SONORA MAQUILA UNION BETWEEN A ROCK AND A HARD

UNCLAS SECTION 01 OF 04 MEXICO 006255 SIPDIS SIPDIS DEPT FOR DRL/AWH AND ILCSR, WHA/MEX AND USDOL FOR ILAB E.O. 12958: N/A TAGS: ELAB ECON SOCI PINS SNAR PHUM MX SUBJECT: SONORA MAQUILA UNION BETWEEN A ROCK AND A HARD PLACE MEXICO 00006255 001.2 OF 004 ¶1. SUMMARY: In the north western Mexican state of Sonora a union affiliated with the country,s largest labor federation, the CTM (Confederation of Mexican Workers) finds itself in a very precarious spot. The newly elected leadership of this CTM union is struggling to balance the expectations of 14,000 workers against the need to maintain good labor relations with some 40 different manufacturing companies grouped together in an industrial complex run by &The Offshore Group8 based in Tucson, Arizona. For nearly 18 years the independent union which previously represented the workers and the Offshore Group had an obliging relationship that comfortably suited them but which did little to promote the interests of the workers. After winning a bitterly fought struggle to become the union of record the new CTM leadership is under pressure from the workers to right the wrongs of 18 years of neglect. At the same time, the new leaders are fully aware that in today,s globalized world the manufacturers operating in the Sonora industrial complex can easily relocate to another site or another country in reaction to what they might perceive as inhospitable labor conditions. The Offshore Group appears to be a responsible employer but seems genuinely unaware of many of the concerns of its workforce. As a US-based company, if The Offshore Group could be encouraged to develop and publish a code of conduct, this would undoubtedly help guide its labor relations in Mexico. END SUMMARY THE COMPANY -------------- ¶2. During the better part of nearly two decades the Arizona based Maquiladora (foreign owned assembly plant),&The Offshore Group8 has operated a highly successful industrial complex in the north western Mexican state of Sonora. The large complex, known locally as &Maquilas Teta Kawi8, is physically located in the adjoining cities of Empalme and Guaymas. As of early December 2007 Maquilas Teta Kawi employed some 14,000 workers in these two cities. In addition to its main operations in Sonora &The Offshore Group8 (TOG) also has a smaller manufacturing facility in Saltillo, Coahuila. The idea behind TOG,s Mexico operations is to provide a range of outsourced manufacturing support services. Its motto is &You manufacture ( We do the rest!8 ¶3. The Offshore Group handles the non-core legal and administrative aspects of doing business in Mexico. TOG sells its services by assuring its client firms that they will control 100 percent of their manufacturing processes and quality assurance functions. Because of the range of services that TOG offers its clients via its &Shelter Program8 which establishes a direct contract with the parent company in Arizona, it claims they are able to quickly initiate operations in Mexico without actually establishing a legal presence here, and without making many of the expenditures typically associated with such start-ups. TOG claims its manufacturers operate in Mexico while always remaining within the framework of the US legal system. ¶4. TOG,s Empalme and Guaymas operations currently have 43 manufacturing clients, the vast majority of which are US owned companies. The services TOG provides includes such things as human resources management (hiring and firing) and administration, on-site worker medical care, payroll and benefit management, accounting and payroll management, logistics and facilities services, procurement and environmental services as well as assistance in the areas of government and community affairs (read negotiating with unions). TOG,s Maquiladora Teta Kawi operations has partnered with medical device, aerospace, automotive, optics, electronics and other manufacturers to enable them to establish and maintain production facilities in Mexico at reduced cost and risk. Some of the companies operating at the Maquiladora Teta Kawi facilities include SpectraLink Corp., EE Technologies Inc., Cooper Standard Automotive, Ping Golf Bags, Medtronic, Delphi, Tyco Electronics, The Phoenix Company of Chicago, Avalon Laboratories, Inc., Parker Aerospace, Sargent Aerospace and many others. MEXICO 00006255 002.2 OF 004 THE UNION -------------- ¶5. The union representing the TOG workforce is known informally as the Maquilas Teta Kawi Workers Union. Officially its name is, the &Union of Workers and General Employees in the Maquiladora, Shipping and Manufacturing Industries8. The union is affiliated with the Confederation of Mexican Workers (CTM) which is Mexico,s largest labor federation and is roughly equivalent to the AFL-CIO. Up until about a year ago an independent union had been the bargaining agent of record for workers employed by TOG almost since the company started its operation in Mexico some 18 years ago. For most of that time this independent union and the management of TOG had an accommodating relationship that comfortably suited the company and provided financial incentives to the then union but which did little to either protect or promote the interests of the workers. ¶6. Over time worker resentment against the complacency of its local union leadership in dealing with TOG grew to the point where a dissident group formed to challenge the long-time leaders for control of the union. Ultimately the dissents won control of the union when they received the support of the state-level offices of the CTM. The state-level offices of the CTM helped the dissidents obtain a secret ballot election for control of the union (a rarity in SIPDIS Mexico) that was closely monitored by federal labor authorities. The new leadership of the Maquilas Teta Kawi Workers Union has been in place for approximately a year. It has been an adjustment for both them and for TOG. THE SITUATION -------------- ¶7. The new head of the Maquilas Teta Kawi Workers Union, Carlos Enrique Gomez Cota, is in his early thirties and most of the union delegates (the equivalent of union shop stewards) who support him are not any older. Gomez has a degree in labor law but lacks extensive experience practicing law; many of the union delegates have not completed high school. Their collective labor union experience is relatively limited but they struck Mission Mexico,s Labor Counselor as dedicated individuals doing their best to improve a bad situation. Specifically they are attempting to change the behavior of company management which has done as it pleased for the past 18 years and to moderate the expectations of thousands of union members whose grievances have gone unaddressed for nearly two decades. ¶8. With some 14,000 employees the Maquilas Teta Kawi industrial complex in Empalme, Sonora is in many respects a small city with problems similar to those of a small municipality. These problems include such things as crime, sexual harassment, drug trafficking and abuse, the