AIN Staff

Eighteen years ago, Presidential candidate Ross Perot referred to “a giant sucking sound” of U.S. jobs moving south to Mexico. According to union officials in Wichita, “the air capital of the world,” that sucking sound is as real today as it was in 1992, and Mexico appears to remain the destination of choice.
The movement of manufacturing jobs from the U.S. began in earnest in the 1980s when the automobile industry began looking for ways to reduce costs and “discovered” Mexico. More recently, Mexico has discovered the aerospace industry and worked at luring jobs south.
By 2006, the Mexican government had agreed to a zero-percent import duty on aerospace components and in 2007 signed a bilateral aviation safety agreement. The move allows aerospace companies in Mexico to certify aerospace designs and components in compliance with FAA regulatory standards.
Mexican universities soon detected the market shift, and today local universities in five of the country’s aerospace manufacturing centers are developing programs to train students for jobs in that sector. Just last year the National Aeronautic University, which opened in Querétaro in 2007, broke ground for a new campus.
Some Mexican students are even coming north. Twenty students from Mexico are now enrolled in New Mexico State University’s aerospace program in Las Cruces. Whether they will stay in the U.S. to work in the aerospace industry or return to Mexico remains to be seen.
A 2010 lecture available on the Slideshare Web site offers an interesting insight into Mexico’s lure for North American manufacturers. In “Aerospace Clusters: Choosing the Right Location,” writer and business executive Miguel Horcasitas points out: • Since 2005, the number of aerospace jobs in Mexico has increased from 10,000 to 27,000, and the value of aerospace exports has jumped from $1.3 billion to $3.1 billion. • Of 196 U.S. and Canadian companies with facilities in 16 of the 31 states in Mexico, 80 percent are performing manufacturing operations. • Of 11 aerospace Fortune 500 companies with international operations, seven have operations in Mexico. • Fifteen U.S. and Canadian companies have 500 or more employees in major aerospace clusters through Mexico–eight in Baja (Mexicali), two in Chihuahua, three in Querétaro, one in Coahuila and one in Tamauipas. • Other U.S. companies have facilities in the cities of Aguascallentes, Guerrero, Jalisco, Nueva León, Puebla, San Luis Potosi, Sonora (Guaymas), Yucatan and Zacatecas.
According to Real Gervais, vice president of operations for Bombardier’s Mexico Manufacturing Centre, “Mexico’s vision is to do the same thing [for the aviation industry] it did with the auto industry.” And he noted that there is the potential to do just that.
While the lower wages Mexican workers receive compared with their U.S. and Canadian counterparts are a major factor in the decision to move jobs to Mexico, there is also the matter of tax incentives offered at local and national levels and lower overhead costs. In addition, some places, such as northern Mexico City, provide a “union-free” environment.
Mexico Promotes Itself At last year’s Paris airshow and this year’s Farnborough airshow, Mexico promoted its aerospace industry, both through industry and government representatives.
At Farnborough in July, ProMexico, a government agency promoting trade and investment in that country, highlighted the benefits of building factories and maintenance workshops, as well as research-and-development offices.
Eduardo Medina Mora, ambassador from Mexico to the UK, acknowledged that training new workers in Mexico is more expensive than it is north of the border, primarily because of the language difference. However, he noted this is a more significant problem with Mexico’s aerospace competitor China, starting with the difficulty in finding expatriates who are fluent in Chinese. And while wages might be lower in China, the cost of shipping raw materials there and finished products back offsets that advantage. 
“Shipping to and from Mexico is easier and faster because it’s over land rather than by sea,” said Cessna CEO Jack Pelton, quoted in a Bloomberg news story by Thomas Black and Carlos Manuel Rodriguez.
However, Gervais pointed out that when the auto industry began moving jobs to Mexico, industry and workers in Mexico “did not want to be at the low end of the supply chain, seen as cheap labor only.” In 2009, some 300,000 Mexicans were working in the automotive industry, not only as cheap labor but also as engineers and executives, and they were delivering not only parts but finished products. “They want to apply the same recipe to understanding the aircraft business: developing training programs, facilitating the integration in Mexico and, in the future, building complete airplanes.”
