This Venture Is Cooking With Gas

An engineer huddles over an Apollo workstation from Hewlett-Packard, designing parts for a gas-range prototype. Nearby, a hermetically sealed chamber recreates the heat and humidity of Mexico's Yucatan peninsula, and 40 probes tell a computer how well a refrigerator is performing under tropical conditions. "Just a few years ago, we had to take readings by hand," recalls Luis Hoyos Parrao. He's director of the new $7 million research and development center built by appliance maker Organizacion Mabe in Queretaro, in central Mexico, soon to be dedicated by none other than President Carlos Salinas de Gortari. With its state-of-the-art technology and top-notch research, it's just the kind of project Salinas loves--proof that Mexican manufacturers can compete at the highest levels.

In this case, though, the company is half-Mexican. The partner is General Electric Co. Now six years old, the joint venture is a model of the north-south cooperation that supporters of the North American Free Trade Agreement dream of: GE has access to low-cost labor and Mexico's fast-growing appliance market. At the same time, Mabe piggybacks on GE's worldwide purchasing clout and its cutting-edge technology. "They learn some things from us, and we learn from them," says President J.J. Dupuis.

Mabe also plays a key role in GE's plan for North America. In the past five years, Mexico has displaced Asia as the most important source of mini-refrigerators for the U.S. One reason: Sanyo Electric Co. now ships most of the 1.1 million minirefrigerators imported each year from a border assembly plant in Tijuana. Mabe, meanwhile, has countered Sanyo, grabbing nearly 30% of total U.S. imports.

LIGHT TOUCH. Gas ranges, though, are Mabe's strongest export. GE had never before manufactured the appliances. So in an unusual reversal of roles, Mabe provided the knowhow, while the American partner weighed in with manufacturing technology and production schemes. The venture hit pay dirt: It now supplies fully one-third of all the gas stoves bought in the U.S.

In Mexico, that's reason enough for bragging. But the same success is controversial in the U.S., where the NAFTA debate is in full swing. GE hastens to point out that 80% of the ranges' components come from the U.S., creating an estimated 2,500 American jobs, equal to those in Mexico. Last year, Mabe imported $20 million more in products from the U.S. than it exported, insists Dupuis.

GE avoids the image of being a foreigner in Mexico by maintaining as light a management hand as possible. Local Mexican executives report directly to GE's appliance chiefs in Louisville, not to a GE country manager in Mexico. That approach allowed Mabe to try out management and production concepts such as multiskills training and just-in-time systems as quickly as GE does at home.

The new R&D center, painted in bold blues and oranges, stands as a monument to GE's big bet on Mexico. Nearly half of its 148 researchers and engineers have studied at GE's Louisville center. Its research team bristles with advanced degrees, and two-thirds of the researchers are 30 or younger. "We're advancing quickly here," says Director Hoyos. It's an understatement GE can certainly live with.

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