How I Helped Move a Factory to Mexico
U.S. factories have struggled for decades to compete with cheaper overseas labor and imports. The economy, once partially driven by manufacturing, is now dominated by service businesses. In 1997 there were 17.4 million manufacturing jobs; by 2007 that number had slipped to 13.8 million, according to Bureau of Labor Statistics data.
Many of these factory jobs—and in some cases, the machinery itself—have been shipped to countries in Latin America, Asia, and elsewhere. A version of this familiar scenario played out recently at the Long Island City (N.Y.) plant and headquarters of auto parts maker Standard Motor Products (SMP). Larry Sills, the company's chairman and CEO, says he decided to relocate the bulk of the plant's operations to Reynosa, Mexico, because of reduced demand for the plant's main product line (distributor caps and rotors) and competition from China. He says the company is profitable, but not enough to justify its nearly dozen factories in the U.S. and overseas.
What's driving relocations like this one, of course, is the gap between the wages paid in the U.S. and elsewhere. While a line worker in a U.S. factory earns an average of about $18 an hour, the equivalent job in Reynosa, Mexico, pays up to $3 an hour, including benefits, says Ralph Biedermann, a partner with Mexico Consulting Group in San Francisco. John Christman, director of the Mexico Maquiladora Industry Econometric Service of Boston-based Global Insight, says the annual increase in outsourcing (BusinessWeek.com, 4/7/08) U.S. jobs to Mexico has declined in recent years, replaced primarily by China.
What was it like on the factory floor of Standard Motor Products in the final months before the relocation? We asked Max Leiber, the brother of a BusinessWeek.com editor, to recount his experiences as a temporary worker from January through March at the Queens location, which ended its manufacturing operations on Mar. 28, 2008. His story follows.
After I graduated from college, I moved in with my brother in New York City and started temping and working odd jobs while I tried to figure out the next step of my life. I sorted files at a UBS (UBS) office in Manhattan, painted my brother's apartment, and covered for a doorman in the Bronx, among other jobs. By my third assignment with a temp company, I didn't pay much attention to the job description. I expected an easy time doing mindless office work.
Sending the Work to Mexico
But I was in for a surprise from day one. The building didn't look like an office building. It was a gray factory, six stories tall, that seemed to take up an entire city block. I walked past a few guys having their morning cigarettes, a secretary buzzed me in, and I sat down in a small lobby to wait for the man who would be showing me around. He arrived wearing a shop jacket with an embroidered name tag and introduced himself. He seemed uncomfortable. He didn't smile when I apologized for being overdressed in my red tie and shiny dress shoes. As I followed him from the reception area to the office I'd be working in, I got a sense of the enormous scale of the place, with its giant stacks of pallets and workers whirring by on forklifts.
My job, he explained, would be to assemble data on auto parts the factory produced and send it to somewhere in Mexico. As he started to speed through the details, I interrupted him, asking, "Can I ask you why I'll be doing this? You must already have this data in your database."
He nodded. "That is true," he said. "The reason is so customs can see what's coming in and we can see what's going out."
I interrupted again. "I'm registering this stuff so that it can be made elsewhere? So I'm helping to get all of these people fired?"
He nodded again.
Not Your Fault They're Closing the Factory
"I'm sorry that's the case," I said. "I didn't know I was coming in to help get rid of all these people. I hope there isn't ill will toward me. I just want you to know I'm not proud to be putting people put of work—I didn't know that's what I was here for."
He tried to put a kinder face on the situation. "No one's going to blame you—I certainly don't blame you, but I appreciate you said that to me and you understand what the situation is. No one is going to dislike you—it's not your fault they're closing the factory."
He smiled for the first time, and it was clear he felt more comfortable around me then. "It's not a pleasant situation for anyone, but it's good you understand it from day one," he said. He told me another temp, a young woman, would be arriving at 9 a.m. and would be my immediate supervisor, though he would check in occasionally. Then he left the room.
I thought about the fact that I'd be helping put people out of work. But I felt that he had a point—I didn't make the decision, the people who run the company did. I told myself that if I didn't do this job, someone else would—and it paid well ($16 an hour and time-and-a-half for overtime). Still, registering products to be made elsewhere and putting good people out of work wasn't what I expected I'd be doing as a recent college grad. I assumed they were good people—I learned I was right later.
Acknowledging the Lie
Over the next several days my supervisor showed me around the plant. On one jaunt we ran into a machine calibrator who asked me who I was and what I was doing. I tried to answer his questions as best I could, explaining I thought I'd be working at the factory until the end of March or early April.
When we got back to our office, my supervisor surprised me. "You shouldn't really be telling people what you do here because some people don't know when the factory is going to be closing and when they're going to be losing their jobs," she said
"So you want me to lie?" I asked.
"It's not lying—it's just not telling them everything," she said.
"Listen, I'll lie if you tell me to lie. But you should acknowledge that not telling the whole story is a kind of lying," I said.
I wanted to know more about what prompted the company to move the factory to Mexico. I learned the announcement had been made about a year ago; similar companies also had a global presence, and a few of Standard's main competitors were doing better. My impression, and I'm no expert, was that the company had tried to hold on to its New York City plant for too long. Operating costs were too high. Its motive seemed right to me—to stay in business, it needed to move.
Proud of Their Success
As the factory's closing date neared, the number of last-day events—parties is the wrong word—increased. These events weren't catered. Workers made the food themselves and brought it in: salads, rice and beans, fried fish. I could see the solidarity and kindness in the interactions of the people, mostly Hispanic women who had been there for decades.
Toward the end of my stint, I attended a formal lunch for about 70 longtime employees. It included a speech from someone I assumed was in upper management. He sketched the history of the factory. It had been here for 70-odd years. People had told the company it couldn't have a major manufacturing location in New York City—the costs were too high. He told the audience they had proved the naysayers wrong. He told them it was the global costs of labor that had made the closing necessary. He said that a year ago, when the decision to close the factory was announced, a typical business pundit would have said productivity would go down, but it had actually gone up. He told the audience to be proud of this.
Chasing Lower Labor Costs
I reflected on what he'd said about productivity. If it had gone up, then what were the criteria for sending the factory to Mexico? I saw highly trained, highly experienced people sitting to the right of me. How much would it cost to train workers in Reynosa? How many costly molding devices would be broken? Would this closing really help? I thought about the drawbacks of committing to a strategy that means chasing the lowest labor costs around the world.
In my last few days, I heard Standard had sold the building and was going to rent the top floors for its corporate division and other brass. I made my good-byes and wrapped up my tasks. A week after my last day, the factory ceased its production operations.
I'm not one of the workers who has been making distributor cap components in a factory basement for the past 25 years. I don't have to go look for another job. I took the temp job knowing it would come to an end and I'd move on. The job got me involved with a company dealing with globalization. It allowed me to get an unfamiliar taste of what happens when a factory moves to Mexico. I'm not proud of it.