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COVER
STORY - June
2001 by Adam Bruns Sidebar-
Think Mexico, and the first image on many American workers’ faces is a frown. Mattel recently closed its plant in Murray and moved production south of the border. The OshKosh B’Gosh plant in Adair County laid off another 148 employees, following layoffs of 162 people in late 1998. Company officials cited their “implementation of global sourcing strategy,” meaning the jobs went to Mexico. Duro has gone to Mexico too, but not at the expense of its 1,300 U.S. jobs. Headquartered in Ludlow since 1953, Duro has operated a maquiladora in Rio Bravo, Mexico since the late 1990s. Workers there, whose complaints of substandard working conditions have allegedly been substantiated by the Mexican State Department, had been striking to form a new independent union since last summer. Several former workers who attempted to visit company officials in Kentucky in February were met by a locked door, while attempts by the Cincinnati Enquirer to obtain a company response went unanswered. Meanwhile, the calls for protest grew exponentially through activist websites, where dramatically-detailed accounts of worker intimidation and abuse were repackaged under headlines like “Terror Continues” and released. So what was really going on? The answer, according to company officials who granted an interview to The Lane Report, says a lot about the maquiladora economy, and about a gullible public that accepts without question stories of corporate bullying. “Strategically, it’s possible we erred early because we didn’t grant interviews and tried to keep a low profile, as we always have,” says Bill Forstrom, vice president of manufacturing for the Rio Bravo facility, from his office in Richwood. But that changed when major customer Hallmark was dragged into the spotlight. “When it started to affect our customers … we felt we had to change our tack,” says Forstrom. “If you had called six months ago, I wouldn’t have talked, but on the advice of pros, we decided we wanted to be more aggressive.” “I can speak with conviction because I was there,” says Forstrom, who has been in the industry for 30 years. “Nothing in Mexico is what it appears. I’ve dealt with plants around the world. In Taiwan for example, I thought the cultural differences were complicated, but they were nothing compared with doing business in Mexico.” “When it was first brought up by someone that the activists had said the company was bringing guns into the plant, I sat down with every manager and said, ‘I need to know.’ I made it clear we would not tolerate it.The GM there [Conrado R. Hinojosa] is absolutely adored by the people. His brother and father are ministers, and he’s as gentle a person as you’d ever want to meet. The accusations are so far gone from what you could imagine. If you knew the person, you’d realize it was fabrication. And we’re caught in the middle. It’s cost us a lot of money and emotional energy.”
In the late 1990s, the company built a 300,000-s.f. maquiladora plant in Rio Bravo, Tamaulipas, Mexico. “Maquiladora” comes from the Spanish word “maquilar” (“to mill”), and traditionally refers to the act of milling wheat into flour. The modern meaning of the word evolved from its use to describe any partial activity in a manufacturing process, such as assembly or packaging carried out by someone other than the original manufacturer. While the term’s origins referred to the payment of a portion of the wheat to the intermediary, today’s maquilas are looked to as a harbinger of hope for an upwardly mobile Mexican economy. The first such facilities began springing up in the late 1960s, allowed only in a very narrow strip of land just south of the U.S. border. The plants are now allowed anywhere in Mexico, and are permitted to keep some product for sale in the country’s domestic market provided import duties and taxes are paid. With very few restrictions on foreign investment, Mexico has attracted hundreds of the facilities, operating under the ownership of companies from around the world who want to not only gain entry into the U.S. market, but to do so at a dramatically reduced labor cost. U.S. customs law only demands duties on the foreign value added to the product, not on its overall value. Today, one out of five manufacturing jobs in Mexico is at a maquila. The relatively rapid growth of maquilas (an industry that’s grown by 10 percent annually for the past 10 years) has occurred in inverse proportion to the wages they pay. According to MaquilaPortal.com, as of April, at the nation’s 3,895 maquiladora facilities, the average wage paid to over 1.35 million workers was $2.48 per hour, with technicians getting $6.54 per hour. All in the service of some $7 billion in annual production. At Duro’s Rio Bravo facility, workers primarily perform manual tasks on the handle portion of the company’s bags, which are adorned with some of the leading retail names in the world. Since last summer, some disgruntled Duro workers had been trying to form an independent union, as many claim that the traditional unions have long been in collusion with the government. Activists also took as their cue renewed calls by Mexican presidential candidate and eventual victor Vicente Fox for labor reform and higher wages. The CTM, which was the union in power for the Duro workers, has around five million members. Some of the workers wanted to go with an independent group, the National Union of Workers (UNT), which represents