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September 18, 1998

12 Min Read
Molding on the border:  A new look at El Paso

Like hopeful miners on their way to the Yukon or California with dreams of hitting the mother lode, molders still come to El Paso, TX. But like many of those miners, a few have found that either most of the gold has been mined or there wasn't much in the first place. The result: El Paso has been like a revolving door for custom injection molders for the past 10 years. Many have come, set up shop, then left for a variety of reasons.

Some came because their OEM customers had maquiladora or twin-plant operations in Juarez and El Paso. Some came because they thought it would be a business climate of cheap labor, low technology, and easy money flowing from the maquiladora community. Others came with the promise of much work from the automotive, small household appliance, computer, and electronics industries there, just waiting for a "good" molder to hit town. A few found out that El Paso proved in reality to be less than promised.

"Many custom molders tend to look at the large number of maquila plants here and think it's going to be a piece of cake to get the business," says Phil Meldahl, president of Rocky Mountain Plastics Inc. However, it takes more than just being located in El Paso, he adds. "It requires a financial investment."

Rocky Mountain Plastics grew out of the former Southern Tech Plastics Inc., which declared Chapter 11 bankruptcy. In November 1995, El Paso investors purchased the company and renamed it Rocky Mountain Plastics Inc. Today, the company's success is evident by its subsequent expansion. The company has added two 1000-ton machines and a 610-ton press in the last year. Rocky Mountain serves a variety of industries, including the household appliance and consumer industries, has 42 presses, and employs 250.

Not every company is lucky enough to pull itself out of the difficulties of custom molding on the border. A year ago, El Paso Plastics Inc., a subsidiary of Engineered Products Co. of St. Louis, closed its doors after serving maquiladora OEMs since 1987. Although no one at Engineered Products would comment on the plant's closing, those in the know in El Paso say that rumors had it that the company lost a major chunk of business. That's a common occurrence for molders in the area.

Overcapacity?

One of the problems in being a custom molder on the border is the sheer number of presses in the area, which means machine capacity is high and competition for jobs to fill that capacity is fierce. Wayne Masters, a corporate vice president for AMI Richco, says, "It's a competitive market, no doubt about it, but there is business here."

Masters blames the El Paso Chamber of Commerce for overselling the capabilities of the area and creating the crunch for molders. Richco came to El Paso four years ago to mold E/E components. At the time, Masters says, the company overestimated the availability of work and put in too many presses. After re-evaluating the business climate, it has since scaled back its operations somewhat.

In addition to the number of custom molders in the area, many OEMs-such as Eureka-have their own in-house molding capabilities. Although most also use the outside capacity of custom molders, that work is sporadic and cyclical, fluctuating with the capacity of the OEM's molding facility. Molds in El Paso tend to shift back and forth between OEM and custom molder as well as move around within the custom molding community. "There are so many OEMs moving stuff around to find the cheapest molder that people can't afford to do the work anymore," says one molder.

Still They Come

There is still enough promise of business to continue attracting new molders to the area. Casco Molded Plastic Inc.'s new plant is across the street from the Eureka facility in an industrial park just half a mile from the Mexican border. Casco already has a facility in New Braunfels to serve Coleman.

Casco's president, Cliff Russell, says the company's strategy of locating close to its major customer base has become one of its strengths, and particularly in El Paso. "I think that it's key to have some customer base partially established before putting a plant there," he says. "You don't want to invest a lot of money and assets without that in place."

Ufe Inc., headquartered in Stillwater, MN, took the cautious route when setting up shop in El Paso. In six years, this molder of small, precision molded components has established itself as a major supplier to its chosen markets: automotive and electrical/electronic. However, Ufe spent time taking baby steps while entrenching itself into the border area. Today, the company operates 24 presses in a 100,000-sq-ft plant with plans to increase to 40 presses by the end of 1998, says Lelan R. Jamison, general manager of injection molding.

The success of established molders and the entrance of new molders to the El Paso market has created added competition for molding business and for trained employees, forcing other molders to rethink their presence in the area. Textek Plastics, a division of Moll Plasticrafters (LaVergne, TN), closed its manufacturing operations in El Paso in September. The company will maintain a distribution center there, however, according to George Votis, CEO of Galt Industries, parent company of Moll. Votis says that its Advanced Custom Molders Div. is building a new facility in Austin that is significantly larger than the El Paso plant. The company made a strategic decision to put its resources into the new plant and retreat from the border. Votis says that between the new Austin facility and the plant in San Antonio, the company will be able to adequately serve its customer base along the border.

Mark McCourtney, vice president of marketing and sales for Plastech Corp. in Forest Lake, MN, says in hindsight, the company probably should have put a plant in El Paso 10 years ago when it decided to have a "border" presence in the Southwest. However, instead it chose nearby Albuquerque from which to serve its maquiladora customers. "We looked at moving down to El Paso and it turned out the costs were higher, labor rates were starting to get out of hand, and there are fewer skilled people," he says.

Many OEMs want their suppliers to cross the border and set up plants in Juarez. But, McCourtney says, once you get into Juarez, there's even more pressure for "cheap." This past summer, Plastech pulled its resources back to Minnesota, where the company is building a new facility. Plastech is retaining three of its maquila customers from El Paso despite the move. "The parts are small enough and have enough value added that shipping isn't a problem," says McCourtney.

Is it Possible to Succeed?

The irony in doing business in El Paso is that in spite of the fact that OEMs want their parts cheap, they want their molders high-tech with state-of-the-art plants and machines, and they want them ISO and QS certified.

Succeeding in El Paso doesn't involve rocket science, just good, sound business practices that reduce costs to manufacture and increase production efficiencies, say those who've found success along the Rio Grande.

