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Carrillo, J. y Lara A. "Mexican Maquiladoras: New Capabilities Coordination and the Emergence of New Generation of Companies”. Innovation and Economic Development. Vol. 7, no.2/3, April-August, Australia, 2005, pp. 256-273

Mexican Maquiladoras. New Capabilities of Coordination and the

Emergence of New Generation of Companies.

Jorge Carrillo Full Time Researcher,

El Colegio de la Frontera Norte, Tijuana, Mexico

carrillo@colef.mx

and

Arturo Lara Professor/ Researcher

Department of Economic Production and of the Master’s in Economics and Technological Change Management,

Metropolitan Autonomous University, Xochimilco Mexico City, Mexico

alara@cueyatl.uam.mx.

ABSTRACT The assembly industry for export in Latin-American countries such as Mexico (called

‘maquiladoras’ or ‘in-bond industry’) is in the biggest crossroad in its history. On one hand, it is observed a great competitiveness of the auto parts and electronics plants and the diffusion of more complexity, technology, organization and skills (companies of second and third generation) and even of new aspects of centralized coordination that they represent qualitative changes. But on the other hand the maquiladoras are in the most serious crisis in their history that has negative impacted to the employment, to the regional activity where they are located and to the reduction of foreign direct investment. Even though maquiladora manufacturing is once again picking up – largely due to economic recovery in the United States – there is a growing concern among strategic local actors, that two year’s crisis could be the beginning of a long term decline in manufacturing along the border due to Mexico’s relatively high cost of labor when compared to that of countries like China. In this context the analysis of different types of companies according with their productive, organizational and labor complexity (generations) it is a good analytical instrument since the companies are being affected in a different way by the economic recession and particularly by the new competitors. This article is structured in five sections. Section one an two presents the importance of maquiladora in the case of Mexico and its current international debate. Section three shows a description of the three generations. Section fourth is a critical

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discussion of generation of companies. Finally, the section five presents the proposal of a new forth generation of companies, based on centralized coordination of different activities. The research results are based on a case study at Delphi Corporation located in Juarez-Mexico

KEYWORDS Maquiladoras, upgrading, capabilities, generation of companies, Delphi Corporation

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1. Introduction1

In the current debate around the process of technology

globalization, we can identify two groups, with two different positions.

In the first group, Patel (1995) maintains that there is no systematic

evidence to suggest greater technological globalization. After analyzing

the patenting activities of the world’s 686 largest companies, Patel and

Pavitt (1992) confirm that technology production by these companies is

a clear case of “non-globalization.” Based on varying quantitative

measurements, other authors agree with these results, specifically

Howells (1990) and Dorrenbacher and Wortman (1991), who use

databases of the number of personnel assigned to Research and

Development (R&D), and Patel and Pavitt (1992) and Cantwell (1995),

who analyze patenting activities.

There is a second group of studies —based on analysis of cases of

companies, industries and countries— that maintains, to the contrary,

that R&D activities are indeed going through a globalization process.

These results indicate that R&D activities are being carried out in host

countries in relation to adapting products and processes to the

conditions of each local market and corresponding legislation (Pearce

and Singh, 1992). This research also indicates that there is a set of

political factors influencing companies in their decisions to locate

activities in countries other than the home country (Hakanson, 1992).

Casson (1991) and Dunning (1992) maintain that transnational

corporations generally establish R&D laboratories as a consequence of

direct foreign investment. Cantwell analyzes the patenting activity of

857 companies during the 1920-1990 period, and discovers an important

finding: that it is no longer possible to accept the existence of a single

1 This article is part of a broader research project: ‘Technological learning and industrial upgrading: prospects for generating technological capabilities in maquiliadora companies along the northern border’, CONACYT no. 35947 & 31902.

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center, when the globalization process indicates the existence of

multiple centers (Cantwell, 1995).

Our research can be included in this second group of studies. And

from this perspective, we have posed the following questions: What

were the factors and conditions that encouraged the globalization of

Delphi’s productive activities in Mexico? How did the creation of a

technical center in Mexico affect the interaction among the divisions and

establishments located in that country? To what degree were the forms

of control and monitoring in the various divisions and establishments

located in Mexico modified with the creation of a research and

development center in that country?. Before answer these questions, we

need to address the content of our case, the maquiladora industry and

their debate.

2. The Maquiladora Industry

The assembly industry for export in Latin-American countries such as Mexico

(called ‘maquiladoras’ or ‘in-bond industry’) is in the biggest crossroad in its history.

On one hand, it is observed a great competitiveness of the auto parts and electronics

plants and the diffusion of more complexity, technology, organization and skills

(companies of second and third generation) (Carrillo and Hualde, 1998) and even of

new aspects of centralized coordination that they represent qualitative changes

(Urostegui, 2002; Lara and Carrillo, 2003). But on the other hand the maquiladoras are

in the most serious crisis in their history that has negative impacted to the employment,

to the regional activity where they are located and to the reduction of foreign direct

investment (FDI). The paradox of the new millennium can be enunciated in the

following way: the biggest modernization and industrial upgrading of their plants,

organizations and human resources, it is limited by structural loss of their competitive

advantages. The follow questions are being studied at every business forum and

academic conference held in Mexico and in the southwest of the US in connection with

the maquiladora: Has the maquiladora model been exhausted? Is it undergoing

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transformation? Is there room for active policies? There can be no doubt that the

backdrop for all these doubts and strategies to be formulated is the emergence of a new

dragon: China.

Although the aim of this work is not to answer such broad questions, nor to resolve

the initial paradox, it does have a direct bearing in this discussion given that it outlines

a particular phenomenon: the upgrading of companies, the diffusion of the third

generation (‘knowledge intensive plants’) and the possible emergence of a new, fourth

generation of maquiladora company, as we will see latter.

The existence of knowledge intensive plants (or third generation) has been received

recognition among business people as well as academics. The modernization of the

export maquiladora industry is now an irrefutable reality and has come a long way

from the old stereotypes that characterized it in the 60s & 70s, namely monotonous

work carried out by women, low levels of technology, simple assembly activities and

the lack of local linkages. But this process really means that the maquiladora industry

have evolved and now are more third generation type? Clearly not. On the contrary,

this is a dynamic process, not only subject to different types of external and internal

pressures, but also success and failure cases. Not all companies evolve and nor do they

do so in the same way. This process means that organizations change, learn,

restructured, relocate and even die. Some, unfortunately very few, however, evolve

quickly towards the incorporation of new activities based on coordination and

information technologies, giving rise to what we shall refer to as “Maquiladora

Company of fourth generation”2.

