million pesos ($38.38 million). It added stone tableware to its products in 1991. In anticipation of the implementation of the North American Free Trade Association, GIS decided to enhance its bathroom fixture business by acquiring a U.S. company in this field, St. Thomas Creations, Inc.

Despite the peso devaluation of late 1994 and the severe recession that ensued, Grupo Industrial Saltillo remained solvent and profitable. It registered sales of 2.55 billion pesos (about $383 million) and net income of 185.85 million pesos (about $28 million) in 1995. These figures increased to 4.24 billion pesos ($555 million) and 484.38 million pesos ($63.4 million), respectively, in 1996. That year the company's Cifunsa subsidiary formed a joint venture--named Castech--with a subsidiary of VAW Motor Gmbh. of Germany to build a foundry (which opened in 1999) for making Volkswagen aluminum engine blocks and cylinder heads in Mexico. In addition, since the implementation of the NAFTA free trade agreement, GIS had become an increasingly important supplier of auto parts to General Motors and Chrysler.

Grupo Industrial Saltillo announced in 1997 that it was investing $13.5 million to build a plant in Saltillo that would make plastics-injection molds to make tools for the foundry industry. The following year it invested $76 million to construct a new auto parts plant and another one to manufacture ceramic bathroom furnishings. In 2000 GIS expanded its water heater operations by purchasing the Calorex division of American Standard for $68 million. GIS thereby obtained Calorex's product line, its factory in Mexico City, and the right to sell water heaters in the United States and Canada under the American Standard name.

Grupo Industrial Saltillo enjoyed record sales of 7.59 billion pesos (adjusted for the end of 2001) in 2000. That year Mexico's auto parts manufacturers exported $6.5 billion worth of brakes, springs, transmissions, and other components to the United States, also a record. By 2001, the recession in the United States was cutting into company sales. GIS's sales fell by 11 percent in that year (fully 25 percent for cast-iron parts) and its net income decreased by 30 percent. The company postponed its plans to invest $40 million in a new engine-block plant for V-6 engines in Torreon, Coahuila.

Grupo Industrial Saltillo in 2001-02

Of Grupo Industrial Saltillo's sales of 6.75 billion pesos ($708 million) in 2001, the metal-mechanical division accounted for 37 percent. This division's activities consisted primarily of the casting of cast-iron and aluminum automotive products in the form of engine monoblocks and cylinder heads for gasoline- and diesel-fueled vehicles, including not only automobiles and trucks but also farm machinery. GIS ranked second in North America in this field. All of the division's sales were exported; Daimler Chrysler and General Motors were GIS's chief customers in 2001, comprising 11 percent and 10 percent, respectively, of its net sales. Other subsidiaries of the division were producing malleable iron for tubing and capital goods for plastic injection and automotive foundry products. In all, cast-iron products for gasoline engines accounted for 61 percent of sales, cast-iron products for diesel engines for 16 percent of sales, and aluminum products for 17 percent of sales.

Analysts of the Mexican automotive market predicted that of the 500 firms providing original components to the assembly plants in 2002, only 300 would still be in business in four years. Motor vehicle production fell by 4 percent in 2001, and the value of auto parts production dropped by almost the same amount. The big automakers were demanding price cuts from their suppliers. This was leading the suppliers to reduce the number of parts to assemble and to make subassemblies in the form of platforms and systems. As one of the biggest companies in this field, GIS was investing heavily in technology and expected to be one of the survivors of this process of rationalization.

The construction division represented 49 percent of GIS's consolidated sales. Chief of its subsidiaries was Vitromex, Mexico's leading firm in the manufacture and distribution of a great variety of ceramic products, including floor and wall tiles and bathroom fixtures, ranking second in the nation in both these products. Because of the growth in sales in recent years, Vitromex established new plants between 1998 and 2001 in San José Iturbide, Guanajuato, and San Luis Potosí. The acquisition of Calorex, together with existing Calentadores Cinsa, made GIS the largest manufacturer of water heaters in Mexico. Ceramic tiles accounted for 49 percent of the division's sales; water heaters for 23 percent; bathroom fixtures for 17 percent; and tubes and joints, 6 percent.

