U.S. -China relations are experiencing a “distinct cooling.” This was highlighted by the Global Connectedness Index published in 2022 by DHL and New York University’s Stern School of Business, which noted a reversal since 2016 in eight of the eleven flows of all types between the two superpowers (from goods to people to scientific collaborations). This is a change in the global chessboard that, in turn, has generated new opportunities for companies from other countries.
Thus, in its efforts to reduce the production burden with China, the United States has turned its eyes towards Europe. A trend that has not gone unnoticed by Tafalla Iron Foundry. “This change in perception, accentuated by the pandemic, has led Americans to conclude that they were very dependent on China, so their decision-making capacity was heavily conditioned by this and other Asian countries. So they have changed their view on who to partner with to implement projects. And that’s where we come in as European manufacturers,” explains Miguel Ugalde, the company’s general manager .
That is why, after verifying this phenomenon, Tafalla Iron Foundry is turning towards industrial vehicles. Its objective? To capture an important share of the market “aimed at heavy transport or public works machinery,” Ugalde explains.
This is a moment of reflection in which the Navarre-based company, which has 900 employees, has been immersed since it completed its cooperativization process last June. This operation, by which 100 % of its rights remained in the hands of its worker-members, entailed a change of corporate name in order to reflect “the global presence of its industry, as well as its local roots and the commitment of the worker-members to the business project”, according to its representatives at the time. They also announced that it was “consolidating its membership of the Mondragon Corporation as a basic cooperative rather than as a subsidiary” and that they had begun talks with new customers in the United States, Germany and England.
At present, most of the company’s production, which specializes in the manufacture of engine components for automotive, commercial vehicle and industrial applications, is export-oriented. Of foreign sales, 84 % are concentrated in Europe, 10 % in North America, 3 % in South America and the remaining 3 % in Asia.
But these figures will change in the future thanks to two aspects that characterize U.S. demand. Firstly, the country “does not have iron smelters for this type of product, so it imports 100 %” from other countries, especially Mexico. At the same time, energy policies promote the development of internal combustion engines that pollute less and are more optimal, but do not contemplate for the moment “a radical change” towards another type of technology: “We have the obligation to position ourselves in this market urgently. We want to maintain our current share of the European market and focus on expanding in America.
This is why the Navarre-based cooperative has already made “two important trips” to start commercial conversations with large American manufacturers, a sector that includes companies such as Cummings and Caterpillar. Specifically, Ugalde calculates that the company from Tafalla still has between “20 and 22% of additional industrial capacity” to be able to serve this market.
“In some companies we have made technical presentations, which have resulted in requests for bids because they have accepted our supply capacity. So, at the moment, economic negotiations are on the table. In other cases, we are still in the process of receiving those RFQs. We know our competitors and their price range, so knowing what we are capable of doing, it is very likely that we will take a significant share of that market,” predicts the CEO.
NEW INVESTMENTS
The cooperative’s new commercial horizons also entail investments in two different areas. In the first place, Tafalla Iron Foundry will adapt its facilities because the product aimed at the United States is different from the one aimed at Europe: “The one aimed at the North American country is much larger and is made with different materials than the ones we use here. It is also likely that we will implement new facilities to reinforce our capacities”.
In addition, the Tafalla cooperative and the Public University of Navarra (UPNA) recently signed a research transfer contract to study the use of hydrogen in industrial engines. “That is the future of the internal combustion engine, so electrification will play a very minor role in heavy machinery. We are investing in developing the product and, once we have finished in three years, we will move it to the market. It will then become an additional source of growth, renewal and viability for our cooperative in the long term,” concludes Ugalde.