Major Players Moving South Bombardier, which opened its first Mexican facility in 2006, is now in the processing of building a third facility at Querétaro. The Canadian OEM has approximately 29,000 employees worldwide, including 17,750 in Canada and 5,000 in the U.S. (primarily in Wichita). It currently employs 1,000 at Querétaro. Its Mexico facilities produce the Challenger 850 mid-fuselage, Challenger 605/850 and CRJ700/900/1000 rudders, the Challenger 605 vertical stabilizer, the Global Express XRS and Global 5000 aft fuselage assemblies, and Q400 rudders, elevators and horizontal stabilizer.
In addition, facilities in Mexico will also be manufacturing the all-composite fuselage, wings and electrical harnesses for the new Learjet 85. Bombardier pointed out, however, that the Learjet 85 work “is not work that has been transferred from another site and the Querétaro site was selected because it made the most sense from both a business and program perspective.” The components made in Mexico will be shipped to the Learjet plant in Wichita for final assembly, interior completion, flight testing and delivery.
According to a spokesman, “We are committed to our long-term presence in Mexico; [however,] beyond the commercial activities that are already public, no decision has been made to expand our presence.”
It is that commitment that angers union workers. “I would not be proud of the fact that I’m moving work to a place where my workers don’t make enough to keep food on their tables,” Bombardier machinists union president David Chartrand told AIN. In Mexico, aerospace workers can expect a starting wage of about $2.50 to $3.00 an hour. The same worker in the U.S. will earn approximately $8.00. According to Bombardier, its Mexican employees receive health insurance benefits paid for by the company.
Bombardier is just one of the U.S. and Canadian business aviation manufacturers looking south to cut costs in a market that is increasingly global in nature, and in an economy that appears to be resisting every effort to effect a recovery.
In Mexicali, Honeywell has produced heat exchangers and electromechanical components and operates a research and technology center. At its Chihuahua manufacturing operation, it produces discs, impellers, gears, shafts, nozzles and duct assemblies. And in Monterrey, it develops and selects vendors for the aerospace business and provides support to “every business segment of Honeywell’s commercial air transport and regional jet business.”
Rockwell Collins builds cabin systems at its 100,000-sq-ft Mexicali facility, including communications and entertainment systems. The facility employs 1,000 and delivers an average of 1,700 individual finished units a day. 
Textron International Mexico builds cabins, electrical harnesses and major and minor structural assemblies for the Bell 429 in Mexico. The facility in Chihuahua opened in May and currently employs about 126 people. At full production, it has the capacity to employ some 350.
In May last year, President Felipe Calderón Hinojosa participated in the inauguration of Cessna Aircraft plants 2 and 3 in Chihuahua, in which Cessna has a $21 million investment, according to American Industries, one of Mexico’s leading manufacturing facilitators.
Cessna employs some 550 workers in Chihuahua producing wire harnesses, metal structures, composite components and composite fabrication for Cessna, and the company might add as many as 200 to 300 more jobs over the next year. 
Gulfstream Aerospace added a facility in Mexicali in 1986 as part of the Long Beach completion and refurbishment acquisition and that center continues to support Gulfstream.
There are now 1,100 people at the facility, according to a Gulfstream spokesman, producing electrical harnesses, sheet metal fabrication and machine work for various Gulfstream entities.
However, the spokesman said, “We have never transferred jobs out of the U.S. to Mexico or anywhere else, and it is not our intention to do so. It’s not even under consideration.”
Unions Battle To Keep Jobs In July <a href="?q=node/25635">the machinists union in Wichita raised the alarm</a> that Hawker Beechcraft was planning to move jobs to Mexico, creating a furor among some 2,200 union workers at the OEM’s facilities there. Barely a month later, the same union described an initial contract offering from Cessna, which employs approximately 2,400 workers in Wichita, as “ugly” and noted that “moving jobs to Mexico is also part of the mix.”
It isn’t a lot different in the Canadian aerospace enclave of Montreal, where some 100 IAM aerospace workers picketed in front of a hotel housing a Mexican aviation industry trade mission on August 26.