Custom molding at DJ Inc., now a Nypro joint venture company, doesn't lend itself to a lot of automation, but the company achieves high production efficiencies in other ways. Michelle Quinn, General manager of the El Paso Div., says that the 64-press operation is divided into small groups or "workcells" of presses, with each workcell running like a small molding company. Each has a supervisor who's responsible for the presses and the employees in his or her group. The supervisor knows the workcell from top to bottom and has vertically integrated knowledge of the entire process from mold setup to quality requirements.

Employee Shortages

The largest hurdle molders in El Paso have to overcome is finding skilled employees, in spite of El Paso's 11 percent unemployment rate, considered good in light of some other maquila regions. Tom Thomas, senior vice president of the economic development division of the Chamber of Commerce of Greater El Paso, says it is difficult training the unemployed for manufacturing jobs. "Most of them are unskilled and many have no manufacturing plant experience, nor do they speak English," he says.

Casco's Russell says that company learned "a pretty good lesson" about the available employee base in the area: a skilled work force is in short supply, meaning "you can't hire the talent" you need in El Paso. Casco went believing it could draw from the large base of workers in the area. However, explains Russell, "the technical ability of the workers hasn't grown as fast as the molding community." To make up for that deficit, Casco transplanted employees from its other three facilities to build an employee base skilled in the technical aspects of molding.

Add to this shortage the fact that molders continue to open shop in the area, and the difficulties increase. "Every time a new plant comes to town, there's always a shuffle in employees," says DJ's Quinn. Many molders find that it's a mercenary situation, with employers vying for plastics molding experience by offering a nickel an hour more than the guy down the street.

DJ has solved some of its turnover problems through its in-house, intensive skills training program. Quinn says it's important to employee retention to be able to show employees how they can advance in knowledge and position through training that will provide them with a career, not just a job.

In August, DJ and Nypro commenced a joint venture agreement, which takes the strengths and the technical and managerial expertise of both companies to launch a new initiative to expand in Latin America. Randy Barko, Nypro's vice president of marketing and sales, says that company continues to see Mexico as a growing marketplace. "The markets that DJ has focused on are automotive and appliance, which are complementary to our business," explains Barko of the new JV.

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Annual growth for Summit Plastic Molding has averaged 22 to 25 percent since its 81,000-sq-ft facility opened in Horizon, TX.

Barko believes that most molders who started businesses in the area and failed did so because they looked at it as a short-term opportunity. "We're long-term players and not afraid of making the investments to build for the future," says Barko. "We see that as an area that will continue strong, and we're looking at El Paso as a launching pad to go into Mexico with a facility much like we did in San Diego and Tijuana, and at some point, on into the interior of Mexico."

Making their presence on the border one of strategic, long-term commitment to growth is one key to success for molders who've established plants-or want to put a plant-in El Paso. Like the Yukon 100 years ago, El Paso is not a strike-it-rich-quick kind of place. Companies must understand that success on the border doesn't happen quickly.

Richco's Masters says, "We're upbeat on molding here, but we've been here for four years and are just starting to make an impact. People think it's going to happen over night, but there's a long road to travel."

One way to succeed in El Paso

When Summit Plastic Molding made the decision to locate a facility on the Texas/Mexico border four years ago, it was a matter of survival as a world-class automotive supplier. Under pressure from its customers-first-tier suppliers to the automotive industry-Summit located to Horizon, TX, a small community and suburb of El Paso.

"We set up here strictly for logistics and cost savings in transportation," says Ray Kalinowski, Summit's president. However, when the company first purchased the 81,000-sq-ft vacant building, it was jokingly referred to as "the white elephant in the desert," says Kalinowski.

As it turned out, Summit-headquartered in Sterling Heights, MI, where the company operates a molding plant and a moldmaking facility-reaped far more benefits than it originally anticipated. Annual growth for the entire company has averaged 22 to 25 percent since the Horizon plant opened.

The success of Summit's border facility means plans for future expansion for the entire company during the next year, including building a "Summit complex" on 25 acres to consolidate its Michigan operations. Work bound for the border comes first to Summit's Sterling Heights facility where molds are designed, built, production-proven, and shipped to the Horizon plant for production.

The Horizon facility currently operates 10 presses and employs 11 full-time and 25 temporaries. In addition to molding, Summit's Horizon facility offers secondary operations such as pad printing and subassembly. The plant's capacity is sold out through the first half of 1998.

Summit has survived and is thriving on the border for several reasons. Management is focused on serving the company's maquiladora or twin-plant customer base, being where the customers need them. Summit saves approximately $600,000 in shipping costs on $2.5 million in finished goods by being on the border, and by using returnable, reusable packaging in which to warehouse and ship finished goods. Its location allows it to ship several times daily to customers in Juarez; Del Rio, TX; and Nogales, AZ for just-in-time manufacturing. The plant also offers barcoding of all inventory to track shipments to customers.

Kalinowski says now that the white elephant has become "gold" to its customers, he's glad to have located on the border. One of his primary customers has recently mandated that plastics suppliers must be located on the border by the end of 1998. Kalinowski is adamant that to be successful on the border, a plant must have the management, systems, and technology in place to be a world-class molder. "Some molders come here and think all you have to do is put in molding machines and forget about quality," he says.

Summit will soon have its facilities QS 9000 certified and receive its Tooling and Equipment (TE) Certification. Additionally, all the plants are now networked together in a new Merlin System from AT&T to facilitate communication, scheduling, and electronic data transfer of information. A real-time production and process monitoring system from Mattec Corp. is being installed company wide as well."It's being creative in how you do business here," says Kalinowski, "that makes the difference in being successful."

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