One major issue that has arisen in the past few years is the violence that has escalated in Mexico, and how that might be affecting foreign direct investment and shelter programs that help companies set up business in Mexico. “The violence in Mexico is a reality,” comments Maria Elena Rigoli, president of Collectron International Management Inc., a shelter program services company located in Nogales, AZ, “but it’s being projected to be much worse than it is. The violence is strictly between the cartels and the police. It’s not open shooting or violence like the media portrays.”
Rigoli says that Collectron (www.collectron.com) is open and upfront with its clients with respect to these activities in Mexico. “We provide our clients with information that we get from Interpol, including monthly crime breakdown figures,” she states. “I can compare these numbers to Arizona and in many cases, there is 25% less crime in our area than in Phoenix, or other large U.S. cities.”
Does it affect manufacturing? “No it doesn’t,” Rigoli emphasizes. “Does it affect the people who come to Mexico to work? We have to be more careful. Many companies manufacture components for the military and defense industries, and in some cases their management can’t travel to Mexico. This puts them in the position of losing their contracts. This is really more of a political issue than a business issue, but the media blows all of this out of proportion rather than project reality.”
Steve Colantuoni, director of market resesarch and communications for The Offshore Group, another shelter services company located in Tucson (www.offshoregroup.com), says, “Obviously it has created concern for companies that are thinking of doing business in Mexico, as well as a number of companies that are already active in the country.”
But Colantuoni concurs with Rigoli, that the media portrayal of the situation is a bit overblown. “Mexico is not in a state of generalized warfare once one crosses the border,” Colantuoni explains. “There are geographic flashpoints that have been plagued by drug violence to a significant extent, however these areas have a tendency to be clustered in the border region. I and many of my colleagues regularly travel to and from our manufacturing locations, and so far, I’ve not seen or heard of anyone that I know having been affected by what has been transpiring.”
To get some input from molders with facilities in Mexico, PlasticsToday asked three companies to provide input on the situation as they see it.
GW Plastics’ facility thriving in Mexico
GW Plastics is headquartered in Bethel, VT, but has had manufacturing facilities in San Antonio, TX and Tucson, AZ for nearly two decades, says Art Bennert, VP and COO of GW Plastics. “Generally, locating manufacturing close to our customers has been a strategy of ours going back 15-20 years—when things started booming along the U.S. Mexican border with the maquiladoras—because this is what our customers want. It has proven to be a good strategy for us.”
GW’s first Southwest molding facility was in San Antonio, established in the early 1990s to service the “maquilas” in the eastern regions of Mexico, east of San Antonio. The 37,000-ft2 San Antonio facility operates 28 molding machines and serves a variety of automotive and healthcare customers.
In 1995, the company set up a molding operation in Tucson to serve their customers along the border from El Paso to the Pacific Ocean in industrial cities such as Juarez, Nogales, and Tijuana, Mexico. GW’s Tucson facility, which also sells to healthcare and automotive customers, runs 35 molding machines in 63,000 ft2 of floor space, including 5000 ft2 of clean room molding and assembly.
GW (www.gwplastics.com) also has a 51,000-ft2 molding facility in Queretaro, an industrial city in Central Mexico, which is further removed from the border where much of the violence is happening. “We did that purposely,” said Bennert.
According to Larry Bell, VP of business development and marketing, the U.S. plants and the Mexico facility are far enough apart to support a different customer base. “Each has its own region to serve,” says Bell.
Bennert was involved in helping to develop the Mexico sites, including getting Queretaro up and running. “We’re entering our sixth year in Queretaro, and for the first few years it was slow going, given the start-up nature of things and the economic climate, but the last couple of years have been pretty successful and 2011 looks very promising as well. The Queretaro facility now operates 15 molding machines with expansion potential of up to 40 molding machines. It is very promising.”
With respect to the plant in Queretaro, that area has been largely insulated from the border violence. “We have a good, stable operation there that is safe for our employees,” notes Bennert. “That facility remains a good situation for us and our employees.”
However, as it relates to the border situation, Bennert adds that “we’re aware of it as are our customers, and while business continues to be robust and investment continues along the border it has changed some things in the way we conduct our business,” he says.
