Jim Cramer’s Manufacturing in Mexico Play

January 30, 2013

With the economy often shed in a negative light, Mexico Manufacturing proves to expose a bright light with a promising future. Mad Money’s Jim Cramer explains how, “Mexico has been getting its act together, industrial and automobile production south of the border are on the rise. They’re growing GDP faster than we are in the United States, much faster. Just two days ago, we got terrific Mexican manufacturing purchaser managers number which rose to the highest level since June, and the Mexican auto business, well, it is on fire.” The phenomenon that Cramer is referring to is called near sourcing. With rising labor and transportation cost in China, it now makes sense for auto companies to build their factories in a place like Mexico and begin sourcing in Mexico where wages are low and it’s easy to ship.  Just ask Scott Stanley, Sr. VP of Sales and Marketing at North American Production Sharing, Inc. (NAPS), one of the largest companies offering outsourced administrative and compliance management services to manufacturers seeking to expand or move to Mexico. “NAPS is receiving a tremendous increase in calls with regard to manufacturing in Mexico.  At least half of these calls are from manufacturers who need to move production out of China and back to North America.  They are finding Mexico to be the right solution.”

For the United States, Mexico is proving to be the long-awaited answer. Railways, like KSU, are also providing an aid to manufacturing in Mexico. Cramer explains, “Kansas City Southern is thriving, stock at $77 and change, just $6 off its highs. Why, oh, why do I like this company so much? It’s geography. Kansas City Southern is the new intercontinental railroad. Except unlike the one you studied in school, it runs from north to south instead of east to west. It has 6,600-mile network, it’s pretty much evenly divided between the United States and Mexico and the network is only one interchange away from every single major market in North America.”

Kansas city southern got into Mexico in 1996 when the company won the option to privatize the can national railroad, this alone creates a strong connection with Mexico City and the U.S. border. They have spent the last 5 years invested in manufacturing with Mexico, and proving that near shoring is a very attractive bargain to manufacture for the U.S. market.