A maquiladora is a factory or assembly plant operated in Mexico under preferential

2 The risks of typologies do not lie in the typology itself but rather in its use. One of the most common problems is that the point of departure of a research project can become its point of arrival. The most harmful aspect of any short-sighted use of typologies is, without doubt, that they reduce the explanation to a description of the distance of the reality regarding the typical – ideal model. The explanation vanishes and gives way to the “classification” of elements of reality that can “fit” in each category. The main purpose typology is to build up a set of circumstances. Typologies are not our point of arrival but rather, primarily, a discriminating mechanism that economizes the process of abstraction. They help characterize the interaction between different variables. They are a cognitive instrument that makes it possible to reduce the complexity of reality, and not an anchor that immobilizes research. They perform a transitory role.

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tariff programs established in 1965 by the U.S. and Mexican governments to encourage

the development of industry in both countries. Mexico allows materials to be used in

maquilas to enter duty-free, provided the finished product and then immediately

exported out of Mexico. The U.S. in turn charges these products a much lower tariff

than products from other countries. The maquiladora industry (or in-bond industry) is

the group of plants (2811 with 1.14 millions of employees in octobre 2004) located in

Mexico that belongs to this specific export program and is structured by 39 economic

activities (from simple goods to high technology products). The process is driven by

transnational corporations (TNCs). However 73% of maquiladora plants are

electronics, auto parts and apparels (and concentrated 60% of maquila employment).

Similar programs to the maquila can be found in the Export Processing Zones

(EPZ) around the world. In order to understand the importance that has acquired this

type of offshore production let see their dynamism: in 1975 there were 79 EPZ in 39

countries with 750 thousand employees (Frobel, et al. 1981); while in the beginnings of

the present millennium it is calculated that they existed around 3000 EPZ in 102

countries employing around of 30 million people (Mercier, 2003), although more than

70% are in China (Yin, 2003). In Mexico as well as in others countries the term

maquila refers to a concept for labor intensive assembly products for export, and their

importance and debated has been related, on one hand, with a success model of

industrialization, and on the other, with their structural limitations (Stallings and Péres,

2000).

In order to illustrate the importance of the concept of maquiladora generations and

to describe a new phase in this industry, we have divided this document into three

sections. The first gives a brief description of the maquiladora generations along with

the criticisms that have been formulated in this regard. The second puts forward a new,

fourth generation maquiladora company, while in the third and last section the case of

the Delphi corporation is outlined as an example of the birth of this new generation. For

that purpose we made in-depth interviews with 15 directors and managers during three

years (2000-2003), and we had many guide company visits during that time. Finally,

some conclusions and lines of research are provided. The concept of generations and

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their typology is conceived like an “ideal typical model” – in the sense of Weber (1944)

– which makes it possible to identify and organize groups of companies from the vast

and heterogeneous set of maquiladoras. What are the basic technological and

organizational configurations that would allow us to recognize different groups of

maquiladora companies? The typology of the first, second and third “generations” of

maquiladoras creates a variety of stylized images; this typology discriminates and, at

the same time, guides the research project.

3. The evolution of maquiladoras and the ‘generations’ of companies

Several studies have shown that the maquiladora in Mexico is constituted by a

heterogeneous group of economic activities with different complexity, productive level

and local integration. From this knowledge and with the purpose to de-construct the

myth that shows ‘the maquila is purely traditional assembly with low skill people and

low wages’, in 1995 has been developed a typology in order to understand the firm

trajectories in the export industrialization model in the north of Mexico (Alonso and

Carrillo, 1996; Carrillo and Hualde, 1998).

The analysis of the maquilas it was useful at that time because allowed to

contrast them with the companies arisen under the import substitution model. But since

practically most of the big firms in Mexico are nowadays exporters and the frontiers

between maquila and non-maquila plants are more and more diffuse (Dussel, 2003), the

concept of 'maquila' is losing its explanatory power quickly. Consequently, to classify

all manufacture plants under the same productive, labor, technological or ecological

type is a task with very limited scope.3

The typologies of maquiladora companies have been a source of empirical

research and public policy strategies. During the eighties were recognized two big

segments of assembly plants: traditional and modern (Mertens and Palomares, 1988),

old and new (Gereffi, 1991), low and high technology (González-Aréchiga, Ramírez,

3 See for example Boyer and Freyssenet (2002) and UNCTAD (2003) for different firm trajectories in

similar contexts.

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and Suárez-Villa, 1989). In the nineties three types of firms were found: according to

their productive pattern Wilson (1992) found ‘traditional assembly’, ‘manufacture’ and

‘posfordists’. Meanwhile Alonso and Carrillo (1996) and Carrillo and Hualde (1998)

based on firm trajectory found three maquila generations. This last typology was built

on the use of labor force: the first generation is based on intensive manual work (like

fordist type); the second is based on the rationalization at work (like lean production

type) and, the third generation is based on intensive use of knowledge. For generation it

was understood an ideal type of companies with common features and with a tendency

to prevail during a specific period. However, mix diversity was defined from the

beginning as a central aspect: different generations of companies co-exist in the same

period, and even in the interior of the same firm (hybridization process). Therefore the

concept of generations do not referred to monolithic and static stages that substituted

one generation from another. On the contrary it referred the mix of generations in the

same period but with prevalence of a one generation; not in quantitative terms (number

of plants for example) but in terms of governance and the driven of value chain.

Therefore generation is referred to capabilities development in a learning process.

Therefore the central hypothesis of this document is that a new type, or fourth

generation, of maquiladora company is being created 4. The characteristics of first,

second and third generations of maquiladoras are on Table 1.

Table 1 Typology based on generation of companies

a. First generation companies.

The source of competitiveness lies in the relatively low salaries and the intensification of labor. The reference period in which they emerge and develop: 1965-1981, from the beginning of the Border Industrialization Program to one year before the economic crisis (1981). Foreign traditional assembly plants, unrelated, from the point of view of production, from national industry; with scarce technology, high dependence on the decisions of the corporate and main customers, and essentially based on intensive manual labor performed by young women with rigid job positions and activities that are repetitive and monotonous (Carrillo and Hualde, 1998).

b. Second generation companies. Period: 1982-1994 with the start of the quest for quality up to the signing of the North American Free Trade Agreement (NAFTA). Plants with capital originating from a greater range of sources aimed at

4 Also known as kereitzu relations and supply chain management.

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manufacturing, with incipient development of local suppliers of components and direct and indirect services; with a higher level of technology and automation; with a gradual albeit timid process of autonomy in corporate decisions and, centrally, with a large trend towards the streamlining of production and work (Carrillo and Hualde, 1998).

