Mexican Maquiladora Plants Present A Catch-22

        In the United States a dollar barely buys an ice cream cone. But in Mexico
that very same dollar will buy an hour's worth of assembly line labor in a
maquiladora, or in-bond factory.

    Under the maquiladora program, foreign components enter Mexico duty free or
in bond. The semifinished or finished product is subsequently reexported with a
value-added tariff imposed on the Mexican labor. Maquiladora programs were
established in 1965 as a way to generate jobs, foreign exchange and technology
transfers in Mexico during a period of rising domestic unemployment.

    But there's a catch to maquiladora programs: In Mexico experienced workers
are scarce, turnover is high and quality assurance is anything but assured.
While seductively low labor costs and reduced duty or duty-free privileges lure
electronics manufacturers to Mexico, once they get there, they face monumental
training issues. In fact, the Mexican government requires a one- or two-year
employee-training plan from any foreign company that wishes to locate in Mexico.

 Mexico's 1,800 or so maquiladora plants amount to "the largest Peace Corps
anyone ever envisioned," says John Sartori, president of Sarco International in
Newport Beach, Calif., which assists blue chip companies in moving to Mexico.

    In what Sartori views as a quid pro quo, foreign companies are bringing
equipment, technology and management expertise to Mexico in exchange for
inexpensive Mexican labor. "If you are going into a Third World country, you
have to bring the training," he tells his clients.  "As managers, you have to
spend 50% of your time being teachers."

    The Mexican government is not averse to foreign ownership of maquiladora
plants, and manufacturers in the United States aren't the only offshore players
with stakes in them. Japanese plants -- including Sony Corp., Sanyo Inc. and
Hitachi Ltd. -- have created 14,000 jobs in Tijuana alone, which has become the
world's largest producer of television sets.

    The upside of training in Mexico is that at virtually all employment levels
"there seems to be a tremendous thirst for knowledge," notes Lee Crawford,
director of operations Mexico West for Packard Electric, an El Paso, Texas-based
division of General Motors Corp., which makes wire harnesses.

    Tijuana, a honky-tonk border town turned Mexican boom town, has new
maquiladora plants constantly coming on-line -- and an acute shortage of trained
labor. Training costs there are roughly 15% to 18% of a company's payroll costs
-- and still climbing, according to Caleb Stevens, vice president of operations
for Deltec Corp., which manufactures uninterruptible power systems in both
Tijuana and San Diego. In the border towns of northern Mexico, he says some 8%
to 10% of maquiladora workers turn over every month.

    Deltec's work force in Tijuana, made up mostly of women entering the work
force for the first time, requires a two-week overview of "the tools we use, the
terms we use, how to recognize the various electronic components, and how to
solder," Stevens says.

    Mexican employees -- from assembly workers to managers -- "have to learn
what Americans want and why they want it," according to Mariah deForest,
president of the Mexico division of Imberman & DeForest Inc., a management
consulting firm headquartered in Chicago. "It is not self-evident to Mexicans
that quality is important." Until recently, the country had a closed economy,
with little need to compete on quality or price.

    Quality concerns, labor shortages and the agonies of training and retraining
have spurred more than one foreign-owned factory to automate. Robert Haywood,
associated director of the Flagstaff Institute, an Arizona-based research
organization that studies world trade, recalls an electronics plant in Juarez
that opted for automation because its scrap costs exceeded its labor costs.

    Computer-control technology, robotics and fault-detection electronic
equipment, however, do not eliminate the need for training; they merely up the
ante. Along with automation comes a growing need for graduate engineers,
computer scientists and sophisticated managers with cross-cultural talents.

    At General Electric Co.'s Mexican operations, where the ratio of Latin to
U.S. employees is 99-to-1 at some of the plants, Mexican-born middle managers
participate in three-day manager-modeling seminars, reports James D. Schwab, GE
Mexico Operations' manager of human resources, based in El Paso, Texas. The
sessions focus on how to deal with other professionals.

    Japanese maquiladoras

    Japanese maquiladoras generally outstrip their U.S. counterparts when it
comes to training, notes Tony Ramirez, vice president for sales for Made in
Mexico Inc., an electronics subcontractor and consultancy in San Diego and
Tijuana. Sanyo, for instance, imports top-level, bilingual supervisors from the
parent country, who hire Mexican proteges as their eventual replacements.

  The trainess are whisked to Sanyo's facilities in Japan for a generous dose
of product orientation, quality control information and "the Japanese philosophy
of work and management," Ramirez says. Thereafter, they receive on-the-job
training in Mexico from their mentors, who fade out of the picture after a year
or so.

    U.S. commuters to border town maquiladoras sometimes view Mexico as an
extension of the United States, while Japanese managers must straddle three
cultures every day and thus "have to be adaptable to survive in Mexico," says
Yolanda Ayubi, a Milwaukee, Wisconsin-based management consultant that
specializes in cross-cultural training issues.  "They don't have a choice." On
the other hand, the Japanese feel reasonably at home with the Mexican emphasis
on separation of the classes, male domination and strong family ties.

    Technical graduates of Mexican universities may be long on theory, but short
on practical application. The U.S. educational system is "narrower and more
specialized" than its Mexican equivalent and focuses on "results, not concepts,"
Sarco International's Sartori notes. Since a college degree has considerable
status in Mexico, graduate engineers may be "less willing to get down in the
trenches, pay their dues and get their hands dirty," he says. "They think their
first job out of school ought to be a management job."

Mexico has a number of distinguished colleges and universities, including
the internationally respected Monterrey Institute. What tends to be lacking in
many of these schools are laboratories and high-tech "tools necessary to train
the troops," according to Howard C. Boysen, president of IMEC Corp., a
maquiladora subcontracting firm with offices in both San Diego and Tijuana. This
void is problematic both at the technician and graduate engineering levels.

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