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Cablegate: Sonora Maquila Union Between a Rock and a Hard

VZCZCXRO8283
RR RUEHCD RUEHGD RUEHHM RUEHHO RUEHJO RUEHMC RUEHNG RUEHNL RUEHPOD
RUEHRD RUEHRS RUEHTM
DE RUEHME #6255/01 3551757
ZNR UUUUU ZZH
R 211757Z DEC 07
FM AMEMBASSY MEXICO
TO RUEHHO/AMCONSUL HERMOSILLO 3851
RUEHC/SECSTATE WASHDC 9993
RUEHC/DEPT OF LABOR WASHDC
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUEHXI/LABOR COLLECTIVE
RHMFIUU/CDR USSOUTHCOM MIAMI FL
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAHLA/DEPT OF HOMELAND SECURITY
RHEHNSC/NSC WASHDC

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

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