More men are incorporated, including qualified workers, technicians and engineers. Work is performed in teams under the functional flexibility scheme (greater responsibility, commitment and involvement). The new activities of engineers make it possible to acquire knowledge and the local and regional professional degree courses are being consolidated. The main concern is to improve quality standards and cut delivery times and rework sources, delays, dead time and inventory. Competitiveness comprises of a combination of quality, delivery time, unit costs and labor flexibility. Companies capable of giving a rapid response to the increasing fluctuation in demand (Carrilo and Hualde, 1998). The management bodies are run increasingly by Mexicans (Contreras, 2000).

c. Third generation companies.

Plants with a greater presence of TNCs focusing on design, research and development. (Carrillo and Hualde, 1998) Vertical integration, both intra-company or kereitzu and inter-company (ties with domestic suppliers and trade between maquiladoras), emerges (Koido, 2003; Lara 1998). Clusters are formed around technical centers, assembly plants, suppliers of components, indirect suppliers such as machining or plastic injection workshops, and suppliers of services (Carrillo and Hualde, 2002; Lara 2002). A greater level of technology and prototype development. There is a substantial increase in autonomy in decision taking. Highly skilled work, with high levels of responsibility and discretion that privileges knowledge and creativity in both design and manufacture. In other words, engineering and technological capabilities, the relative salaries of skilled staff, along with communications and the proximity of assembly and manufacturing plants (Carrillo and Hualde, 1998; Lara and Carrillo, 2003). Top level management becomes increasingly Mexicanized, although there is still a mixture of foreigners and nationals (Contreras, 2000; Dutrenit and Vera-Cruz, 2002).

The generations of maquiladora companies in Mexico are associated not only

with important stages in industrial-business development on a global level but also with

the formulation of strategies and policies in domestic industry:

The assembly stage (“maquila or assembly in Mexico”) corresponds either to

the new worldwide division of labor or production sharing (the life cycle of the

product) in which the main policy was to attract foreign direct investment to the

northern border area to create jobs en masse. (Frobel, et al. 1981).

The manufacturing stage (“made in Mexico”), for its part, with a strong element

of streamlining of work through new organizational models, corresponds to the

installation of the “Japanese system of production” generally known as ‘lean

production’ 5 . Industrial policy focuses on continuing to attract foreign direct

5 Without taking into consideration the extensive literature that criticized the dominance of a unique and universal model of production (see the synthesis of an extensive research program: Boyer and Freyssenet, 2001)

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investment but now requiring that it be more capital, technology and training intensive.

The process of certifying quality among companies is encouraged and the arrival and

operation of companies is facilitated and simplified.

The design stage (“created in Mexico”) corresponds to a worldwide trend

towards concentrating design and development activities close to manufacturing, in

order to synchronize manufacturing and research, as well as to cut the times and costs

of work on new products. The development of engineering involves the generation of

greater added value locally, improving the productive capabilities of companies and

strengthening links with universities, technological schools and medium and higher

education technical centers (Villavicencio, 2004). Industrial policy was notable for its

absence and for being tied to the commercial agreements undertaken in the NAFTA. In

particular, efforts were made to stimulate industrial clusters through inter-company

integration and the development of local suppliers. Of particular relevance was the

initiative to promote and consolidate local linkages committees between business

associations and centers of education.

Industrial policy has progressed in parallel with industrial development moving

from an industrialization strategy based on replacing imports to encouraging exports

after manufacturing in Mexico, in order to achieve ‘world class manufacture’, and

finally the development of products in Mexico through design and development.

d. Fourth generation companies (“coordination from Mexico”)

Once the assembly and manufacturing capabilities have been developed, and

following the concentration of research, development and design activities, it is

necessary to develop non-material activities that make it possible to coordinate a huge

range of activities, agents and units of production connected throughout Mexico and the

NAFTA region. In other words, companies need to perform the functions of corporate.

Yannick Lung points out that, in the case of the automobile industry, logistics take on a

strategic status with the aim of ensuring coordination along the chain and synchronicity

in modular production, thereby giving rise to a new central role for transnational

subsidiaries (Lung, 2002).

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The technological and organizational progress of the automobile and auto parts

sector is characterized by: a) an accelerated trend towards concentration through

mergers, acquisitions and alliances; this marks an increase in crossed operations

(Chanaron, 2001); b) the rapid emergence of new technologies for automobiles –

electronics, shipping, new materials, etc. – affecting the levels of Research and

Development and opening the door to new potential players; c) the new industrial

conceptions and methods for final assembly, in particular the modularization and

expanded use of mechanical subsystems and platforms (motors and transmissions)

(Fujimoto and Akira. 2001); d) the new paradigms and philosophies regarding

managerial modes in the field of strategy outline the re-concentration of key roles

through outsourcing (Langlois, 2002); e) the new philosophy in the sharing of

responsibilities in the value chain, from the conception to the final assembly, and

notably co-makership. All of this sustains the two hypotheses of the switch from a

mono-polar scheme to a centre-polar one based on growth and technological

coordination (Lara and Carrillo, 2003)6.

In this context of evolution of productive capabilities resulting from the

coordination of innovation, transfer and learning, as well as the installation of regional

systems of innovation, the coordination of activities through information technology

becomes a priority. It is now the turn of policies encouraging the coordination of

activities at plants and centers in Mexico and throughout the NAFTA region (such as

‘supply chain management’ and ‘local governance’), as well as promoting own brands.

The stage of coordinating multiple activities based on information technology

corresponds to the production of algorithms and software in order to support intra-

company flows of information and supply chain management.

The coordination of manufacturing, research, purchasing and services becomes

the central axis of the new, fourth generation of maquiladora company. The Delphi’

technical center located in Juarez (known as MTC - Mexican Technical Center)

coordinates around 57 plants and almost 75,000 employees in Mexico, as well as an

6 ‘Galactic system’ for Chanaron, (2001).

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extensive supply chain. Similar activities are performed in the conglomerates of TNCs,

as is the case of Lear with 22 plants and almost 31,000 employees in Mexico; Yazaki

with 14 establishments and more than 23,000 employees; Thomson with 6 plants and

17,425 employees; Alcoa Fujikura with 9 establishments and almost 14,000 employees;

Sony with 7 plants and almost 13,500 employees; or Philips with 12 plants and more

than 9,000 employees.7 These figures speak for themselves regarding the magnitude of

these conglomerates in Mexico. Non-maquiladora companies, such as the VW

automobile assembly plant (with the support of technology from Telmex –Mexican

telecommunication monopoly), recently announced their new role in ‘supply chain

management’ coordination (in other words, the link in real time between the assembly

plant, distributors throughout the NAFTA region and suppliers). This does not just

involve the phenomenon of trans-nationalization of industrial activity (maquiladora

and non-maquiladora), which characterizes the model of industrialization for export,

but also the broad coordinating functions taken on by affiliates in Mexican territory and

which comprise an extensive network of establishments both within and outside the

company .

