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A Little Help From New Friends

The success of a U.S. company's move to Mexico may depend on how much help it asks for from domestic experts.

  [ 10/1/2002 ]  By: David Hendricks   Print This Article  Reprint/License This Article  E-mail This Article To A Friend  
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Unintended consequences.

The unexpected usually happens in one form or another when a U.S. manufacturer moves operations to another country. Mexico, the destination for many U.S. manufacturing relocations for decades, has seen all of the unintended consequences - the effects on U.S. companies when they venture offshore.

Mexico's industrial parks, as a consequence, are even prepared to help U.S. companies anticipate problems and smooth them over as they crop up.

Mexico's industrial park operators can even help when some of the unintended consequences are beneficial for the U.S. company and its U.S. headquarters.

"Our experience has been that most companies do not move all of their manufacturing at one time, just a piece," said Richard Kean, special projects director for Tucson, Ariz.-based Offshore Group, which operates industrial parks primarily in the northern Mexican states of Sonora and Coahuila.

When just a portion of the manufacturing moves, the effect on the U.S. company often is minimal, almost as if the manufacturing moved to Iowa, instead of Guaymas, Mexico, Kean said.

Quick Studies

In as little as a year, however, a pleasant surprise may be in store for the U.S. headquarters. The first thing a U.S. company moves to Mexico is the technology. After the Mexicans learn the technology, they soon travel to the U.S. headquarters with improvements in mind.

"Mexican workers and supervisors have had to do so long with so little, they figure things out," Kean said. "Pretty soon, there is technology going from Mexico to the United States, improvements to perfect a process. It happens all of the time."

Kean said U.S. companies benefit just from setting up operations anew in a different place. He cited a Northeast U.S. company that manufactured flexible printed circuits in a two-story building in the United States.

The company moved into a one-story building in Mexico, resulting in a smoother production flow that later improved the Northeast U.S. operation, too.

"In Mexico, companies can start with a clean sheet of paper," Kean said.

Sometimes, communication problems arise when manufacturing moves to a distant location, said Raul Barksdale, a sales and marketing executive with Amistad Industrial Developers. Amistad has operations in various locations in Mexico, primarily in Coahuila.

"We've heard the comments, 'At headquarters, they forget about us,'" Barksdale said. "When there are communication problems, we try to help. We will travel to the headquarters. We can tell them to try to use different words when communicating with the Mexico plant. The wrong words can make people upset.

"The major thing we see when U.S. companies move to Mexico is that they find that the Mexican people are very united," he added. "They are more dependent on each other."

The success of a U.S. company's move to Mexico can depend on how it makes the move, said Jose Enriquez, sales and marketing director for American Industries International, which operates industrial parks, primarily in Chihuahua.

"If a company is coming by itself, there can be a steep learning curve," Enriquez said. "There can be uncertainty if you don't have all of the information you require. The truth is that brokers, construction companies, parks - everyone - is selling you their story."

The cultural differences sometimes catch companies by surprise when they send managers to the new Mexico site.

Enriquez said his company helps the managers and their families find suitable housing and schools, something that is just as necessary as getting permits for the plant and learning how to avoid double taxation.

American Industries International personnel have even helped spouses learn how to adjust to the differences in Mexican supermarkets.

Give Them Shelter

All three companies - Offshore Group, Amistad and American Industries International - recommend a shelter plan for companies entering Mexico for the first time.

Shelter plans offer a way for U.S. companies to enter Mexico without an initial legal presence.

Mexican park operators offering shelters hire, train and pay the workers, pay the permits and utilities, and arrange and pay for transportation. U.S. companies reimburse those costs, plus a shelter administration fee.

"With a shelter, there is a checklist," Enriquez said. "The customer can visualize what will happen."

Offshore Group's Kean said, "With a shelter plan, a lot of administrative things that would take up time at headquarters can be done in Mexico."

He added advice on when U.S. companies should not move to Mexico.

"If a company is under financial pressure and is losing market share, Mexico will not save [that] company," Kean said. "If moving to Mexico is a desperation move, it won't work. It will just make matters worse."

If a U.S. company has substance, however, but still must regain market share quickly, "Mexico is a good alternative," Kean said. "It wouldn't be a matter of losing business in the United States but expanding business in Mexico."

David Hendricks is business columnist for the San Antonio Express-News.

 

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