Mexico presents U.S. companies many distinct opportunities,
but for the uninitiated, misunderstandings, manufacturing conditions and a different
way of doing business may
cause problems.
Take Eric Hofmann, founder and CEO of New Orleans-based
Bric McMann, a manufacturer and distributor of beauty salon garments. After being
burned by a textile manufacturer in China who supplied him with smocks that were
not color-fast, he decided to source his textiles locally and have the garments sewn
in Mexico. He had met a Mexican agent at a trade show in the United States who said
he had just the site for his operation. Although Hofmann was gun
shy of foreign agents, he decided to take the plunge.
"I shipped him my products, then began getting excuses
as to why they were not being
made," he said. "Meanwhile orders for the garments were rapidly coming
in."
Hofmann decided he had better fly to Mexico and see what
was going on. He soon found
the garments were being produced in a run-down converted tortilla factory.
"When the products finally did show up, they reeked
of corn," he recalled.
Rather than throw in the towel, however, Hofmann decided
to work with his Mexican agent
to find another manufacturing site. His partner claimed he knew another man who ran
a maquiladora in Reynosa.
"He said he could give me a good product for a cheap
price," he said. So Hofmann gave
him $10,000 to start manufacturing the garments.
"I never saw my product," he admitted. "It
turns out my partner was not as connected as
I had thought."
Not giving up, Hofmann turned to Pakistan for textile sourcing,
then Honduras for sewing. Finally he hit a home run and his business took off. Ultimately,
however, he returned to Mexico because of its proximity to the United States. This
time, he established a solid relationship with a Mexican contractor whose sole business
was concentrating on Bric McMann.
Hofmann moved 300 sewing machines slated for the factory
in Honduras to Mexico for contract sewing.
Today Bric McMann supplies smocks to beauty salons across
the United States and is doing contract sewing for such companies as Levi Strauss,
The Gap, J.C. Penny and Burger King.
"The key to success in Mexico is finding someone you
can trust and then establishing a good relationship with that individual," Hofmann
said.
Site options
A report by Fluor Daniel Consulting shows that the attractiveness
of Mexico as a location for certain types of industrial facilities is improving rapidly
after a short but serious decline.
Of course, when a company is considering a Mexican location
it must first decide what region of the country will best suit its needs.
"Unless transportation, which is uneven across much
of Mexico, is a key issue, opportunities exist throughout the country," said
Frances Sanchez, director of PHH Mexico, a division of HFS Mobility Services. PHH
Mexico has been a site selection consultant in Mexico for years. Executives taking
a look at Mexico quickly learn that one region of the country is as different
as the East Coast of the United States is from the West Coast.
For example, Guadalajara, while not easily accessible by
truck or train, offers good air connections. For this reason, high-tech companies
like IBM, Motorola, Kodak, Hewlett-Packard and Lucent Technologies have set up operations
here.
On the other hand, some firms choose to operate in cities
along the U.S.-Mexican border, where products can be transported easily and quickly
to the large consumer market in the United States. Lucent chose Reynosa for its telephone
service and repair center for this
reason. Other companies operate from the many maquiladoras ("twin plants")
along the U.S.-Mexican border.
"The most aggressive industrial development and activity
opportunities currently are found
in Mexico's northern states," said Sanchez. "In Chihuahua, Mexico's largest
state, for example, industrial parks and maquiladoras are strong."
The growth of plants locating in this region has skyrocketed.
"Tijuana has become so saturated, that there is zero
unemployment," she asserts.
Harish Dadoo, a consultant who works closely with PHH Mobility
Service, points out, however, these areas still offer huge industrial park and growth
capacity.
"Incentives, which must be negotiated case-by-case,
typically include a waiver of property
or transfer taxes," he said. "Utilities, such as electricity, are provided
and most parks have
their own water supplies independent of the city's."
The state of Coahuila has been aggressive in attracting
U.S. manufacturers. Coahuila offers added advantages: a choice between locating at
the U.S.-Mexico border or in Mexico's interior.
Coahuila has a long tradition of serving the automotive
industry, with two Chrysler plants and two General Motors facilities in Saltillo,
the state capital, and Renault in La Laguna. Coahuila has also been an important
location for textile and apparel manufacturing. Located there are Sara Lee, Hanes,
Cone Mills, Dickies, Savane and Wrangler.
Universal advantages
Dadoo points out that no matter where a company locates
in Mexico, the country offers several advantages. These include having to pay no
taxes on finished materials, since materials are typically brought in from outside
and assembled in Mexico; paying taxes only on wages; Mexico's large, non-unionized
work force; and, contrary to the maņana myth, high work standards of the Mexican
people.
"One company, a subsidiary of a large U.S. denim jean
manufacturer, cited work in Mexico
as the best they had seen in all of their global plants," Dadoo said.
Key to working with Mexicans, however, is relationship building,
Sanchez stresses.
"Mexicans want to know you first before they will do
business with you," she said.
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