According to Dave Chartrand, union representative for the International Association of Machinists and Aerospace Workers, a symposium by the Mexican delegation “is a clear example of what’s wrong with our industry today.”
Chartrand emphasized, however, that the machinist union protest “was not against our company or any specific company, but against the Mexican government coming here.”
“While Mexico comes into our backyard to promote its own aerospace industry–inviting Canadian aerospace firms to move their facilities south of the border–our governments sit on their hands and do nothing.
“I have nothing against the Mexicans trying to promote their industry, but not at our expense,” he added.
Union members in Montreal are hoping they will meet with the sort of success their counterparts in Wichita have achieved in at least two instances. 
In June, the machinists union in Wichita reached an agreement with Spirit AeroSystems that, among other concessions, calls for Spirit to retain manufacturing jobs for the 10-year life of the contract. 
And on July 30, Kansas Governor Mark Parkinson announced that Bombardier’s Learjet business division in Wichita agreed to keep its Learjet 85 business jet assembly work in that city in exchange for $27 million in bond financing from the state. Learjet also agreed not to move operations out of state as part of the exchange. &nbsp;&nbsp; &nbsp;
The money will be used for modifications at the site, including a new exterior paint facility, customer delivery center, production flight-test facility and expanded assembly hangars.
Learjet assembly, outfitting, exterior paint, test flight and delivery in Wichita will support 600 jobs, of which approximately 300 will be new positions. 
The issue of jobs going south has also, unsurprisingly, found its way into the political mid-term races. In Kansas, Democratic Congressional candidate Raj Goyle has accused Republican candidate Mike Pompeo of supporting the North American Free Trade Agreement, which he claimed has cost Kansas more than 8,000 jobs to Canada and Mexico. Even his Republican primary opponent, Wink Hartman, has taken issue with Pompeo’s alleged previous decision to move jobs to Mexico.
Pompeo was CEO of Thayer Aerospace in 1997 when the Wichita company moved some equipment from Wichita to a new plant in Mexicali in 1997. Pompeo said he had done as his customer required in setting up Nex-Tech in Mexico, which he said was part of an effort that included creation of dozens of new jobs in Wichita.
Meanwhile, Mexico isn’t the only competition for Wichita jobs; another challenge comes from closer to home. Louisiana has made it clear it would welcome aviation to that state, and Machinists District 70 president Steve Rooney told union members at a rally that the state has tripled its offer to Hawker Beechcraft.
Union representatives at the rally also said contract negotiations with Cessna were not going well, and if Cessna does not come up with something better than its last offer, the negotiating committee will authorize a strike. (The union accepted the contract by default when it could not get a two-thirds majority to authorize a strike. See page 10.)
Executives at both Cessna and Hawker Beechcraft have not stated specifically that the companies are considering Mexico or Louisiana as possible sites to relocate work. But they have also made it clear that moving work out of Wichita is an alternative.
In a July 20 letter to some 6,000 employees, Hawker Beechcraft president Bill Boisture said an adjustment of the cost structure was necessary. He added, “To make these adjustments, the company is developing a spectrum of possibilities for the size and functions of our business in all our locations, [including] exploring other locations, both within and outside the U.S.”
Faced with a lingering recession and uncertainty about when the business aviation industry might feel a recovery, it is unlikely U.S. and Canadian manufacturers will ignore the advantages of moving jobs, either to other parts of the U.S. or to Mexico, or even to China.
At the same time, unions are faced with hard choices: either accept reduced contracts or watch jobs move south.
Bombardier defended its decisions, noting that its presence in Mexico “gives us the advantage of increasing our competitiveness and having a better understanding of the Latin American market.
“Whether in business aircraft, commercial aircraft or amphibious aircraft, we see the globalization of our industry as positive and we have been progressively extending our business presence around the world for a number of years now, either directly or through partnerships.
“This has allowed us to increase our know-how by taking advantage of local knowledge, improve our competitiveness by reducing costs, and better understand local needs,” said the company.

Bizav manufacturing jobs continue to move south

Eighteen years ago, Presidential candidate Ross Perot referred to “a giant sucking sound” of U.S.

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