Corning, Mexican Glassmaker Set Up Marketing Venture

In a striking example of how U.S. and Mexican corporations are joining forces in anticipation of a North American free-trade pact, glassmakers Corning and Vitro agreed Tuesday to combine their consumer products operations into a joint venture expected to generate sales of $800 million a year.

Such well-known Corning brands as Corning Ware, Pyrex, Revere Ware and Corelle will become part of the joint venture, along with Monterrey-based Vitro’s stemware and glassware division, Vitrocrisa.

Although Corning and Vitro are comparable in size--each with annual sales of slightly less than $3 billion--Corning’s consumer products division is about three times as big as Vitrocrisa. The agreement calls for Vitro to pay Corning more than $130 million in forming the joint venture.

The agreement is the latest example of a developing trend among North American manufacturers to complement rather than compete with each other as the countries negotiate a free-trade agreement.

Because Mexican companies operated in a protected market for four decades, they seldom exported and did not develop distribution networks outside their own borders. Similarly, U.S. manufacturers did not develop distribution systems in Mexico, because they could not get their products past customs.

Now that Mexico is opening its borders, though, U.S. companies eager to sell goods need distributors here.

Mexican manufacturers, meanwhile, are dropping product lines that cannot compete with imports and expanding production of goods that meet international standards for price and quality. They need help marketing their products abroad, along with imported goods to fill gaps in their product lines.

The result is a good fit for marketing joint ventures such as the one announced by Corning and Vitro.

Through the joint venture, the two glass companies will provide each other distribution channels in their respective countries. Both companies operate modern, efficient factories for the goods they make, so they have no plans to shift production--or jobs--across the international border.

Indeed, if the joint venture works as the firms anticipate, both companies will expand production, said Vitro spokesman Ulrich Sanders.

In similar deals, Vitro already markets Whirlpool appliances in Mexico and has has a windshield-making joint venture with Ford Motor Co.

Vitro and Corning agreed to take the concept a step further by setting up a double joint venture--that is, two separate companies in the United States and Mexico. Corning will own a 51% controlling interest in the U.S. company; Vitro will own a 51% stake in the Mexican company. Each will own 49% of the company that the other controls.

The arrangement gives each company control over production in its respective country, utilizing each partner’s expertise to best advantage.

“Each of us has different operating skills in our own country,” said Corning Vice Chairman Richard Dulude, who heads the company’s worldwide Consumer Housewares Group. “We are moving toward a North American trading community. We will be in a tremendous position to take advantage of that.”

The companies see the joint venture as an opportunity to improve the profitability of consumer glassware divisions whose performance has lagged behind that of other parts of the parent corporations.

Besides providing new, Vitro-made products for Corning’s well-developed U.S. distribution network, the joint venture will allow Corning better access to the Mexican market, said Dulude.

“Right now, there are probably more products hand-carried across the border than sold through a distribution network,” he said.

Vitro’s consumer goods division has suffered from import competition and Mexican price controls. Exports to the United States and Canada were $26 million last year, more than one-third of the division’s sales, and the company was looking for a strategic alliance that would allow it to increase sales abroad.

“Such alliances are the new way that we, as most of Mexican industry, will be doing business,” Sanders said. “Our best alliances will be within our own bloc in North America.”

Vitro has been a leader in seeking such alliances, with a dozen joint ventures, mainly joint marketing arrangements such as the one signed with Whirlpool for household appliances in 1986.

More recently, the company tested the double joint venture concept with Connecticut-based Amsilco’s World Tableware International division, which manufactures and imports silverware. Two weeks ago, the companies signed a $10-million deal that became a model for the Corning-Vitro agreement.

The two joint ventures provide Vitro a major opportunity for increasing consumer products export sales, said Scott Galle, who follows the company for Los Angeles-based D. A. Campbell Associates.

That benefit would be even greater if the current 38% U.S. import tariff on glassware is reduced as a result of free trade negotiations, he said.

Corning shares closed up $1.50 at $65.625 on the New York Stock Exchange. Vitro closed down 25 cents at $27 a share on the Mexican Stock Market.