Louisiana-Pacific Threatens Pullout From Baja Venture

Mired in a labor dispute with the Mexican government and unions, Louisiana-Pacific Corp. has suspended construction of its huge maquiladora plant near Ensenada and is threatening to pull out of the project altogether unless the dispute is settled to its liking.

A Louisiana-Pacific spokesman confirmed reports published earlier this week in the Tijuana newspaper El Mexicano that the company has laid off more than 400 construction employees. The workers were helping to build the first, 200,000-square-foot phase of a redwood planing and drying facility on 80 acres that Louisiana-Pacific bought last year at El Sauzal, a few miles north of Ensenada.

Louisiana-Pacific called the construction halt on June 14 after it said the Mexican government reneged on a promise to let the company use its own employees to unload rough-cut timber from barges transporting redwood from the company’s mills in Northern California. The government is now insisting that Louisiana-Pacific use longshoremen to unload the timber, the company says. Government officials were not available to respond to the allegation.

Using its own employees is cheaper than using unionized laborers and was one of the main reasons that Louisiana-Pacific decided to become the first U.S. lumber company to set up a large-scale maquiladora operation to Mexico, spokesman Shep Tucker said Thursday.

Unless the dispute is solved in the next two or three weeks, Louisiana-Pacific will “pull out” of its El Sauzal project altogether, Tucker said, despite already having spent $7.8 million for land, construction and improved port facilities at El Sauzal.

Although leaving the door open to negotiations, Tucker said the suspension was “appropriate so as to clear up this important issue before more capital is invested.”

Officials at the Tijuana office of Mexican Secretary of Commerce and Industrial Development, which approves maquiladora permits, were unavailable for comment Thursday.

Portland-based Louisiana-Pacific, the nation’s largest producer of redwood timber, announced the purchase of the El Sauzal site last year for the purpose of processing redwood to be shipped back across the border and sold mainly in Southern California. The first barge-load of rough-cut redwood timber arrived in February from Louisiana-Pacific mills in Northern California.

Louisiana-Pacific’s decision to build the Baja California plant was viewed as part of a trend by which U.S. manufacturers would move heavy manufacturing operations to Mexico in addition to the light assembly work that has characterized most of the maquiladoras that have opened in Mexico so far.

Tony Ramirez, a vice president of Made in Mexico, a Chula Vista-based consultant who advises foreign manufacturers setting up plants in Mexico, said Louisiana-Pacific’s problems are indicative of the “mine fields” some U.S. companies can encounter in Mexico if not sufficiently attuned to the political and cultural differences between the two countries.