A NAFTA Test Case: Manitex Tries Both Sides of the Border
FOR six years before free trade, Manitex Inc. made products at a Reynosa, Mexico, maquiladora and sold them to Mexico.
By the Jan. 1 advent of the North America Free Trade Agreement (NAFTA) that maquiladora had closed and the company was operating a new plant in the heart of Texas.
Former presidential candidate Ross Perot, who led the fight against NAFTA, predicted that its passage would cause high-wage manufacturing jobs to move south from the United States. Manitex could prove Mr. Perot wrong. Or it could be typical of industries needing low amounts of labor that can benefit from NAFTA while staying put.
Manitex, a maker of boom crane trucks - the kind that utility companies use to set poles for power lines and that roofers use to lift their materials to the top of building projects - is a subsidiary of Manitowoc Company of Wisconsin, a manufacturer of diverse engineered products with $300 million in annual sales. Ice cube machines for the food service and hospitality industry account for a third of revenues, says Manitowoc's president Fred Butler. ``We also build ships, but there are no ships to build [right now].''
In 1982 the world saw ``a virtual cessation of heavy construction business,'' Mr. Butler notes, and the company's crane business came to a ``screeching halt.''
In 1986, with eyes on the $80 million annual market for pedestal cranes used on offshore oil platforms, Manitowoc established Manitex, a twin plant operation based in McAllen, Texas, and across the border in Reynosa, Mexico. That year, oil prices collapsed. By 1987, when Manitex opened, the pedestal crane market had shrunk to $5 million a year.
SCRAMBLING for another product to make, the company chose boom crane trucks. These trucks cost from $60,000 to $180,000. Manitex and three other firms produce 1,500 to 2,000 a year for the North American market. National Crane is the market leader.
Having some Mexican content in its trucks gave Manitex a price advantage when selling to the Mexican market, one of its largest, Butler says. But the company experienced other problems that caused it to reconsider its operation.
Recruiting supervisors for the US side of the operation proved difficult. ``We were having trouble even getting Texans to come to McAllen,'' Butler says.
Boom trucks, it turned out, require far less labor than the original product, pedestal cranes. Thus, the maquiladora meant less savings in labor costs. There were also the strains of trying to operate under two roofs divided by an international border that is always crowded with shoppers.
While it was true that the maquiladora saved Manitex money, Butler says, ``there are soft costs that you can never really get a full grasp of.'' The true savings was probably less than 1 percent. ``We said, that's not enough to justify this split operation,'' Butler says. Manitex ceased operations across the border in September 1992.
The company could have moved anywhere, Butler says. But with the cost of labor not an issue for boom trucks, Manitex remained in the US. After considering San Antonio, it finally settled in Georgetown, 25 miles north of Austin.
The cost of labor in Georgetown is three times higher than Mexico, Butler says. And as for quality, ``I've got regrets'' about leaving Mexico, he adds. The Reynosa workers produced ``some of the most beautiful welding I've ever seen.'' That is not what people generally believe about Mexican labor. ``All I can say is, what we hear and what's real are very different,'' Butler says.
Unlike Perot, Butler was a ``very, very strong'' advocate of NAFTA. He says its value will come in allowing US companies to stay home and export to Mexico. ``That is their preference,'' he says.