The home products division accounted for 14 percent of GIS's 2001 sales. Its Cinsa subsidiary was the leader in Mexico in the manufacture of porcelainized steel. Cersa was the leader in Mexico in the production of ceramic tableware.

Grupo Industrial Saltillo's operating profit came to 735 million pesos in 2001, of which the construction division accounted for 57 percent, the metal-mechanical division for 28 percent, and the home products division for 15 percent. GIS's exports accounted for 43 percent of its sales volume. The company's debt was 1.93 billion pesos ($201.88 million) at the end of 2001.

In April 2002 GIS announced that it would build a $55 million plant in Irapuato, Guanajuato, to make brakes, steering, and exhaust systems. The company also was building a $100 million engine-block plant in Ramos Arizpe, seven miles east of Saltillo. These facilities were being financed in large part by a $130 million syndicated loan. Also in April 2002, GIS announced that it planned to invest $51 million in a new cast-iron foundry in central Mexico. This plant was expected to open in 2003 and produce 60,000 tons per year. In September 2002 the firm agreed to send 51 percent of its Ditemsa subsidiary, which was manufacturing foundry equipment and tooling, to the British company NPL Technologies.

During this period Grupo Industrial Saltillo created Techmatic, an affiliated company specializing in automating production processes, and was maintaining an alliance with Home Depot in order to enhance its prospects in the U.S. and Canadian markets. GIS had 17 subsidiaries in 2002. A Spanish management study released that year rated GIS fourth among 20 Latin American enterprises ranked for ethics, based on such criteria as treatment of employees, openness to investors, and respect for the environment.

Principal Subsidiaries: Calentadores Cinsa, S.A. de C.V.; Castech S.A. de C.V. (50%); Ceramica, S.A. de C.V.; Ceramica Santa Anita, S.A. de C.V.; Cifunsa Diesel, S.A. de C.V.; Cinsa, S.A. de C.V.; Grupo Calorex, S. de R.L. de C.V.; Manufacturas Cifunsa, S.A. de C.V.; Manufacturas Vitromex, S.A. de C.V.; Porcelanizados Enasa, S.A. de C.V.

Principal Divisions: Construction; Home Products; Metal-Mechanical.

Principal Competitors: Alfa, S.A.; Grupo Lamosa, S.A. de C.V.; Interceramic de Mexico, S.A. de C.V.; SanLuis Corporación, S.A. de C.V.; Unik, S.A. de C.V.; Vitro, S.A.

Further Reading:

• "American Standard Cos.: Calorex Water-Heater Unit Is Sold to a Mexican Firm," Wall Street Journal, December 11, 2000.
• "El buen norte del Grupo Industrial Saltillo," Expansión, November 22, 1978, pp. 74, 76-78, 80.
• Concheiro, Elvira, et al., El poder de la gran burgesia, Mexico City: Ediciones de la Cultura Popular, 1979.
• "Gissa Sells Ditemsa Subsidiary to NPL Technologies," Modern Casting, September 2002, p. 18.
• "Gissa to Invest $51 Million in Mexican Iron Foundry," Modern Casting, April 2002, p. 14.
• Hope, Maria, "La pieza que falta," Expansión, April 17, 2002, pp. 55-56, 59, 61.
• "Integración en Saltillo con impacto nacional," Expansión, pp. 17-18, 20-22, 25-26, 28.
• Leal Garcia, Alma, "Isidro López Zertuche," Expansión, April 10, 1996, pp. 25-26.
• McKinlay, Joann D., "Mexican Firm to Build $13.5 Million Plant," Plastics News, October 13, 1997, p. 13.
• "Mexican Partner for Auto Casings," Aluminum Today, December 1996/January 1997, p. 3.
• Millman, Joel, "Mexico Becomes a Leader in Car Parts," Wall Street Journal, March 30, 1999, p. A21.
• ------, "Mexico Braces for Drop-Off in Auto Sector," Wall Street Journal, January 23, 2001, p. A18.

Source: International Directory of Company Histories, Vol. 54. St. James Press, 2003.