Companies like Delphi MTC in Juarez are no longer just a R&D center, but

have now become a coordination center for different activities of Delphi in Mexico, as

we shall now see.

4. Diffusion of ‘generations of maquiladoras’ and their criticisms

Since the mid-1980s, a process of technological, organizational and labor

modernization has been under way in the maquila (Mertens and Palomares, 1988)

leading to the existence of different levels of maquiladora plants (Gereffi, 1991;

Wilson, 1992). In the early 1990s, a representative survey conducted among the

maquila plants of three main cities in Mexico in the electronics, automobile and apparel 7 100 Top Maquilas www.maquilaportal.com These companies rank highly among the 500 biggest companies in Latin America. In the year 2000, Lear held 61st place, Sony 78th and Thomson 114th (AméricaEconomía no. 213, August 22, 2001).

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sectors found that almost 20% of plants already had high technology, a complex

organization and highly skilled staff (or second generation companies)8 (Carrillo and

Ramírez, 1990). More recent evidence reveals that, since the late 1990s, an industrial

upgrading process has emerged among the main maquiladora sectors, such as

electronics (Lara, 1998; Carrillo and Hualde, 2002; Hualde, 2001), auto parts (Lara

2002; Lara and Carrillo, 2003) and apparels (Bair and Gereffi, 2001).

Although the concept of the third generations of maquiladoras was initially

developed in the mid-1990s (Carrillo and Hualde, 1998) and different authors have

used it, there has been no formal process to measure the development of the maquilas

in terms of generations. A recent survey found that, out of a sample of 297 electronics

and auto parts companies in the northern region of Mexico, the development of the

third generation companies accounted for 27% (Gerber and Carrillo, 2003).

In spite of that the concept of generations was developed to understand trajectories

of learning of the companies and in that sense its use has been qualitative, exist a

generalized concern in order to know to what extend the third generation assembly

plants has been diffuse.

The importance to know the diffusion and the scope of the industrial upgrading

process in the maquila sector is vital for many reasons: a) it allows to forecast the

export industry in Mexico in a context of dynamic globalization and intense pressure to

reduce costs, times and inventories; b) it allows to understand the strengths and

weaknesses of the maquila trajectory in underdeveloped countries; c) it allows to know

the strategic position of the companies in front of the global competitors such as China

and India; , and d) it allows to elaborated specific public policies according to their

technological, organizational and skill capabilities acquired by the companies.

The criticism

Criticisms of the third generation are formulated mainly by some labor

sociologists.9 They conceived that the maquila is a form of labor exploitation, with

8 The remaining 80% are first generation companies. 9 The best example is De la Garza, 2004.

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very limited modernization process and do not constitute a true export industry. The

two main criticisms in this respect are the following:

i) The third generation is based only on one plant (the Delphi Technical

Center) and its statistical representation is therefore more than limited (it

does not account for even 1% of the maquiladora plants).

ii) The concept of generation is evolutionary (the third generation is better than

the preceding generations) and linear (one generation follows on from the

other), which means that one generation replaces another (when we talk

about the third generation, it is being assumed that it is predominant in the

maquiladora industry).

The first criticism deserves two comments: there is a relatively extensive

diffusion of third generation plants. Other technical centers have been opened in

Mexico by TNCs such as Valeo, Thomson, Philps and Samsung, along with advanced

engineering and design departments in many other companies. A recent survey of

electronics and auto parts maquiladoras in Tijuana and Juarez10 revealed that 26.4%

of companies have design or design engineering departments or centers. This figure

increases substantially if we just take the auto parts sector as reference, in which the

corresponding figure stood at 35.9% (Colef, 2002). If the concept is used in a more

general manner, in other words not as a technical center, but as companies that use high

levels of technology, embark on innovative processes and have highly skilled labor,

then one-third of maquiladoras in the electronics and automobile sectors – which are

the most dynamic and dispose of the most technology – can be understood as third

generation, according to the aforementioned survey.

The second comment is that generations are not a quantitative issue but rather a

qualitative one. It is not magnitude that reflect is relevance, but the significance of this

evolution and the potentials that involves. Why is its statistical representation not

relevant? Because the maquiladora industry is structurally heterogeneous (Carrillo,

10 295 questionnaires were applied to maquiladora plant managers. See the project’s website: www.maquiladoras.info

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1993) even within the production of the same product – such as TV sets or harnesses

(Lara, 1998; 2002; Koido, 2003; Urióstegui Araujo, 2002).11

In other words, it is not possible to expect technical centers to develop in the

furniture industry like in the electronics sector, for instance, nor for the clothing

industry to have the same level of engineering as the automobile sector. Furthermore,

the multiplying effect caused by a company of this size like the MTC in Juarez cannot

be summed up in terms of its 2000 employees. The spillovers associated with the

setting up of companies such as VW in Puebla, Ford in Hermosillo, Nissan in

Aguascalientes, GM in Ramos Arizpe, IBM in Jalisco, Thomson in Juarez, Matsuchita

in Tijuana (and the scheduled plans of Toyota in this city)12 cannot be explained by

statistical representation in the number of plants or employment in Mexican

manufacturing, or by representation in each segment. Each of these examples has

triggered regional economic growth, a source of learning for thousands of workers, and

the generation of business for local and external parties, along with the subsequent

impact on added value and the flow of foreign currency. The case of Delphi-Mexico is

not unique as we find other examples such as Samsung Display-Tijuana or Ford-

Hermosillo, which are set up with the most advanced technology and the best

organization available on the market, even technologies and forms of organization that

were still not being used in the countries of origin (Shaiken, 1990; Carrillo and Hualde,

1998; Koido, 2003).

Also, the construction of a model from a company is nothing new in social

sciences: the paradigms of Ford, GM, Toyota and Dell gave way to the formulation of

productive models that have been emulated extensively around the globe and has been

analyzed by a huge range of disciplines and research perspectives13.

The second criticism, that of linear evolution and the replacement of

generations, is not relevant as, in the first place, we do not use the concept of

11 In other works, we have argued that the concept of maquiladoras is no longer of use for reflecting what takes place in companies or to show that it is a model of development or industrialization (Alegría, Alonso and Carrillo, 1998; Alonso, Carrillo and Contreras, 2001). 12 There are a number of cases in other countries, such as Intel in Costa Rica (see Mortimore, 2003; UNCTAD, 2003). 13 In the case of Mexico, the company Telmex has been used to create a model for unions.

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“evolution” in its teleological sense but rather in the framework of the theories of

economic evolution of Darwin and Lamark (Nelson and Winter, 1982; Hodgson

2001)14.