around 1.5 million workers. Forstrom says the trouble started because of one well-meaning but misguided individual. “Three years ago, we hired Elud Amiagar,” he explains. “He worked on the pre-printer, was an excellent employee, promoted several times. His wife also worked at the plant. He was very charismatic and popular, and was elected as local secretary general of the CTM union, reporting to the union’s national office in Mexico City. In March 2000, Elud went to Mexico City with a committee of five people, and we saw this friction developing between national headquarters and local representation. We arranged to have negotiations at the secretary of labor’s offices – we wanted a mediator during the entire negotiating process. I was personally there, and there was a lot of friction, a lot of showing disrespect. But we had the support of the secretary of labor, and we were able to come to an agreement. While the official salary increase for inflation was between 14 and 15 percent, we actually ended giving 18 percent, plus two percent on food coupons.” Forstrom says that employees receive four forms of compensation: salary, food coupons, an attendance bonus and a productivity bonus. While wages for Mexico as a whole are regarded as universally low, Duro tries to keep its wages at the midpoint of current salary ranges. “We felt it was a real good increase – everyone shook hands and said we had a contract,” says Forstrom. “But Elud refused to sign it. Because the national union is who we have the contract with, we signed and went on. He told employees they didn’t get an increase, and he was very disruptive in the workplace. We terminated his employment, but allowed him to remain as head of the union. He even had an office at the plant. “In early June, he called for an illegal strike. For a legal strike you have to give employees 72 hours notice. The gates are basically locked. I couldn’t even come into my office on Saturday. They threw up their banners on a Monday morning. It was illegal because they had not notified the company. We had third-shift employees in the plant. Government officials and police came in and asked the people to leave. Elud had roughly 120 people – around 10 percent – we feel that at the height of his support he had 150 people supporting him. I’d be surprised if somebody in this plant couldn’t get 10 percent to say they’re not happy with wages or working conditions. “After the walkout, they didn’t come back,” continues Forstrom. “A total of 80 employees just didn’t come back. Elud and five others were detained for a couple days and released. We did not press charges. Since then, it’s become apparent that Elud has been connected with pressure groups in the U.S., particularly the Coalition for Justice in Maquiladoras. Their leader Marta Ojeda has been in Rio Bravo a lot, trying to organize workers. They found in the records in Tamaulipas that when Duro moved from Matamoros to Rio Bravo, the old registry for the original union had never been officially closed. So this group was granted the old registry, which gave them the legal right to organize. They filed suit through the Office of Conciliation and Arbitration in Mexico City against CTM. Then at a hearing in December, a third party came forward: CROC (Revolutionary Confederation of Workers and Campesinos). Then it all went to court.” The judge ruled that there would be an election among Duro’s workers to choose the union on March 2. What transpired was a simple vote conducted amidst peripheral theatrics and a general tenor of suspicion. “Three to six people from the Office of Conciliation came to the plant,” remembers Forstrom. “Because we thought the results might be challenged, our attorney asked the Secretary of Labor to send representatives. In the weeks between filing suit and the election, the three groups were campaigning – one group would put up their banners, and the others would take them down. I imagine the same thing would happen in Cincinnati. U.S. activists and supporters of each group were all staying in the same hotels. At dinner there would be one group shouting at another. “On election day, we were very concerned about the safety of our employees,” says Forstrom, who arrived plenty early that day. “We ran our buses every hour. All the day shift employees were into the plant by 5:50 a.m. I think the demonstrators were disappointed there was no one to demonstrate to. “We were accused of holding people hostage,” Forstrom says with a rueful expression. “Actually we were playing volleyball at 1 a.m. We had music going, dancing. A lot of ladies wanted to dance with our GM to celebrate his birthday. The demonstrators had bullhorns and were chanting, so we took one speaker and played music to drown them out. It was actually a fairly festive atmosphere. The employees all had breakfast, and the officials from Mexico City arrived at 8 a.m. The attorneys, Elud and six other observers arrived about 9 a.m. The election started about 10:30, with three voting stations set up. We didn’t want people outside to observe what was going on inside, so we set up some rolls of paper.” “There was not a shove or a push or a shout,” he continues. “It was calm and collected and orderly. And it was overwhelmingly in favor of the CROC: 497 to 4. So 500 employees. Even though we had 800 at the time, 200 are considered company or salaried, and 600 are ‘syndicado.’ Of that number there were about 100 who didn’t come to work that day.” After it was all over, it was the workers who were shouting, according to Forstrom. “A group of them went out to the gate and started chanting pro-company slogans,” he says. “They said they didn’t want them interfering with their jobs. Overall, we feel it was one person who wanted to control the union. He truly felt the wages should be higher and conditions could be better. Another issue was the secret ballot, which is a huge issue with the Canadian and American pressure groups. We do whatever is legal in Mexico. If secret were legal, we would do it that way. There’s a history of corruption – that’s why they have developed the system they have. We’re dealing with a different union now, but dealing with them the same way. We’ve negotiated a contract since this happened, and we’re three to four percent above the minimum wage increase again.” That increase is still no great shakes, but corporations balk at taking the blame for Mexican social and economic problems that go far beyond their purview. At the same time, the promise of pro-business president Fox to put a “human face on the global economy” has perked up awareness of the vast inequity in living conditions and pay that straddles an ever-more-permeable border. And the long-awaited potential of the maquilas to provide the training and technological transfer capabilities that Mexico needs to stand on its own two feet is still slowly unfolding. But there are some steps being made. For those on the shop floor at Duro, “Advancement is very similar to what we have here in Kentucky,” says Forstrom. “We invest more in Mexico on training than we do here.” At the same time however, he points out that “we are one of the few maquilas who don’t require a high school education because of the nature of the work. So we have the opportunity to tap part of the labor market other maquilas don’t tap.” Meanwhile, Latin America is the fastest growing market for Kentucky goods and services. Trade with Brazil, Argentina and Chile has grown dramatically. The state already operates an office in Guadalajara, Mexico and officials are currently reviewing several locations for a second office in the region. In July, Governor Patton plans to lead a delegation of government and business leaders on a trade mission to Latin America, where they’ll have a chance to see firsthand what is and is not happening. “Fox has said he supports changes, but they haven’t occurred yet,” says Forstrom of the plans announced by the newly installed Mexican president and his pro-business National Action Party. As for being lambasted about not conducting a secret ballot, he points out that the law has not been changed yet and is only a presidential plan: “It would be like filing my taxes,” laughs Forstrom. “Since President Bush campaigned on a significant tax reduction, should I just automatically deduct the five percent now?” “Productivity suffered a little bit because our focus wasn’t on making bags, but it’s better now.” In fact, the company continues to grow by about five percent a year in volume. What would Forstrom recommend to company leaders looking south? “You have to have management who understand local ways of doing business, customers and practices,” he says. “The most important job at a maquila is human resources. A U.S. company may have an HR manager at a mid-level, but there it’s much more important and you have to have a senior person in that position.” Has the ruckus, the first in the company’s history, cooled the company’s enthusiasm for Mexico? “We’re
not going to leave Mexico,” says company controller
David Brown. “And if we had an opportunity for more
business, we’d open a plant down there tomorrow.
Doing business in Mexico is still, for certain types of
work, a good way to go.” Adam
Bruns is associate editor of The Lane Report.
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Copyright 1996-2001, by Kentucky Business Online. All rights reserved. Editorial
content is copyright 2001, Lane Communications Group The Lane Report is a trademark of Lane Communications Group. All other trademarks are the property of their respective owners. |
Think Northern
Kentucky and unions, and the first image in
everybody’s mind at this writing is the continuing
struggles of Comair and its pilots, who just turned down
a compromise contract and entered another 30-day
cooling-off period. But Ludlow-based shopping bag
manufacturer Duro Bag recently has been through that mill
too, and on an international stage that is purportedly
growing more lucrative for Kentucky companies: Mexico.
S. David
Shor founded Duro Bag as a paper grocery bag maker, later
moving into the specialty shopping bag market as plants
opened up in Covington; Brownsville, Texas; Hudson,
Wisconsin; Tampa, Florida and Mexico. A plastic bag
division opened in the 1980s, the company’s most
versatile plant opened in Richwood, Kentucky in 1986 and
soon thereafter the company’s business grew even
more specialized under the new leadership of Shor’s
son Charles as the Designer Division was created. With
its 1995 acquisition of the Union Camp Retail Bag
Division, based in a 240,000-s.f. facility in Richmond,
Virginia, and its 1999 acquisition of Equitable Bag in
Florence, the company has grown to over 1,300 domestic
employees, with employment at its Mexican plant –
formerly in Matamoros – wavering between 800 and
1,200 seasonal workers. The company employs around 600 at
its Northern Kentucky locations, and according to a
profile in the Cincinnati Business Courier in 1997,
reported 1996 revenues of around $351 million.