Arizona Firms Look South

Ensenada, Baja California
The road to Ensenada is a jewel.
The four-lane tollway cuts free of the industrial labyrinth of Tijuana and turns west toward the Pacific Ocean, where it clings to cliffs jagging into the surf. Snaking its way down Mexico's northernmost coast, every turn reveals another expansive, soft vista of sea, sky and earth.

Known mostly to Americans as a port of call for cruise ships, Ensenada has become a hot spot for maquiladoras. More than 75 maquilas operate in the city, including 16 that have more than 100 employees.

Just 100 kilometers from the border, the city is large enough to provide a stable work force but is not overwhelmed by a huge influx of job seekers from Mexico's impoverished interior. The slums dominating other maquila cities like Nogales and Tijuana are few and far between.

One of Ensenada's most successful maquilas is Scottsdale-based Fender Guitar Company. The venerable manufacturer of electric guitars and amplifiers has flourished since opening its maquila 12 years ago. Not only has the company created more than 700 jobs in Ensenada, the high quality of instruments made there is allowing Fender to greatly expand its factory in Corona, California.

"Ten years ago in Mexico, we had five employees," says Kurt J. Hemrich, senior executive vice president. "Now we have 716. Ten years ago in Corona, we had 40 people. Now, we have more than 800."

And more jobs are coming to both cities. Fender is nearing completion of what will be the world's largest guitar manufacturing center in Corona. The Ensenada plant is continuing to expand as Fender steps up production of a new amplifier series.

The privately held company nearly went under in the mid-1980s after its former owner, CBS, pulled the plug midway through a five-year turnaround plan. Fender had lost much of its once dominant market share to Asian and Japanese guitar companies.

A handful of Fender executives purchased the company from CBS and set out to re-establish Fender as the world's leading guitar manufacturer. A key element in rebuilding Fender was to find a low-cost, high-quality assembly plant.

After scouting guitar manufacturing centers in China, Japan and elsewhere, Fender settled on Mexico. The decision has proved to be fortuitous for both Mexican and American workers.

"We took business from Japan and Asia, brought it to Mexico and created jobs in the U.S.," says Bashar Omar Darcazallie, Fender's senior vice president in charge of Mexico manufacturing.

Fender eased its way into maquila manufacturing. It began with an operation set up in an old Ensenada church to coil guitar strings. Next, Fender added amplifier cabinet manufacturing. By the early 1990s, the maquila started manufacturing about 25 guitars a day.

Production expanded throughout the '90s. Fender's maquila now builds 600 guitars a day, in 20 models, including its famous Stratocaster and Telecaster axes. The maquila produces a number of Fender's "signature" model guitars, including the popular Jimmie Vaughan Tex-Mex Stratocaster.

Vaughan threw a 1996 concert for maquila employees at one of Fender's twice-a-year employee fiestas.

"When I came down and saw the people working, it really got to me," Vaughan says in an interview on Fender's Web site. "Over the past 20 years, I've basically had any guitar I wanted, and sort of forgot what it takes to make one. They were all doing such a good job down here, and it made me grateful."

Fender's progressive management style has earned it a loyal work force--30 percent of the workers have been at the maquila more than five years; total turnover for this year through mid-May was only 7.8 percent, well below the industry average.

While Fender isn't the highest-paying maquila in Ensenada--wages range from 350 pesos ($41) to 750 pesos ($88) a week for assembly-line work--it offers its employees numerous additional benefits, including a 401(k)-type savings plan, low-cost loans, athletic programs and free medical care.

The company is working with Mexican housing authorities and private contractors to build employee housing south of Ensenada. Fender plans to provide workers with no-interest loans for the down payment for the one-, two- and three-bedroom homes. The company expects to begin the first phase of the 750-home project this year.

Perhaps more important than the tangible benefits is the attitude Fender projects to its Mexican work force.

"I don't make a distinction between myself and the guys that clean the floor. We try to be correct and fair to the people working here," says Darcazallie. "This results in improved communication."

Fender employees work flexible hours, usually five days a week, between 7 a.m. and 5 p.m. If they fill their quotas, they can leave early.

On the day in May that New Times toured the facility (unescorted by Fender executives), many workers knocked off at 3 p.m.

Unlike most maquilas where workers never see the finished product and might not even know what they are making, Fender employees see and hear what they are building every day. In a nation where the guitar has deep cultural significance, it's no surprise that one of the most coveted jobs is actually playing the finished product to check for defects.

