QUERETARO, Mexico—(April 26, 2002) Michelin North America Inc. is re-establishing tire production at a Mexican plant it closed 20 months ago, saying the business environment has changed significantly enough since then to allow it to operate the plant profitably.
The announcement, made April 18 at a ceremony attended by Mexican President Vicente Fox, angered local labor leaders, who blasted the company for its union-busting tactics and took Mr. Fox to task for supporting efforts to end collective bargaining.
Michelin closed the Queretaro plant—then operating as Uniroyal S.A. de C.V.—in August 2000, saying it was the “least cost-competitive” source of Uniroyal tires in North America despite repeated cost-cutting and productivity improvement programs during the 1990s.
At the ceremony held to mark the launch of a new holding company—AutoPartes Internacionales de Queretaro—to operate the revived plant, Jim Micali, president and chairman of Michelin North America, praised Mexico's industrial development policies, the availability of skilled workers, a labor agreement that “creates a new level of teamwork,” and positive responses by federal, state and local authorities to Michelin's commitment.
The tire maker has invested about $3 million to restore the 25-year-old, 500,000-sq.-ft. Queretaro plant to active manufacturing status. It will start production of BFGoodrich-brand radial car and P-metric light truck tires in May with a workforce of about 100.
Michelin said employment should grow to more than 400 by year-end. A company spokeswoman noted that women make up about 25 percent of the current work force at the plant, which she said is unusual in Mexico.
The plant will have a capacity of 6,000 tires a day when it's fully staffed. The output will be exported as well as distributed locally. Since the Queretaro plant closed, Michelin has sourced BFG brand tires for Mexico from other North American plants. At that time, the plant employed 500.
While a new labor agreement—with the National Union of Workers of Community, Commercial Activities and Services for the Mexican Republic—played a role in Michelin's decision to restart production, it's not the only factor, the spokeswoman said. The company did not provide any details comparing the new labor agreement with the older one.
By starting a new holding to oversee production in Queretaro, she said, Michelin was able to restart operations with a clean sheet of paper, to be able to set productivity targets at levels that will make the plant competitive. At the time the plant was closed, Michelin was able to make tires in the U.S. and ship them to Mexico at a lower cost than making them domestically, the spokeswoman said.
Jesus Torres, secretary general of the National Revolutionary Syndicate of Hulera Euzkadi union, called Mr. Fox's appearance at the grand opening “cynical” and “shameless,” in light of the nearly 800 workers who lost their jobs when Michelin closed Queretaro and and a plant in Tacuba operated by Uniroyal.
Michelin later decided to lease Tacuba to the independent Mexican tire maker Tornel S.A., which is now making Uniroyal brand bias-ply tires there for Michelin. In the meantime, Tornel has bought the Tacuba plant, the Michelin spokeswoman said.
Both Queretaro and Tacuba were built by Uniroyal Inc., which later merged its tire operations with those of B.F. Goodrich Co. to create Uniroyal-Goodrich Tire Co. Michelin bought UGTC in 1988.
The new venture reinforces the company's commitment to the Mexican market and strengthens its presence in the country, Mr. Micali said.
Mexico is a growing market for the tire industry, the spokeswoman said, “and the market is right for us to be there right now.”
Underscoring the problems tire makers have had in Mexico are two other closings there in the past year.
Goodyear closed its Mexico City plant (1,559 employees, 20,000 units per day) in April 2001, citing high costs and a downturn in the Mexican economy.
Continental Tire North America Inc. shut down the Guadalajara plant of its Compania Hulera Euzkadi S.A. de C.V. subsidiary in January, eliminating 1,164 hourly and salaried jobs.
In addition to labor and general economic questions, a strong peso made it difficult for Mexican tire firms to export tires, while at the same time making the domestic market attractive to imports, according to Francisco Martha, president of the Mexican National Rubber Chamber.