Even though one generation is superior to the previous one – in terms of

technology, added value, knowledge and organizational complexity – it should be

pointed out that all the generations are ‘necessary’ in a cluster as they provide greater

territorial competitive advantages 15 . There is no clear break between different

generations. Different generations coexist not only in the same period, but also could

exist in the same firm.

Finally, the proposal of recognizing a new type of company, and name it like

“type x or y” and not as a ‘generation’ does not seem to provide any substance to the

analysis16. It is necessary to find a concept that reflects, as well as possible, the

changes taking place in a segment of companies and, in particular, a concept that is able

to transmit and communicate these modifications17.

Two positive aspects of the criticisms made are, on the one hand, that it is often

forgotten that many of the maquiladora plants have not gone beyond the first

generation and are much more vulnerable to competition from countries such as China

or Central America. In fact the highest proportion of plants still first generation. And,

on the other hand, the trend among companies is not always towards upgrading18.

Another criticism mentioned that the maquiladora should not be considered like

custom tariff regime. This brings a great confusion. When academics and politicians

speak in worldwide forums about the EPZ, such as the maquiladora model in fact they

are referring to an archetype model (for instance a model of production, labor or 14 For example, companies that, in certain stages of the labor process, replace capital with work. 15 This is not just about privileging the third generation and forgetting about the others (which for example would lead to the statement that first generation maquilas are migrating to China), this would be a serious mistake. For example, see Lara, et al; 2003. 16 The construction of a typology is not merely a question of semantics. 17 The scientific findings need to be shared and understood by a public sector than the industrial sector itself, especially by the actors involved in the matter. 18 There are companies that do not progress and lose competitiveness, and some even regress or simply vanish. As a result of the survey mentioned beforehand, it was found that the primary factor for 42.1% of plants is price competitiveness (Colef, 2002). In connection with the typology formulated and its measurement, it turned out that 18% of the plants were classified as ‘first generation’ (Carrillo and Gomis, 2003).

17

technology) but not to a specific firm neither to a specific national export program. In

strict terms the maquiladora industry are manufacture plants of a Mexican government

program, the ‘Maquiladora Decree’, which allows them tax incentives for temporary

imports. But there are others export programs for export in Mexico (Pitex, NAFTA,

Prosec). Authors such as Dussel (2003) has pointed out that the export industry based

on temporary imports constituted the industrialization model in many Latin-American

countries, and not one single specific program (such as Maquiladora Program). For

example, Delphi, the global auto part supplier leader, operated in 2000 64 plants in

Mexico, 60% under the Maquila program and 40% under Pitex program. But Delphi

plants are too similar, depending on the product. So is analytical nonsense try to

distinguish a productive or a labor model based on specific programs for export.

In other words, when we want to settle down to the maquila like an archetype

model, in fact this term should not be used. Instead is much useful to use company’s

exporters, or industries of temporary imports. For that reason, when we use the

maquiladora concept as a tariff regime we are not suggesting that the maquila

shouldn’t be analyzed through the systemic productive models (Fujimoto, 1999; Boyer

and Freysenet, 2002) or socio-technical configurations (De la Garza, 2001). But rather

the maquiladora concept itself doesn't help in this sense, on the contrary, it hinders the

analysis for the enormous heterogeneity contained, and because neither all maquilas are

similar nor many similar plants are not registered under the Maquiladora Program.

Partly the new investment of Toyota in Tijuana (TMBC) preferred to take other export

program rather than Maquila Program, since a great stereotype exists when people

referred to a maquila plant, and usually brings strong negative aspects.

The agenda from this perspective does not lie in discussing the significance of

words: a fully defined typology puts an end to its evolutionary potential or, on the

contrary, a typology that contains notions lacking accuracy or solidity encourage the

refining of the heuristic instrument and the enriching of the quality of the questions.

However, intellectually productive typologies are not those that help us explain

dichotomies - or alternatives for the precedence of A or B or C-, but rather help explain

the history of the maquiladora companies as: stochastic, non linear processes, that are

18

highly sensitive to initial conditions and which follow accumulative causation

processes – feedback – and which, as a result, are highly subject to inertia and where

the actors, characterized by limited rationality resolve and, ultimately, choose paths of

development on the basis of their past history (Nelson and Winter, 1982; Hodgson

2001) 19.

The typology of generations is recorded in the methodological tradition that

conceives labor as an instrument. This typology may be used to provide explanations:

it is from here that the intellectual productiveness and relevance arise, along with the

need to complement the research program that opens up the typologies of the

generations with other disciplinary explanations.

5. The case of Delphi: new functions, new generation?

Delphi, a spin off of General Motors (GM), is currently the world’s biggest

company in the auto parts industry and leader in technology. In 1995 started the des-

incorporation and in 1999 it becomes totally independent of GM. Delphi Automotive

Systems has 198 manufacture plants, 53 centers of sales and customer services; 31

technical centers, and 44 joint-ventures in 43 countries (www.delphi.com), and

employed more than 200,000 people. In 1996 Delphi was three times bigger than their

nearest competitor. The firm is specialized in four big systems (batteries, fuel injection,

atmospheric purification, and energy and motor), and it is structured in seven divisions.

The head quarter is located in Troy, Michigan.

A large proportion of its worldwide business is based in Mexico (35%

compared with 60% in the US and Canada) (Carrillo and Hinojosa, 2000). This

company integrates systems through modular and component production, for which it

has a divisional structure covering the different systems of the vehicles (batteries, fuel

injection systems, air purification systems and motor systems). Its importance and

presence in Mexico are huge, having become one of the country’s main sources of

private sector employment (with about 75,000 employees and even more staff than in 19 The important aspect of the evolving economy is that it offers a set of instruments – categories – whose aim is to solve problems, and not to create an endless stream of reasoning centered on words.

19

the US)(Lara and Carrillo, 2003). In addition to its 57 manufacturing plants, it also has

warehouses, technical centers, machining centers and administration centers, all of

which amount to a total of 64 installations in Mexico midway through the year 2002 20.

Given the volume of business in Mexico and in other regions, the company is

considering replacing its divisional organization for a regional one, in other words,

developing “global regions”. This means that the divisions would no longer be

separated in Mexico, synergies would be made possible and substantial savings would

be made by putting an end to duplication. Such is the case of MTC, which employs

people from all the divisions of Delphi and even from other companies, such as EDS

and Telmex, instead of having a technical center for each division and in each region,

as is still the case in other regions (Carrillo and Hinojosa, 2000).