The biggest concern for GW is employee safety. “We caution our employees not to get caught in the wrong place at the wrong time,” says Bennert. “Unfortunately that’s become a fact of life at the moment. What we’re doing now—compared to three years ago—is being more selective and more discriminating in the number of visits that our employees make across the border to our plants or to our customers’ facilities. We’re requesting that when possible, customers come to the U.S. side of the border—and our customers are willing to work with us on that. Where we’d normally go to their plant in Nuevo Larado or Juarez, they will come meet with us on the U.S. side. Obviously, they still want us to come to visit their plants, but we do that less frequently.”
Many of GW’s customers that have manufacturing plants in Mexico now have a strict protocol in place in how GW visits their plants. “With one, we have to meet in El Paso, and they provide a van service and chauffeur us to their plant and back,” explains Bennert. “We look out for everyone’s well-being, both suppliers and employees. So far it’s working out fine.”
Bell adds that GW is “trying to strike the right balance”—to be in Mexico for the growth but “also taking the right steps to make sure our employees and customers are safe.”
MGS and TecStar de Mexico growing south of the border
Like other custom molders, MGS MFG Group (www.mgstech.com), headquartered in Germantown, WI, established a molding facility in Mexico at the request of several customers that represented a significant revenue stream for tooling and molding, and had long requested a presence in Mexico to better and more widely support their requirements. In January 2008, after looking for nearly seven years, MGS purchased an existing molding operation in Chihuahua, Mexico, which is in the interior—about a four-hour drive south of Cuidad Juarez (near El Paso).
Berg says that the violence in Mexico has not impacted its facility in Chihuahua, or its employees. “Nothing has happened in or around or near our facility. We don’t have the problems that exist on the border,” he says, addressing this issue. “Our management team that is responsible for that facility travel from Germantown to Chihuahua continually and have not reported any type of trouble with regard to travel. However, what we’ve done is be more proactive with communications to ensure the employees feel safe.”
Berg adds that the business climate in Mexico is “very vibrant and active” and TecStar de Mexico has 35 injection molding machines up to 700 metric tons, and two continuous extrusion shuttle blow molding machines in 90,000-plus ft2. That facility is poised for $15-20 million in annual sales, he notes.
In just three years MGS has expanded the facility, added new customers, purchased new presses including two 700-ton presses, and added multi-shot technology to TecStar. “We’ve injected some serious technology in that facility, which has involved training our workforce to a higher level to accommodate our medical business in particular,” Berg comments. “Multi-shot is a re-education for many of the employees, but they have responded to the challenge. TecStar de Mexico is a jewel and one we point to with a great deal of pride.”
Anchor Tool & Plastics Inc. changes course, finds success
Ron Rogers looked southwest to Nogales, Mexico from his facility in Minneapolis, MN, some 12 years ago. Today, Roger’s son owns and operates the Minneapolis operations, Anchor Plastics Inc., and Ron Rogers focuses on the Mexico plant.
“We came here for a specific customer to mold and assemble TV cable boxes, but after that company was sold to another company, the work went away and I started looking for new markets,” Rogers explains. That turned out to be the foreign automotive industry, and today his company, Anchor Tool & Plastics Inc., molds, assembles, tests, packages, and ships various automotive components for a large Tier One company that has plants throughout the U.S. and Canada.
The issue of drug violence south of the border hasn’t hurt Rogers’ business at all, and he’s not bothered by it. “I’ve been going back and forth at the Nogales Port of Entry for 12 years and not much has changed,” Rogers comments. “The violence here impacts mostly those in the drug trade—I heard one statistic that 67% of all people killed in Mexico are in the drug trade and the other 30% were police. It’s not really affecting us that are in business down here.”
Rogers ([email protected]) does admit however, that some of his customers are afraid of going into Nogales, Mexico. “A few people are using the violence as an excuse not to have to go to Mexico, but generally we’ve not noticed a difference,” says Rogers.
About 95% of the work that Anchor Tool & Plastics does gets shipped to the U.S. His focus remains primarily on assemblies, not just parts. “I pretty much got out of the ‘shoot-and-ship’ business. There’s no reason to be in that anymore. And we’ve tried to stay away from the commodity markets.”
Because of lower priced labor, Rogers’ primary business is assemblies and testing of products for the automotive industry. “If it needs ‘fingers’ on it, we can make it more cost effectively here and the product comes to the customers ready to go to their line to be put into their product,” he explains.
Anchor Tool & Plastics operates 17 presses ranging from 110 to 500 tons, and employs 250 people, most of those doing assembly. “It’s a tough business because of the requirements that the automotive industry has, but it’s the only one left that has any margin in it. And being in Mexico allows us to be competitive.” —Clare Goldsberry