TIJUANA, Mexico - Yoshiro Takemoto walks swiftly through thePanasonic factory, s
ID: 1234983 • Letter: T
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TIJUANA, Mexico - Yoshiro Takemoto walks swiftly through thePanasonic factory, showing off the improvements being made toproduce the latest generation of flat-panel digitaltelevisions.
New automated equipment for wiring electronic circuit boardshums away. Japanese-style work teams collaborate to assemble plasmascreens. Mr. Takemoto, the president of Panasonic's North Americantelevision manufacturing operations, tracks all his components onintricate charts covering the walls of a conference room.
After a three-year slump, the plant is hiring again. Retooled ata cost of $10 million, the factory created 400 jobs this year toprepare for Christmas sales.
Across Tijuana's vast industrial parks, the export assemblyplants known as maquiladoras are thriving, posting giant "helpwanted" signs. In June, an industry group estimated that theTijuana plants needed to fill some 15,000 jobs. The governmentannounced recently that it expected $300 million of investments inTijuana this year that would mean another 15,000 jobs; the boom isbeing repeated all along the border.
It is a sharp change. Three years ago, as American consumerdemand shriveled and plants shut or moved to China, maquiladoraslost 280,000 jobs. In Tijuana, more than 60,000 factory jobsevaporated. But this year the tide is turning. Maquiladora exportsrose 22.4 percent in June, driving a more general export surge forMexico. The nation expects economic growth of 4 percent this year,the strongest since 2000.
"We have lived through the hard times," said CésarLópez Ramos, the president of the Tijuana maquiladoraassociation. "We have made it, so we are less vulnerable."
Investment poured into Mexico after the North American FreeTrade Agreement took hold in 1994. Companies came to take advantageof cheap labor and duty-free access to the United States. But by2001, the maquiladora industry was shocked to discover howvulnerable it was to the swings of the American economy and toAsian competition.
But analysts say that is not the only factor in the maquiladorarecovery. Stung by Chinese gains, many executives have decided thatMexico must sell efficiency, flexible engineering and quickturnaround time, not just cheap labor.
"Those who stayed have had to restructure to diminish costs andraise competitiveness," said Jorge Carrillo, a researcher at theCollege of the Northern Border in Tijuana.
"They had to reduce the work force and do more with less," Mr.Carrillo said. "Factors like technology; innovation and deliveryare all critical. Now the ones who stayed are starting togrow."
The shift is clear at the Panasonic plant, where the move todigital television sets with large flat-panel display screens isdriving the recovery.
Mr. Takemoto has been on the job for three months with one taskfrom Panasonic's parent company, the Matsushita Electric IndustrialCompany. "I was assigned to make this factory able to manufactureflat-panel digital TV's that are competitive globally," he said. Hesummed up his goal simply: "We will win against China."
The new sets are revitalizing Tijuana's industry, which has beenshipping televisions to the United States since Sony, Sanyo andPanasonic established assembly plants in the 1980's. Samsungfollowed in 1995.
Questions:
1. Using the modelfor purely competitive firm, explain why many maquiladoras wereshut down recently.
2. In the maquilasector, many plants that were shut down or moved to China a fewyears are now reopened. What makes these plants competitivetoday?
3. The observationon maquiladoras suggests that many firms can easily relocate theirmanufacturing plants in different countries. What does this implyabout the competitiveness of the world market for manufacturingworkers?
Explanation / Answer
1. In the case of a perfectly competitive industry, firms competeby price, because the goods are standardized and consumers haveperfect information as to where they can purchase the cheapestproducts. Firms unable to compete, such as the many maquiladorasmentioned in the article, are forced to close down in asurvival-of-the-fittest contest. 2. The newly competitive plants have upgraded their technology inorder to produce goods that are not as easily produced in Chinasimply because of the abundance of cheap labor. They'recapitalizing on the concept of competitive advantage, where a moredeveloped country produces goods that require better trained humancapital or more capital investments in technology. 3. The world market for manufacturing workers is high competitive,as the supply of unskilled or semi-unskilled labor is abundant allover the globe. Firms are able to offer low wages because they havemuch higher bargaining powers than do the laborers.
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