Delphi-México, like the rest of the global companies, is seeking to focus on its

central functions and, given its very large size, the company’s strategy has been to

develop partners (national or foreign) in the places where it operates. As a result, it has

forged important alliances with manufacturing companies such as Condumex, or

service companies like Dell, Microsoft or EDS, as well as with local Internet Service

Providers (ISP).

The integration of systems in the automobile industry, in particular modular

production, implies a physical concentration dynamic in different activities, mainly the

joint location of the product conception and development stage and the joint presence

of production activities (Lung, 2002). The regional concentration of production and

Research and Development activities at the Delphi technical center in the mid-1990s

(Carrillo and Hualde, 1998; Lara and Carrillo, 2003) has entered a new stage: the

centralization of functional activities or activities in support of the main activity. Such

is the importance of this transformation that Delphi Automotive Systems changed its

name to Delphi Corp.

The low level of competitiveness of a monopole model (R&D from the center –

US – and manufacturing on the periphery – Mexico -), in terms of costs, project

20 Interview with the MTC Purchases Director in Ciudad Juárez; 2003.

20

duration and customer attention, led to the relocation of the technical center near the

maquiladora plants in Juarez, giving rise to a multi-polar model (Lara and Carrillo,

2003). The capabilities obtained in the MTC, the learning acquired and the increased

competitiveness made it possible to bring together, one by one, the research and

development activities of the six divisions21 of the corporate in the three buildings that

make up this center belonging to the company (488.000 feet in 2002), that is to say, a

vertically integrated condominium company that houses dissimilar projects (air bags,

sensors, harnesses, etc.) but brings together common needs (machining, test and

validation laboratories, etc.).

As this R&D integration process moved on, a centralized administration grew

with the aim of avoiding the duplication of activities, increasing the efficiency of the

service for OEMs (original equipment manufacture), maquiladoras and suppliers, and

above all to cut costs. As a result, the MTC has been transformed from a mere

engineering center into the critical nerve center of the network of plants, companies and

divisions in terms of technology, administration and information.

Coordination from the hub in Juarez covers manufacturing plants throughout the

country and research, development and design in the six divisions of the corporate, as

well as customer service, the chain of direct and indirect suppliers, a number of services

such as freight and personnel transportation, etc. It also concentrates functions such as

finances, e-commerce (B2B, B2C) and the development of infrastructure for

technological information. Furthermore, it coordinates intellectual services (R&D,

design, conception, algorithms, ‘industrial genius’, etc).

The decentralized coordination of the original supply companies (known as

OES –original equipment suppliers) in different parts of the world, as is the case of

Delphi, helps the development of the central processes of modularization,

standardization (‘expanded use’), joint development, globalization and knowledge

management in the automobile industry. Finally, the development of these processes

turns such capabilities into resources for the company itself, as well as for its 21 Energy & Chassis Systems, Harrison Thermal Systems, Interior Systems, Saginaw Steering Systems, Packard Electric Systems and Delco Electronics Systems.

21

subsidiaries.

Let us see the main areas in which Delphi has managed to concentrate its

functions and establish itself as a critical hub of the corporate on a regional level.

A. Coordination of all the divisions within the MTC.

The six corporate divisions have both space and staff in the central building of

the MTC22. The MTC has level 5, the maximum level, which means that all the stages

of a product are performed in this Center, from the conception, development of

prototypes, experimental and validation stages to production and manufacture. It has a

number of technical support areas, such as prototypes, laboratories, machining,

suppliers’ room, exhibition / seminar room, etc.

The MTC is Delphi’s biggest center in the world. While Delphi’s 30 technical

centers consist of a single division, the two others house more than one division, and

one of them, the one in Juarez, houses all of its six divisions. In 1995, the MTC began

with 600 employees (75% engineers, mostly Mexican) in the Energy division, and

immediately afterwards it housed Packard. Electric. Then the other divisions started

arriving. It should be pointed out that the first wave of engineers employed worked in

other Delphi manufacturing plants in Mexico or the US, in other words, these engineers

had experience and knowledge of the company23. By July 2002, the MTC was

employing 2,129 engineers and technicians (36% working in the functional areas of

support or administration ).

Engineering capabilities are such that one hundred inventions and a number of

“nest” patents have been produced, a record for the corporate.24 The MTC performs

design, R&D, manufacturing and training for all the different divisions of the corporate.

To this end, it uses different spaces to house technicians and engineers from each

division, as we said in the ‘condominium company’ mode. In order to provide

centralized support for engineering projects, a number of support activities have been

centralized in the form of a consortium. This applies to functional areas such as 22 It also house staff from other companies – as we saw previously 23 Interview with an MTC maintenance engineer in Delphi, 2003. 24 Interview with the Chief Engineer of Stage 00 in Delphi’s MTC, 2003.

22

finance, human resources, purchases, machining, etc. All of this has given rise to

greater added value. The MTC was expanded to centralize the engineering activities of

all the divisions, but also to centralize administrative support. 64% of staff in the MTC

is working on engineering projects, while the remaining 36% are employed in the

support areas .

The growth of the administrative area was due to the view that the business

needed to increase its productivity and excellence in the service and, in particular, cut

costs. Delphi has found that the centralization of the functional areas is of strategic

value for cutting costs. Each space costs money and in this respect “...a productive

plant must use its space for such purposes as far as is possible rather than divert it for

administration...”25.

The functional areas have become increasingly technical on the level of systems

and centralized at the same time. The process of centralization began in 1998 with

payroll. All the operations of Delphi-México are technologically connected and use

common and standardized systems in al the functional areas. They apply the same

philosophy of ‘lean production’. This has allowed large savings in each administrative

function, as well as an improved service avoiding dispersion and duplication. The aim

is to consolidate different areas, such as finances, industrial safety, purchases, audits

and customs. The first stage will be concluded in 2004. The progress achieved through

this coordination has made it possible to cut costs and increase efficiency. This process

involves not only technology and organization but a change in managerial attitudes:

“[We are migrating]...from a decentralized system of human resources, labor,

safety, purchases, finances, etc. to a centralized one...It has been an educational

process: before, each plant manager felt that he needed to have all the

infrastructure and all the administration in his plant (purchases, finances, payroll,

human resources, labor, training)... which made them feel very sure... Now the

same centralization is providing that same assuredness to these business

managers ... We are used to having things in excess .. Hey, they are taking away

my staff, areas, etc. No, I am not taking them away, I am trying to help you

25 Interview with training managers, MTC Juarez, 2001and 2002.

23

focus on your own matters” (Interview with human resources manager, MTC

Juarez).

The greatest advances towards centralization have been achieved in the field of

finances; purchases are undergoing a stage of consolidation. These areas are virtually

non-existent in the manufacturing plants of Delphi-México26. In order to speed up this

decentralization process, Delphi is using its own “critical mass”. There is a well-

defined plan in which the ‘vision and the mission’ consist of centralizing in order to cut

costs and optimize internal synergies.

