Boon or Bust? : Why a U.S. Furniture-Maker Moved New Operations South

TIJUANA —  Ike Munoz, a corporate manager at the vanguard of a new industrial age along the U.S.-Mexico border, struts confidently through assembly lines of seamstresses and upholsterers, carpenters and painters, all busily fashioning chairs, sofas and tables for U.S. consumers.

“This business would never have been able to survive in the United States,” said Munoz, a self-assured U.S. Navy veteran who favors open-collar shirts and blue jeans while overseeing a massive furniture-manufacturing operation here. “This is our opportunity to be competitive. We just couldn’t compete any more in the United States.”

Munoz, whose family emigrated from Mexico to California when he was a youngster, is now general manager of Douglas Furniture of California’s sprawling Tijuana operations, which are centered in two adjoining industrial complexes in the city’s Otay Mesa area, east of downtown.

Douglas, based in Redondo Beach, built its subsidiary on tracts scooped out of a hillside above a residential neighborhood called El Ejido Chilpancingo, many of whose residents work at Douglas and other foreign-owned maquiladoras on the hillside and mesa to the north.

Douglas now employs about 850 workers here, making it one of the largest of Tijuana’s more than 500 maquiladoras , along with Japanese electronics giants Matsushita, Sanyo and Sony, and U.S. manufacturers such as toy producer Mattel.

If the United States and Mexico sign a free-trade accord, many observers view so-called “offshore” production facilities, such as the Douglas Furniture plant, as a kind of precursor of the future, for better or worse.

The company is among several dozen furniture makers from Southern California that, in recent years, have joined the exodus of manufacturers to Tijuana and other Mexican border cities.

Lower wages and benefits are not the only attractions to relocating in Mexico. (Total labor costs in Mexico amount to anywhere from one-quarter to one-eighth of similar expenses north of the border, experts say.) In addition, wood furniture manufacturers, whose standard treatment processes emit toxic paint coatings and solvents, face less stringent enforcement of environmental regulations--particularly air pollution guidelines--and occupational safety standards in Mexico.

From management’s perspective, Mexico represents an opportunity to be competitive, especially with Far East manufacturers, and remain geographically close to the Southern California market.

“There are people in our industry, particularly in wood furniture, who are finding it virtually impossible to manufacture in Los Angeles,” said Douglas Vice President Harold Applebaum, who specifically cited stringent Los Angeles-area air standards, promulgated by the South Coast Air Quality Management District and the U.S. Environmental Protection Agency.

Organized labor representatives and other critics view the motivations of furniture firms differently. Union officials maintain that executives of Douglas and other companies that moved south were eager to reap huge profits on low-cost labor, wanted to escape U.S. worker-safety regulations, and were insufficiently creative to integrate more environmentally sound technologies, such as water-based coatings.

“I would say that Douglas was lacking in foresight and was downright cheap,” said Peter Olney, an organizer for Local 1010, International Union of Electronic, Electrical, Salaried, Machine & Furniture Workers, AFL-CIO. The Huntington Park-based union chapter represents about 1,200 Los Angeles-area furniture workers, not including Douglas workers.

“The companies that are crying about regulations in Southern California today are the same type of companies who were crying about child-labor laws 70 years ago,” Olney said.

Douglas, long one of the nation’s leading dining-room furniture manufacturers, has plans to add a third Tijuana manufacturing site on a lot adjoining its property, Munoz said, eventually increasing its Mexican payroll to about 1,200. The move would give the company about half a million square feet of production space--roughly equivalent to more than 10 U.S. football fields. Douglas began moving operations to Tijuana almost six years ago.

Douglas’ Tijuana plants are identical to sister facilities in Southern California and Chicago, Munoz said, dismissing suggestions that any kind of substandard methods are employed. “I would say this plant is better than what we have in Los Angeles,” he said while escorting a visitor through one of the cavernous production buildings, abuzz with workers sewing and sawing, painting and finishing.

“We’ve got as good a pollution (abatement) system here as anywhere,” he said, pointing to a masked worker using a spray gun to apply finish to slabs of wood moving on a hanging conveyor. A web of filters absorbed excess coatings. “If the system weren’t top-notch, there would be paint all over the place,” added Munoz, whose bilingualism and affinity with Mexico has helped make him a point man for the firm’s Mexican enterprise.

Munoz, an unabashed champion of the maquiladora concept, scoffs at frequent complaints that the industry offers few advancement avenues for mid-level Mexican employees. Douglas, in fact, employs about 2-dozen supervisors in Tijuana, all Mexican nationals, said Munoz, who began working for the furniture maker about 25 years ago after Navy service during the Vietnam War.

“This has been a great opportunity for me,” said Carlos Garcia, 25, who in less than five years has risen from a line worker at Douglas to a position overseeing more than 50 employees. (Supervisors here earn $200-$250 a week, a third of what their U.S. counterparts take home.)

Nationwide, Mexican authorities say, the percentage of skilled technical employees in the maquiladora industry has been rising, from 8% of the total work force in 1975 to 12% last year.

Interviews with Douglas’ assembly line workers--usually migrants from elsewhere in Mexico, who say they typically earn $40-$60 for a 48-hour week--indicate that Garcia’s perception of opportunity is not shared by all. Nonetheless, most workers say they are better off with jobs in the maquiladoras.

“You look at these people. They’re a lot happier than the workers are in Los Angeles,” said Munoz, a 48-year-old father of four who lives in Chula Vista and commutes south of the border each day. “We’re trying to build a company where people feel comfortable.”

Nonetheless, he and others acknowledge that setting up shop in Mexico involves obvious difficulties: high turnover, a paucity of skilled workers, infrastructure problems such as substandard electrical, telephone and sewage services--not to mention language barriers and trans-border transportation tie-ups. “You can’t just come down here expecting to pay low wages and be successful,” Munoz cautioned.

Douglas is not at all typical, considering the great diversity of the maquiladora industry.

Most border-area plants are considerably smaller, averaging about 230 employees nationwide, less than one-third as many as Douglas, government figures show. Furniture plants like Douglas and other wood-products concerns account for less than 6% of maquiladora employment in Mexico, ranking fifth among industry sectors nationwide. Production of electronic and electric components accounts for 36% of jobs; vehicle parts, 22%; assorted manufacturing, 21%, and textiles, 9%.