If a company is going to move operations to Mexico, finding "shelter" may be the first, and best, course of action.
Foreign manufacturing in Mexico operates under the maquiladora - or "twin plant" name - but several forms of maquiladoras can be found. One special form - called shelters - won't ever go away because shelters often are the way foreign companies begin in Mexico.
In plain terms, Mexico's shelter operators offer a way for foreign companies to conduct labor-intensive production in Mexico on an outsourcing basis. That means the foreign companies have no legal exposure in Mexico, because the shelter operators have that status instead.
That can be an assurance when small- and medium-sized companies have few resources for tackling the challenge of expanding to a new country.
"Shelter programs are unique in Latin America. They offer savings during the start-up, pre-operational phase," said Armando Charles Rubio, vice president for marketing and business development at a Monterrey, Mexico, consulting firm, Grupo Prodensa.
Shelters the popular choice
"Shelters are very popular among foreign direct investors," said Charles. "Probably 30 percent start their Mexican operation through a shelter service or similar start-up service package."
How shelter companies, which are based in both Mexico and the United States, charge for their services varies and is often tailored to their customers' needs. But one basic, popular method is to charge a fee for a shelter service that is included in the hourly wage rate for each worker employed by the shelter company.
The rate goes up and down on a sliding scale as the number of workers goes up and down. Other charges for leases, utilities, transportation of goods to and from the plant and other operations are charged to the company on a pass-through basis.
The advantages to this arrangement could fill a small book. Here's a typical example. Mexican law requires stiff severance pay allowances for workers employed more than 90 days, which could stick a large liability on a company that has to cut back or move operations.
A shelter operator, however, can spare their customers that liability because once a company has finished a production run, the shelter operator can switch its workers to another operation for another shelter operation, according to Nader Zabaneh, general director of Offshore Promotion Inc. which operates out of Tijuana, Mexico, and San Diego, Calif.
Examples of how it works
Of the numerous shelter companies, all their strengths and special features that manufacturers may want to consider. Some examples follow.
The Offshore Group has operated shelters for 14 years, and has 11,000 workers in four locations working for 37 clients, up from 25 a year before. The number of workers has remained steady, but the number of clients has risen because more suppliers are moving closer to their large manufacturing customers, according to Richard Kean, special project director for The Offshore Group.
Some of its clients have been with The Offshore Group all 14 years, and the shelter operator likes to convince its customers that staying in shelters is better than later going out on their own stand-alone maquiladora.
"We have large multi-national companies that see it the way we do," said Kean.
Those companies include ITT Automotive, Tyco Corp., Kimberly Clark and Viag of Germany, which makes auto airbag canisters.
San Diego-based Made In Mexico Inc. started operating shelters in 1985 and has 3,000 workers serving 16 clients in the medical, electronics, textiles, auto, plastics injection molding, and consumer goods fields, according to A.M. "Tony" Ramirez, executive vice president of Made In Mexico.
Made in Mexico stands ready to help companies graduate to their own plants as their operations grow.
"We assist in that transition," said Ramirez. "We do that quite a bit."
Offshore Promotion Inc., also based in San Diego, began shelter operations in 1986 and has operations for eight clients in Tijuana and the Mexican state of Sonora.
David Hendricks is business columnist for the San Antonio Express-News.
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