In brief, the role of Delphi in Mexico has changed since the arrival of MTC.

This new role confers, de facto, a vision of headquarters or “global region”. A key

factor has been internal competition between the plants of the corporate itself, the

divisions, their technical centers, their machining centers, etc. Each unit competes to

obtain contracts not just with the OEMs but from Delphi itself. “They are treated like

any other supplier, they are given purchase orders like any other and will not win a

contract just because they belong to Delphi”27. Delphi has been present in Mexico

since 1978 and has performed excellently:

“There is a long history of recognition: we have broken all types of records, we

have won all types of prizes, and we have continued to gain recognition

throughout the world for quality, delivery and costs. We have fewer problems

that anyone else. Bringing up the center (allows us) to carry on growing form a

technological and administrative point of view, and that is what we are doing

...”.28

B. Coordination of purchases from direct and indirect suppliers.

All of Delphi-México’s purchases are coordinated to a large extent from the

MTC. The business of Delphi corporate in Mexico has grown substantially since the

1990s (Lara and Carrillo, 2003) which has meant that it is logical for more purchases to 26 Industrial safety and human resources are the areas that continue to work in each plant. 27 Interview with Purchases Director. MTC Juarez, 2002. 28 Interview with human resources manager, MTC Juarez, 2001 and 2002

24

be located in this region, as this means cutting costs and delivery times, and improving

time to market responses. As the director of indirect purchases (with the level of

country manager) says:

“The logistics of bringing our materials from other places and having to cross

borders with them ...comes at a cost that is added to the operations of this center

[MTC]. The more we can locate (suppliers) in Mexico, and not just anywhere in

Mexico but close to our plants in Mexico, the better it is for us.”

In 1997, Delphi bought less than 100 million dollars of indirect materials in

Mexico. By the year 2000, this figure had doubled. By the end of 2002, it was expected

that indirect purchases would rise to more than 400 million dollars. A portfolio of more

than 3,000 suppliers is coordinated in Mexico. Of the total number of indirect

purchases, 180 are made with Mexican suppliers and the rest with suppliers from other

countries, mainly the United States. The purchases department employed 122 people in

three centers in northern Mexico. Indirect services in Mexico29 during this period rose

from 50 to 180 million dollars, while services in other countries grew from 50 to 220

million dollars. Purchases of indirect services such as the construction of industrial

premises and refurbishing, cafeteria, transport, professional services, etc. are usually

made at the location, due to the structure, capabilities and culture of the service

companies .

The purchases area in Mexico started out with a department of the Packard

division (which has the most plants and staff 30) and grew to take on two management

bodies (one for direct purchases and the other for indirect purchases). Both direct and

indirect purchases made in Mexico are centralized from the MTC. However, their

relative importance is very different, given that 90% of direct purchases for Delphi-

México are made from the US while 100% of indirect purchases are made from

29 These include the following in order of importance: construction, transport (34 million), cafeteria (23 million), packaging, machining (15 million in the US and 3 in Mexico), wooden pallets (3-6 millions) and professionals (technological, training). 30 Packard had 42 plants in 2002.

25

Mexico.31

One case of particular relevance is that indirect purchases are growing for the

United States and Canada from Mexico. “I get divisions calling me and saying: hey,

when can you buy for Warren and for Mississippi, etc.”. The reason for this is simple,

says the purchases director: on the one hand, retirements etc. are depriving them of staff

in the US, and, furthermore, these are not central functions for the company and, on the

other hand, it is more economical to buy from Mexico. Packaging, corrugated iron,

bags, plastics and cardboard are purchased from the MTC for many of the divisions of

all of North America; machining is also purchased from the MTC – although most of it

still comes from “the other side”.32

The MTC has a supplier development department, whose function is to inform

suppliers of company expectations, develop them and evaluate them. It coordinates

projects for external services and has a supplier development/supplier quality group,

which reviews and supports the quality and development of suppliers.

Training is offered, with the support of Human Resources, in performance

standards (defined by the OEMs or the corporate itself) through continuous

improvement workshops (quality, quality in delivery, cost, excellence in service,

customer orientation, etc.). Performance standards must be followed by first and second

level suppliers.

There is e-commerce (E-C), although it is still in its incipient stages. Orders

with direct suppliers are still not ‘on line’ but E-procurement and web applications have

grown. E-C will grow exponentially with the introduction of this system by the OEMs

with their suppliers. The after market, on the other hand, is conducted through e-

commerce. Plant requisitions for indirect purchases are made electronically. There are

specialized warehouses in the manufacturing plants from which access is gained to the

information system (Intranet). They usually have open orders in which the prices, etc.

are set out. The person in charge of the warehouse from any Delphi establishment may 31 The reason for which direct purchases have not all been passed over to Mexico is that that most of the suppliers of components are located in the US. 32 The opinion on the performance of Mexican suppliers, according to the director of indirect purchases of Delphi-México is positive: “I have seen that suppliers are becoming very strong ... companies run by well-trained businessmen who are taking this to another level”.

26

place an order which goes straight to the supplier without the need to go through the

purchases management once again.

C. Coordination of Information Technology (IT).

Another relevant area in which this process is observed is IT. There are two

system departments in the MTC: one belonging to Delphi while the other is outsourced,

EDS (that is to say, it operates as a condominium company). For the purposes of IT, the

MTC represents the central nervous system of Delphi-México, as it is here where the

central system operations are located (Carrillo and Hinojosa, 2000).

Delphi disposes of a robust corporate internet called Apollo, with a very broad

band, in which all the inter-linked software may be found. It has bulletins, menus,

different services and, of course, all things relating to production, quality, etc. It is

constantly being updated. The ISS systems group (Information System and Services)

consists of 44 people. The ISS has the Help Desk system controlled from Mexico City,

from which help may be provided and any problem dealt with in any computer in any

operation in Mexico. It also has EDI with mainframe which offers a number of

applications, such as payments, customs and production33. Delphi has 7,500 PCs

connected in a network in Mexico, all with “complete service” (Apollo system, internet,

e-mail, CAD for drawing, e-procurement, applications, services, help desk). 34

The systems subcontractor, EDS, is another spin off of GM. 250 people from

EDS are employed within the MTC, along with 1 to 2 people in each plant. EDS is the

system support and deals with all matters relating to the network, the information center

applications, the information center functions, voicemail, etc.35

They work with ISSNS application, which is the basis of Oracle. In a matter of a

few years, the Oracle system has spread to all the plants of Delphi-México, hand in

hand with the company’s regional strategy. As the ISS director said: “The IT system in

33 It still does not have SAP, but it will by early 2003. 34 Although, as is the general rule, there are restrictions depending on areas and hierarchies. 35 The staff is highly skilled and come from a number of different countries, even though most of them are Mexican. Although EDS is a world leader in systems, it is losing business with Delphi, as it now only accounts for 40% of business in systems. The remaining 60% is open and shared by many other companies.

