Louisiana-Pacific Negotiating to Build Plant in Baja California
Louisiana-Pacific, the nation’s second-largest producer of lumber, is in the final stages of negotiations to build a huge lumber processing plant near Ensenada in Baja California, 80 miles south of San Diego.
The multimillion-dollar project may signal the start of a new migration of U.S. heavy industry to Mexico in response to liberalized foreign investment laws, observers say. So far, most of the plants that U.S. companies have located in Mexico under the maquiladora program have been light assembly plants that involve a minimum of capital investment.
But the Louisiana-Pacific plant, in its size and scope, more closely resembles the commitment of capital that Japanese consumer electronics companies have made in Mexico.
Mexican government officials said this week that Louisiana-Pacific’s plans focus on a site in the fishing community of El Sauzal on the Baja coast a few miles north of Ensenada. The facility would cover at least 70 acres, possibly as many as 100, and would process redwood to be transported by barge down from Louisiana-Pacific’s logging operations in Northern California.
The plant would also include high-speed planers, massive shed-like kilns and outdoor drying yards used to cure green timber, all involving an investment in the millions of dollars. If all goes well with the new facility, Louisiana-Pacific might in the future add a plant to manufacture particle board, the wood byproduct used in cabinets and as construction material, sources said.
A publicly held company based in Portland, Ore., that posted $1.8 billion in sales in 1988, Louisiana-Pacific operates 115 lumber mills in the U.S. and Canada employing 14,000. Known as a cost-conscious producer, Louisiana-Pacific successfully decertified two labor unions, the International Woodworkers of America and the Lumber Production and Industrial Workers, after the unions struck 18 of Louisiana-Pacific’s plants in the mid-1980s.
Cheap Labor
The company owns 1.5 billion acres of timberland, including 500,000 acres in California. Louisiana-Pacific, which also makes plywood, particle board and wood pulp, is the nation’s 10th-largest wood products manufacturer overall.
If consummated, Louisiana-Pacific’s move to an offshore plant would be the first on this scale by a U.S. wood products manufacturer, said Malcolm Epley, vice president of Western Wood Products Assn., a Portland, Ore.-based trade group consisting of 260 lumber manufacturers.
To date, the more than 700 U.S. and other foreign companies that have set up plants or maquiladoras in Baja California have done so to do light assembly work, taking advantage of relatively cheap labor.
Notable exceptions are such Japanese electronics manufacturers as Sony, Sanyo and Matsushita that have invested millions in Tijuana facilities.
But Tony Ramirez, vice president of Made in Mexico, a Chula Vista-based firm that consults U.S. companies considering setting up operations in Mexico, said he expects other U.S. manufacturers to follow Louisiana-Pacific’s lead in taking advantage of liberalized foreign investment laws announced by Mexican President Salinas in June. Word of Louisiana-Pacific’s move to Baja has been circulating in Tijuana for several weeks, he said.
‘Contracts Are Out’
Sources who have seen Louisiana-Pacific’s schematic plan for the Baja site say it could ultimately include more than 1 million square feet of buildings and employ hundreds of employees. Louisiana-Pacific acknowledged that it is negotiating to build the plant but declined to discuss specifics, saying talks are “in the delicate stage.”
“We don’t have the whole (Baja) package put together, and until then we won’t feel comfortable talking about it,” Louisiana-Pacific spokesman Shepard Tucker said Wednesday. The company’s redwood production is concentrated in Samoa, a logging community and port near Eureka in Northern California.
One company official who asked not to be identified said “contracts are out” to acquire the Mexican site and could be consummated in 30 to 60 days. Mexican sources say Louisiana-Pacific intends to “recondition” a nearby port facility to accommodate the barge traffic.
Tucker said Louisiana-Pacific is considering the move to Baja in order to increase its redwood processing capacity, to lower labor costs and to produce the popular wood closer to one of its largest markets: Southern California. Most of the redwood processed in Baja would be shipped back across the U.S. border to Southern California, he said.
Tucker said if the plant is built, only roughly cut timber, not logs, would be barged down to Baja. At 300 million board feet produced per year, Louisiana-Pacific is the nation’s largest redwood lumber producer. He said the wood is used in decks, planter boxes, railings and architectural trim.
Tucker admitted that particle board, which is manufactured from sawdust and other timber wastes, would be a logical product for Louisiana-Pacific to manufacture in Baja. A ready-made market for the material exists among Japanese television manufacturers in Tijuana, which use it for TV cabinets.
