Industrialization and Private Enterprises in Mexico: 6: Industrial Policies and Promotion of Indigenous Enterprises: Desc in the Autoparts Industry

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Desc and the Autoparts Industry

Overview of the Desc Group

Desc is an enterprise group consisting of a holding company of the same name under which are intermediate holding companies which control numerous subsidiary operational firms. Its principal business activities are autoparts, chemicals, and foods with the first two accounting for 80 per cent of the group's total sales (as of 1996). All of the group's subsidiary firms are large-scale enterprises with majority Mexican ownership, and many of these firms are joint ventures with foreign companies with Desc being the majority shareholder (Desc 1997; Expansion, August 14, 1996, p. 308).

The holding company Desc was established in accordance with the 1973 "Government Decree Giving Favorable Treatment to Enterprises Promoting Industry." Based on this decree, indigenous holding companies that fulfilled certain conditions were eligible for favorable tax treatment. Desc was founded through share swaps with Mexican entrepreneurs who operated their own businesses and those who had invested in joint ventures with foreign companies, thereby bringing these entrepreneurs in as Desc shareholders. Then soon after its founding, Desc acquired stocks in enterprises working in the autoparts, petrochemical, and chemicals sectors. In this way Desc grew into an enterprise group (Expansión, September 17, 1975, p. 32). The advantages of becoming an enterprise group, besides the favorable treatment it was afforded under the 1973 decree, were that the firms that became subsidiaries were able to increase their financial strength, their managerial capabilities, and their negotiating strength vis-à-vis the government, and in the case of joint ventures with foreign companies, the influence of Mexican entrepreneurs in business operations.

Desc's founder and promoter was Manuel Senderos who along with family members and relatives provided about 60 per cent of the initial capital. Other capital subscribers included such prominent industrialists as Eneko Belausteguigoitia, Crescendo Ballesteros, Gastón Azcárraga, and Antonio Ruiz Galindo Jr. (RPPCDF, C-3-890-7-4). With the exception of Belausteguigoitia, the other three investors were also founding members of the Mexican Council of Businessmen mentioned in Chapter 5 (Camp 1989, p. 153). The Senderos family remained the top shareholders in Desc, and as of 1996, Manuel's son, Fernando, was chairman of the board of directors. Manuel Senderos was born in Mexico and has Mexican citizenship, but his father had immigrated from Spain. After arriving in Mexico his father had set himself up as an import agent and as a representative of foreign insurance companies. Through this work he was able to move into the insurance business himself, ultimately setting up the big insurance company Seguros La Comercial. Manuel Senderos succeeded his father in 1937, making the financial sector his main area of business while also becoming actively involved in the establishment of various companies in the manufacturing sector (Expansion, January 16, 1985, p. 33). Important among these was the autoparts maker Spicer, which will be discussed in more detail later.

The course of Desc's growth can be divided into two periods: one of rapid growth between 1973 and 1982, and a second period of business restructuring after 1982. During the rapid growth period, Desc rapidly expanded the number of its subsidiaries and promoted business diversification. At the same time it raised the share of its stockholdings in its joint ventures with foreign companies. Although these moves greatly increased the scale of the group's operations, it had to rely on loans from foreign commercial banks to fund this growth, and Desc became caught up in Mexico's foreign debt problems that broke out in 1982. Thereafter the group was compelled to restructure its business operations as it faced a lengthening economic recession and struggled to cope with Mexico's economic reforms which liberalized trade and brought sweeping deregulation of controls on foreign investment. …