Despite recent economic woes, some potential upsides generated enthusiasm at Mexport 2002, held June 27 in San Diego. While business has been declining in the border area of Tijuana, it appears some companies giving Asia a try may return.
``The maquiladora industry, for the first time in its 37-year history, has seen a decrease in number of employees and number of physical plants,'' said John Jolliffe, president of the Otay Mesa Chamber of Commerce and executive vice president of Casas International Brokerage Inc. of San Diego.
``This is a watershed event, and where it goes, nobody knows,'' Jolliffe said at Mexport. ``The entire U.S.-Mexico border is affected.''
As of Dec. 31, government statistics said 1,192 maquiladoras existed in the state of Baja California, down 88 from the previous year. Those plants, mostly in Tijuana, Mexicali and Tecate, employed 224,579, down 61,653 from a year earlier.
``But I've been told that some of the companies that went to Asia are starting to come back because they were not happy with the activity and the distance and the problems,'' said Regan Tully, executive vice president and senior sales associate with IRE Enterprises Inc.'s International Real Estate division in San Diego.
Closures in Tijuana and moves to Asia also have ``hurt the American side,'' across the border from Tijuana, where leasing and land transactions in San Diego's Otay Mesa area are down about 30 percent from a year ago, he said.
Toshiba Machine Co. America's plastic machinery division still sees potential in Mexico, said Brian Petersen, Toshiba's international sales manager in San Antonio.
``There is an opportunity for some new molders - even some existing molders - to pick up work because of bankruptcies and closures,'' Petersen said by telephone.
Of the work that shifted to China, some is coming back, he said, citing toy maker Mattel Inc., which ``sent a lot of tools over there and brought them back to Tijuana. Some find it is difficult to control operations overseas.''
Petersen remains optimistic that work is available for the right firms.
``Some big contract manufacturers have closed their doors [and left] some work hanging,'' he said.
In the television market, in particular, China is achieving gains at Mexico's expense in toolmaking and production, especially in 13- and 19-inch sets. Production of 25-inch and larger sets destined for the North American market has stayed in Mexico because the larger sets are inconvenient to ship and store.
Processors are dealing with an evolving market. Large projection models with flat screens carry premium prices, while sets with traditional curved tubes cost less. Sanyo, Sony, Panasonic, Samsung and Hitachi are brand-name TV manufacturers in the Tijuana area.
However, said Toshiba's Bob Pett, opportunities for plastics processors are there.
``People are optimistic,'' said Pett, a Toshiba sales manager in Ontario, Calif. The television industry is ``going to bigger machines now'' to mold larger housings, such as those required for projection and high-definition sets.
Pett, whose area includes Baja California, said he is receiving requests to quote Toshiba presses with clamping forces of 2,750 and 1,760 tons.
Baja California plant closures and relocations to Asia have included a computer printer, cartridge and keyboard unit of Tokyo-based Canon Inc.'s business machines group; a computer keyboard and television tuner operation of Alps Electric Co. Ltd. of Tokyo; a rechargeable battery site of Saft Group of Paris; and the graphite golf-club shaft production of Aldila Inc. of Poway, Calif.
But encouraging signs exist.
Toyota Motor Corp. of Toyota City, Japan, broke ground in June for a plant on 700 acres on Tijuana's eastern edge and expects to complete the first phase of construction by 2004.
Within Toyota's supply chain, Budd Co. of Troy, Mich., said its plastics division will build a Tijuana plant to manufacture the inner box of sheet molded compound for some future truck beds.
For plastics injection molding, Toyota often establishes a local joint venture with another Japanese company. But that may take three to five years to materialize, a Mexport source said.
The state of Baja California is responding to the maquiladora decline.
``We can't compete, in terms of cheaper labor, with Asia,'' said Mario Juarez, undersecretary with the state's economic development secretariat in Mexicali, Mexico. ``We need to work and try to attract more companies with high-tech processes.''
The state's response includes coordinating with plastics processors and special technical schools on programs to teach injection molding and other skills.
``We must focus our efforts to provide the companies more technical labor ... to create the conditions to invite these companies to bring in more high-tech processes,'' Juarez said.
Tony Ramirez, executive vice president of Made in Mexico Inc. in San Diego, has another viewpoint.
``Some people in the Mexican government are rationalizing the loss of assembly services leaving,'' Ramirez said. They hope ``some of the higher-technology companies are going to come in and replace the low-cost assembly that is leaving.''
``If a lot of the rules and requirements and infrastructure to support the low-cost-labor assembly companies is not all here, how is it going to help with high-tech-type industries? I'm not sure how that is going to work out.''
Mexico established the maquiladora program in 1965, offering tax and tariff incentives to foreign firms. The 1994 North American Free Trade Agreement stimulated growth, but called for elimination of the maquiladoras' tariff exemptions in 2001. Further, Mexico has imposed more and higher taxes. And vacant space is increasing.
``By the end of 2002, we will have 10 percent vacancy in the market out of 50 million square feet in Tijuana,'' said Neil Whiteley-Ross, a sales representative with Cushman & Wakefield of California Inc. of San Diego. That compares with about 5 percent at the end of 2001, he said. In sublease situations, ``someone may be paying the bills, but it is vacant.''
For its part, Mulay Plastics Inc. of Carol Stream, Ill., has concentrated on lean manufacturing at its Mexican plants in Tijuana and Ciudad Juarez. Each site employs about 250 and increases to 300-350 during the normally busier fall production cycle. Mulay has combined jobs in cells, improved flow through the plant and made operations error-proof, according to President James Newman.
Labor turnover has slowed, and Newman credits mostly the improved plant operations. In early 2001, monthly turnover was 12-15 percent. In a recent month, only two employees left.
Mulay has expanded employees' job content and involved them in more processes.
``We can get 25-30 percent productivity improvements,'' Newman said. ``We can't afford to have any types of waste.''
Robotic systems have become essential, especially in painting parts. Mulay has emphasized getting part designs correct upfront, reducing material content and speeding up cycle times. In recent years, some customers have encouraged Mulay to get more involved in tool building.
The Otay Mesa Chamber of Commerce and San Diego Economic Development Corp. organized Mexport.