How a Texas Border Town Boosts U.S. Manufacturing

Brownsville, Texas, first caught manufacturers' attention with the creation of the North American Free Trade Agreement. Located where the Rio Grande and Gulf of Mexico meet, Brownsville and its sister city Matamoros, Mexico, offer a valuable geographic advantage.

"We set up shop here 26 years ago. In compliance with laws related to maquiladoras, we manufacture in the U.S. and assemble in Mexico," says Martin Kennedy, managing director of the Americas for Trico, which manufactures nearly 40 million windshield wipers per year for 24 global automakers. "That has been a winning strategy all of these years."

Trico was one of several manufacturers that moved to the area to take advantage of the location, There are now 120 maquiladoras, including companies such as Dura Automotive Systems and Delphi Automotive.

Global trends, such as increasing labor costs in China, continue to affect manufacturers' decision to produce in this area. "Six years ago we set up a plant in China as a potential source of providing components due to the low costs," Kennedy explains.

"However, changes in China and the increased cost of transportation altered that equation. It just didn't make sense from a cost perspective, so we instead supply local customers in China and co ntinue to manufacture here in Brownsville."

Diversifying the Manufacturing Base

"The support at all government levels has been key to our contnued success."
-- G.S. Tan, CEO Keppel AmFELS

"Ten years ago our base of automotive suppliers stopped expanding," explains Gilberto Salinas, executive vice president, of the Brownsville Economic Development Council. The city's leaders decided to target large-sized multinational companies given its international presence, Salinas says.

"Now we are bursting at the seams," he says. The company's top 10 planned projects total $5.5 billion with upwards of 4,000 jobs being created., Salinas says.

In the past year, the Brownsville area has attracted ?$67 million in investment, including a new plant operated by CK Technologies, a trucking part manufacturer. Matamoros also saw a $49 million investment by Hauppauge, N.Y.-based Spellman High Voltage.

The location of the city and its easy access to the global market is why Keppel AmFELS chose Brownsville. "As a division of Keppel Corp., the world's biggest builder of oil platforms, we were looking for a U.S. port location to service the mobile drilling rigs and platforms," says G.S. Tan, CEO, Keppel AmFELS. "It was a good decision as we continue to grow. The support at all government levels has been key to our continued success."

Government support also was a significant factor in CK Technologies' decision to locate in Brownsville. "We did an exhaustive search, and the ease of doing business with the state and local governments was a determining factor," says Mark Miller, CEO, CK Technologies. The company also received $1.3 million in incentives through cash, tax abatements and training dollars.

The U.S. location provides other benefits. PIASA, a Monterrey, Mexico-based company that produces natural preservatives and ingredients used by companies such as KFC and Domino's Pizza, utilizes the regulatory advantage.

"For companies selling products to both the U.S. and Mexico, having a location in the U.S. greatly reduces the time necessary for FDA approval," says Ricardo Madrigal, PIASA's vice president of engineering and research and development.

Brownsville also helps the company leverage global sales, Madrigal says. "We want to expand to the Caribbean and this is a good port for expansion," he says.

In addition, Trico has benefited from the region's steady workforce, Kennedy says. "We have found that given the small-town, family-oriented characteristic of Brownsville, our workforce is very loyal," he says. "People want to stay here and that translates to very low turnover for us."

The nature of this town was also a factor in CK Technologies decision to locate here as opposed to the many other choices it had. "We felt that we could make a difference to the lives of the people in this town and this is keeping with who we are as a company," explained Mark Miller, CEO, CK Technologies.