EL PASO, TEXAS - While more plastics manufacturers are moving to the U.S.-Mexican border area, the structure of plastics manufacturing there, like that of other industries, is changing. Maquiladoras, factories on the Mexican side to which American manufacturers have sent duty-free components for assembly by cheap labor, are evolving and probably will disappear as the North American Free Trade Agreement matures. In fact, the Mexican government has created a legal entity for U.S. companies - the Pitex.
Under its structure, a factory can import components and raw material from the states, just as in the maquiladora structure. But, unlike maquiladoras, it is not required to ship all finished products back to the states. It can sell up to 25 percent of its output to the Mexican market.
For example, Autopartes de Precisi¢n de Santana SA de CV, owned by Miniature Precision Components Inc. of Walworth, Wis., makes vacuum harnesses for the Big Three and other auto manufacturers, using both molding and extrusion equipment. The company exports about 80 percent of its products to U.S. plants, and the rest are sold to six plants in Mexico.
Another Pitex operation is Badger Custom Molding, which has been in Nogales, Ariz., since 1981. The last twin-plant operator in the Nogales area, Badger molds products in Arizona and ships them to its plant in Nogales, Mexico, where they are assembled and mostly shipped back to the United States, while a small percentage is sold in Mexico.
Unlike other industries, plastics plants still find it advantageous to be near the border to serve clients across the border.
When maquiladoras first appeared in Mexico in 1965, they were located mainly along the border. Now, some U.S.-owned maquiladoras are moving into Mexico's interior. And the classic twin-plant operations are declining. No longer do all plants on the American side have a counterpart assembly operation in Mexico.
And suppliers of components for labor-intensive operations from inside Mexico are not all clustered near the border. More Mexican-based companies tend to source their components from OEMs that are almost as likely to be in Michigan, Ohio or Indiana as in El Paso.
However, the exception to that trend is plastics. As Bob Cook, senior vice president for economic development in the greater El Paso Chamber of Commerce, pointed out, the just-in-time concept of assembly has driven a need for plastic component manufacturers to be within easy reach of assembly operations on the other side of the border.
As a result, the plastics industry in El Paso continues to grow. Currently, more than 30 custom molders are located in the El Paso area, plus another 30 proprietary molders.
The move of some manufacturers to Mexico's interior is increasing for several reasons.
Cook and Don Nibbe, editor of Twin Plant News, believe lower wages, more stable work forces, and the absence of unions are motivating the deeper penetration.
Ford Carplastic SA de CV, located in Monterrey, for example, has a turnover rate of less than 1 percent of its 1,100 hourly workers.
Some employers contend that Mexican employees working in companies near the border tend not to be as stable.
Dennis Campbell, manager of plastics technology for Thomson Televisi¢nes de Mexico, said the Ju rez work force has a higher degree of turnover than a comparable work force in the United States.
``That appears to be a common problem for maquiladoras, at least near the border,'' Campbell said.
To counteract problems of stability, U.S. companies in Mexico tend to offer various programs, ranging from free meals to 45-minute birthday parties, all designed to build loyalty among their workers.
Ciudad Ju rez, across from El Paso, has not attracted many plastics plants. Only a few American plastics companies have ventured into Mexico. There are several reasons.
Bruce Bedwell, whose Infinity Plastics Inc. will start up in a month or two in El Paso, said he investigated the possibility of locating in Ju rez. Bedwell rejected the idea because higher costs of electricity and real estate were not offset by lower wage costs. And Bedwell thinks skilled American workers quickly tire of commuting from El Paso to jobs in Ju rez when they have to contend with daily traffic jams that can keep them sitting in their cars on the international bridge for up to two hours.