need for adequate day care, class conflicts as well as a full range of differing political and economic agendas. Added to all of this is the difficulty of changing an 18 year relationship with TOG management and its client manufacturing companies. One union delegate compared the labor organization,s relationship with TOG as being similar to that of a parent who did nothing to teach their child morals for the first 18 years of its life and then suddenly expecting that child to know the difference between (labor) right and wrong. RECURRING PROBLEMS AT MAQUILAS TETA KAWI -------------- ¶9. One of the long term problems at Maquilas Teta Kawi is unclear lines of authority. TOG sells itself by offering its clients human resources services while leaving them free to manufacture their products. In practice this means that TOG hires, but , according to many of the workers, both Maquilas Teta Kawi and its client manufacturers can fire. This perceived dual authority to fire employees is probably not correct but it is what many workers believe. Because of this misperception, if an employee has a problem that it wants to discuss with management they are often unsure who they should go. There is a real fear, probably unfounded, that if they MEXICO 00006255 003.2 OF 004 go to the wrong one they may be fired for neglecting their responsibility to the other. This has created an atmosphere in which the workers do not know who to trust and as such they are reluctant to trust any level of management. ¶10. For example, the union delegates, who worked for different client manufacturers, told Mission Labor Counselor of pervasive drug trafficking within the industrial complex. They are all aware of the dimensions of the problem and would like to do something about it. Unfortunately they are unsure of whom to trust and so far have preferred to avoid confronting this situation. ¶11. Another long term problem related to hiring and firing is the practice of client manufacturers essentially trading workers from one to another. Officially, TOG does the hiring and firing of all workers and as such, in theory, they all have the same employer regardless of the client manufacturers where they may actually work. However, whenever a client manufacturer has to shut down for retooling or changes a product line it often fires large numbers of workers. The workers do not receive the severance pay legally mandated under Mexican because they are promised they will be rehired by another client manufacturer if they go quietly. ¶12. In the overwhelming majority of these cases the workers are ultimately rehired by someone but they know that if the first manufacturer does not recommend them to a second manufacturer they will not be rehired. Also, whenever a manufacturer offers fired workers a job they rehire them as brand new employees; this means the worker comes in as an entry level employee with entry-level wages. These traded workers have no possibility of ever gaining seniority or the higher wages that come with it. Moreover, should they work for Maquilas Teta Kawi long enough to reach retirement the amounts of their pensions under Mexico,s social security/retirement system will be determined by the level of their wages when actually employed. Since TOG has been in Mexico for almost 18 years there are now workers employed by the company who will soon face the prospect of &retiring8 on a pension that will be insufficient to meet even their most basic needs. Mission Labor Counselor personally spoke with a woman who after 16 years of working at the Maquilas Teta Kawi complex had never been employed by the same employer for more that two years. WAGES: A MUTUAL PROBLEM -------------- ¶13. Another long term problem for the TOG, the union, and the workers, is the question of wages. Mission Labor Counselor talked to a woman who worked seven days a week, endured 12 hour shifts for at least three of those days, and still earned the equivalent of less than USD 400.00 a month. The woman was not required to work such a grueling schedule nor was she required to work 12 hour shifts. The woman, who is a single parent, volunteered to work these long hours in order to earn the overtime pay that enabled her to pay school fees for her two high school age children. The situation of this woman was somewhat extreme but not unique because of the low base salaries paid to TOG workers. ¶14. Without exception the workers at Maquilas Teta Kawi believe that TOG should be paying better wages and they expect the union to get these higher wages for them. An average wage for a worker with six years of employment with the various TOG client manufacturers is roughly equivalent to USD 13.00 per day. This is more than three times the daily Mexican minimum wage but it is not a salary that would allow Maquilas Teta Kawi Workers Union members to one day join the ranks of Mexico,s middle class. That said, the wages are nevertheless considered competitive for this and many other regions of Mexico. ¶15. The union would very much like to get higher wages for its members and, interesting, it seems that TOG management is relatively sympathetic to this goal. However, TOG,s money comes from its client manufacturers and not all of them are prepared to pay higher wages. The client manufacturers know that they can pay cheaper wages in other parts of the world than those they are currently paying in Mexico. The union MEXICO 00006255 004.2 OF 004 and TOG are well aware that client manufacturers can quickly pick up and move their operations elsewhere and this point was clearly underscored for them in early December when several manufacturers who jointly employ 2,000 workers informed them that they would be moving their operations to another country. The Maquilas Teta Kawi Workers Union and TOG are working cooperatively together to attract new manufacturers to replace these departing jobs as soon as possible. COMMENT -------------- ¶16. Although The Offshore Group has clearly gotten its way on any labor issue of substance for most of the past 18 years it does not appear to be an irresponsible employer. There is no doubt that TOG pays more than the minimum wage and provided such benefits as on site emergency medical care for workers and free day care services for the high number of single parents that it employs. That said, until recently TOG seemed genuinely unaware of many of the concerns of its workforce. It has gracefully accepted that it has to deal with a new more proactive union leadership and seems to be adapting well to the new reality. The examples above indicate that TOG still has a long way to go but it appears to be open to change. If the company could be encouraged to develop, publish and fully implement a code of conduct this would undoubtedly help guide its labor relations in Mexico. ¶17. This message was cleared by AmConsul Hermosillo. Visit Mexico City's Classified Web Site at http://www.state.sgov.gov/p/wha/mexicocity and the North American Partnership Blog at http://www.intelink.gov/communities/state/nap / BASSETT