Fender has turned over nearly all of the maquila operation to Mexicans. There are only four U.S. citizens on staff. The rest, including middle managers, computer operators, electricians, engineers and accountants, are Mexican. Many were trained in nearby technical schools or the local university.

Ruben Aguilar has been with Fender since it started operations in Mexico. A college graduate, Aguilar has risen through the ranks to production manager overseeing electronics final assembly.

There is no doubt in his mind what Fender's maquila has done for Mexico.
"It's good for us, for our families, for our community," he says. "It's good for our hearts."

Empalme, Sonora
Ten years ago, President Ronald Reagan awarded Phoenix entrepreneur Karsten Solheim the "E" Award for Export Expansion.

Solheim's company, Karsten Manufacturing Corp., was exporting Ping golf clubs and accessories to more than 60 countries and was a shining example of a small American business developing an international clientele.

Today, Karsten Manufacturing is not only exporting Ping gear worldwide, it is exporting Phoenix jobs to Mexico.

Faced with intense competition and weakening sales growth, Karsten is in the process of transferring 250 jobs--about a quarter of its work force--from Phoenix to a maquiladora in Empalme, a city of 80,000 located about 650 kilometers south of Phoenix.

Like many American companies whose competitors use low-cost, foreign labor, Karsten was faced with a difficult choice: Shift jobs out of the country or lose significant sales, possibly endangering the company.

Karsten enlisted the assistance of a Tucson maquiladora shelter company, Offshore International, to help it set up operations in Mexico. Karsten began transferring its golf bag manufacturing operations to Offshore's maquila industrial park earlier this year.

Karsten now has about 40 Mexican workers sewing golf bags in a 26,000-square-foot warehouse. There is plenty of room for expansion at Karsten's new Mexican operation called Bolsas de Golf.

Ruben Whitten, Karsten's manager for new product development, hopes the maquila will allow Karsten to produce a better golf bag at a much lower cost.

"We will become better across the board because of this," he says.
Shifting jobs to Mexico, Whitten says, was not an easy decision for Karsten, which has a history of promoting from within and taking care of loyal employees.

Whitten, for example, started as a maintenance worker in the early 1980s and weaved his way up the corporate ladder. When he unveiled his fluent Spanish, he was given the task of setting up the maquila.

But first, Whitten says, he had to take care of the Phoenix employees that would be out of jobs.

"Fortunately, about half of the workers were full-time, and half were temps," he says, adding that many of the full-time workers found other jobs within Karsten.

Next, Karsten hired Jose Luis Garza to manage the day-to-day manufacturing operations in Mexico. Garza, a former maquila manager for luggage manufacturer Samsonite, keeps busy training workers on industrial sewing machines.

"The training process is huge," Garza says during a May tour of the facility. "We have to teach the workers how to see."

Not that the workers are blind, but Garza wants the employees to be able to sense when a product is built correctly. Right now, he spends a lot of time simply making sure workers know what to do--let alone mastering what they are doing.

Dressed in casual attire, the workers appear relaxed but focused. The factory area is spotless and well ventilated, with comfortable lighting. An employee lounge adjacent to the factory floor contains a refrigerator and two microwave ovens. Workers leave the production area one at a time to take rest-room breaks without seeking supervisor permission.

Most of the work force lives in Empalme, and many ride their bikes to Offshore's industrial park, which has a child-care center and a medical clinic. Offshore provides transportation to workers who live in Guaymas, about 15 minutes north.

Whitten, who is black, grew up in Calexico, California, a small border town across from sprawling Mexicali. He developed tight bonds with Mexico and has an innate understanding of the culture.

"I'm completely comfortable here," he says, which is not always the case for American blacks in Mexico, where racism is prevalent.

Karsten, he says, conducted extensive research before selecting Mexico. Whitten says he and other Karsten employees were amazed at the conditions in overseas factories. In Vietnam, he says, workers considered themselves lucky to have jobs that paid 10 cents an hour.

"Asian prices are cheaper," Whitten says. "But Mexico is closer."
Whitten wouldn't say what the Mexicans sewing Ping golf bags are paid. Technically, the workers are not Karsten employees. Offshore International hires the work force and sets the pay for each employee. Karsten pays Offshore a flat rate. Wages for such work typically would be less than $1 an hour.

No company wants to be seen as exporting American jobs to Mexico, Whitten concedes. But he believes the issue over jobs leaving America for other nations needs to be widened.

"Is it a question of creating jobs, or creating jobs in the United States?

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