Cloyes Gear & Products’ business in Mexico City began with the acquisition of a subsidiary company in 1990 in Chicago called Timing Gears Company, which manufactured and sold timing components under the brand Cy-Lent. Timing Gears Company sold to a few distributors who imported the product into Mexico. In 1996, the Timing Gears Company operations were folded into Cloyes, including sales and marketing. At that point in time, total sales into Mexico for Cloyes was less than $250,000. During the next several years, Cloyes was able to grow sales substantially in the Mexican market and surpassed the million-dollar mark in 2003.
At this point in time, Cloyes had also acquired our biggest competitor, Dynagear Timing Products, out of bankruptcy. Dynagear had a Mexican distribution operation called Dynagear de Mexico. Our senior management made the decision that Dynagear de Mexico would not be a part of the acquisition. Dynagear de Mexico was subsequently acquired by a former Dynagear employee and re-established under a new brand of products. However, Cloyes purchased the trade name Dynagear.
In Mexico, Cloyes began marketing three brands of timing products – Cloyes, Dynagear and Cy-Lent. We also began to consider setting up a manufacturing plant in Mexico to manufacture timing chain, as it was the most labor-intensive product we made. And it was thought that the new plant also could function as a distribution center that would service our Mexican customers. We had come to the conclusion that because we were a small, single-line supplier, having local distribution would significantly help our selling efforts. Our competitors were Mexican companies, and we felt we needed to have a local presence as well. A very large engine parts distributor agreed to buy Cloyes timing products as soon as they were available in Mexico. This distributor could only buy from us if we were in Mexico because they did not possess an import permit enabling them to buy from U.S. companies. At that time, however, we thought that a distribution only operation might not generate enough revenue to be a stand-alone business. So we were still considering developing a manufacturing facility as well.
As we began the search for a manufacturing and distribution facility in Mexico, we decided it would be prudent to partner with an established Mexican company. We felt that having a Mexican partner would make the incorporation of a Mexican business easier. We also felt that having a Mexican partner would be a big help with our selling efforts. We were able to find a partner that was well established in Mexico and very connected to the key aftermarket distributors. Both of the benefits we hoped for in having a partner materialized for us in big ways.