27

Mexico is unique in the world, they do not even have it in the US. (Delphi) is at the

vanguard of technological information systems”. (Carrillo and Hinojosa, 2000).

From the MTC, Delphi also uses ISP in Mexico: Telmex, TDE del Norte

(telecommunications, cable networks, routers, etc.), as well as multiple local services,

and even large companies in Mexico City, such as IBM, Del Norte Consulting, Dell.

Each of the approximately 64 locations of Delphi-México has some local ISP.

D. Human resources coordination.

MTC staff is categorized as administrative and ‘hourly’. 53% work in

administrative areas (finances, legal, industrial safety, purchases, customs, staff, public

relations and computer systems) which serve as support for all of Delphi’s operations in

Mexico. The engineering area, for its part, employs professionals and technicians and

concentrates the development of projects, design, prototypes and manufacturing. A

large number of engineers work in these two areas, making the MTC one of the world’s

largest engineering companies associated with the automobile industry (Chanaron,

2001).

As far as human resources systems (such as training and studies within the

company) are concerned, the different establishments of Delphi generally follow the

same policy. In the case of the divisions in Mexico, these are standardized. Human

resource managers are trained at the corporate in the United States and one of their

functions is to transfer to the divisions the concepts of corporate identity (excellence)

and customer orientation. They work to identify needs through the PBP (Personal

Business Plant), which is related to global roles and specific training for each MTC

employee. The aim is to close the gap between the needs of the position and the skills

of the person on arrival at the company. Internal and external training programs are

formulated to this end, as well as academic furtherance programs. An average of 90-

100 hours’ training is offered to each employee (more than 200,000 hours a year).

Internal training is provided through the ‘skills plans’ while external training is given at

universities and through the outsourcing of professional services. Most of the internal

programs are technical and highly specialized (70%), while the rest deal with

28

organizational matters (30%).36

Human resources maintain integration in qualification courses, internal

education activities, seminars, intra- and inter-company workshops, as well as academic

furtherance programs (from languages and finishing off technical courses to grants for

masters degrees and doctorates). There are many agreements with prestigious

universities in the United States and Mexico, and for highly specialized training they

also use the internal resources of people who have been trained abroad.

The company is also strongly encouraging training and improvements in the

levels of education of hundreds of employees. It also follows the strategy of seeking the

best students in communications and other disciplines. Moreover, it is currently re-

educating its employees on the vast potential of the internet.

E. Project and activity coordination

The evolution of engineering capabilities and even of the functional support

areas is, to a large extent, the result of the critical mass consisting of a set of capabilities

among working teams. As the president of Delphi points out, “...the success of the

project [of the MTC] has been the integration of knowledge...”. Technical infrastructure

is an essential part of this process (laboratories, equipment, highly specialized

equipment, software, etc.), especially critical and strategic infrastructure, as this allows

them to experiment and progress. The same happens with the form of organizing things

in order to carry out projects in which the MTC disposes of a clear guide for the whole

process. The MTC, like the rest of the corporate, uses the PDP system (product

development process), which consists of a set of activities per band including the whole

process: handling of projects, finances, product design system, testing and validation,

the outsourcing of resources and manufacturing). Each design, project or activity fits

into this mandatory flow guide.

36 This ratio previously stood at 85% technical and 15% organizational, but it has been modified due to the increase in administrative staff.

29

6. Conclusions

1.- Finally, we return to the main question: Are there technological and

organizational elements to lead us to think in terms of the emergence of a fourth

generation of maquiladoras?.

2.- The restructuring of the coordination, administration, centralization and running

of the network of plants belonging to the Delphi – México corporate and the MTC leads

us to identify the existence of local integration and coordination capabilities, along with

a “private” infrastructure, which is the cohesive force binding the flow of supplies,

goods, information and knowledge of Delphi in Mexico, and facilitates their

incorporation into the worldwide chains of production. It is necessary to study not only

the internal activities of the company but also the nature and form of intra- and inter–

company connectivity. The evolution of different generations may be schematized in

terms of the following evolutionary process: manual work à rational work à creative

work à non-material coordination work. Because of this, along with the emergence of

new coordination capabilities among the maquiladoras, the construction of a new

generation of maquiladoras becomes imperative.

3.- In the motley and heterogeneous world of the maquiladoras it is possible to

identify the birth of the fourth generation of maquiladora companies. The first major

technological, organizational and labor-related jump involved moving from assembly to

manufacturing, while the second was the transition from design to research. Now

another jump is being made: the concentration of multiple activities revolving around

intra- and inter-company coordination. The creation in lesser developed countries of

mini-replicas of corporates from first world countries .

4.- While the third generation refers to the setting up of technical centers and/or

research, development and design activities linked locally with a number of companies

in which engineering plays a major role, the fourth generation is centered on the

coordination of different activities throughout the territory with strong support from

system engineering. Innovation gives way to the coordination of multiple activities. In

other words, these companies are capable of organizing the chain of production on a

30

worldwide level and, in doing so, develop organizational capabilities that go beyond the

product itself and account for the organization’s know-how on a large scale, giving rise

to critical hubs in territories such as Mexico.

5. - It is convenient to emphasize that the concept of generations of companies

refers more to a qualitative analysis (although is possible to measure) rather than

quantitative. The crucial question is to know if the changes in different areas can be

interpreted like industrial upgrading and learning process based on the evolution of

local capabilities, rather than measure how many maquilas belong to what generation.

Not only sector, employment size and origin of capital are relevant variables for

understand the complexity of the export industry in underdeveloped countries, but

building capabilities also.

6. – Finally, the relevance of global leader transnational, such as Delphi in

country like Mexico, is very important. First, shows the restructuring process of

affiliates in underdeveloped countries in order to confront the strong pressures for

increase competitiveness. Second, shows how the evolution of local capabilities in the

affiliates can achieve regional head quarter’s functions. And third, shows how Chinese

competition with Latin American manufacture export platforms (South-South

competition) is not only for cheap wages, but for getting systemic advantages. The

success cases such as Delphi-Mexico show a pattern of industrial upgrading and a

potential positive future. Other companies should copy or adopt upgrading process like

this.

31

Acknowledgements

The authors would like to express their gratitude for the great support provided by the

Delphi, especially their Mexican Technical Center in the city of Juarez

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