Thursday, October 6, 2011
Southern California was once a critical manufacturing center for the defense and aerospace industry. But as costs have risen, much of that production has now moved right across the border to Tijuana.
Border Business Part 2
TIJUANA, Mexico Hundreds of buyers and suppliers from the United States, Mexico and Europe gathered in August inside an old airplane hangar in Tijuana. They shuffled around the vast space — filled with samples of advanced electronic equipment — wearing dark suits and with briefcases in hand.
With its high-profile speakers and 3D simulation stations, the second annual Baja Aero Space Show did a pretty good job of putting the Mexican state of Baja California on the map — at least when it comes to aerospace manufacturing.
“People’s perceptions about what cross-border manufacturing, what maquiladoras are like, is still based upon what was happening in the 70s and maybe the 80s,” said Kenn Morris, president of Crossborder Group, a San Diego-based market research firm.
“The fact is that a lot of the factories, whether they produce medical devices, aerospace, or electronics; they are built in such a way these days, and they’re managed in such a way, that they can be put anywhere on the planet,” Morris said. “But they’re coming to Mexico.”
According to Mexico’s Trade Ministry, more than 50 aerospace and defense companies have started operations in Baja in the last five to 10 years. Most of them are American and manufacture parts for companies like Honeywell, Goodrich and Gulfstream.
They produce a wide variety of items, from electronic components, air conditioning systems, and cable harnesses, to steel bolts for commercial and military aircraft. Their advantage is the proximity to the United States and to Western ports that ship to the Asian markets. They have access to a large, high-tech workforce in Tijuana, made up of engineers, technicians and software developers.
But the main reason the companies come to Baja is simple: The cost of that highly skilled labor is low — about one-third of what it is in the U.S.
Currently, the Baja aerospace industry employs more than 10,000 machine operators and technicians. And that number has been growing steadily since 2007, when Mexico dropped import duties on aeronautics components. According to Mexico’s Trade Ministry, between 2007 and 2008, the amount of aerospace companies with operations in the Mexican border state grew by 50 percent.
COBHAM, a global company producing advance defense systems with some operations in San Diego, made the move to Tijuana in 1997.
On a recent day, about 50 workers dressed in royal blue overalls sat in groups of five. They were looking into microscopes and holding tiny tweezers as they assembled parts. Their building, a nondescript brick structure, is just 15 miles south of the U.S.-Mexico border.
"Over here we do the tuning and testing of the product," said plant manager Javier Urquizo, as he gave a brief tour of the plant. "After we finalize the assembly, we need to tweak around some components to get the electrical responses required on the different frequencies.”
Urquizo said he could not say exactly what those parts were made for. "That is classified information," he said.
The manager did explain that the company must regularly apply for a special license from the U.S. Department of State in order to build those parts in Mexico. It is to ensure the raw materials, parts and technology do not end up in the wrong hands. Once they receive those licenses, COBHAM is authorized to ship materials from the U.S. to Mexico and then back again to the U.S. as a final product.
Teresa Jesus Rio Ramos is a production supervisor at COBHAM and has worked at the factory for 15 years. The aerospace and defense industry in Tijuana offers the most stable and best paying jobs in this city, she said. Her salary is about $1,800 U.S. a month.
"I think our company is pretty financially stable," said Rio Ramos. "I don’t have to worry from month-to-month whether I will have a job or not. But that is not true for all maquilas in Tijuana. People get fired and rehired elsewhere all the time.”
There are still 130,000 people across California employed by aerospace suppliers, which is down some 40 percent since the mid-1990s. Since then, it has remained static. On the other hand, Mexico’s aerospace industry has been adding many new jobs in recent years.
"The private sector has to tell government and academia what our needs are and how they can help," said Riley, pointing out that the real challenge will be finding enough people to fill future jobs as the industry continues to grow.
"We need to get involved, especially in aerospace, because some of these things take five, 10, 15 years for people and industry to really get good at it,” he said.
As a long-time champion of a cross-border aerospace industry, Riley has always argued that people should start looking at Baja’s success in manufacturing as a benefit to San Diego. A lot of those same workers who are earning money in Tijuana are bringing products into the U.S. for packaging and for sale, he said. They are also spending money on products and services on the U.S. side of border.