Mexico Tries to Bolster Its Productivity : Commerce: More efficient production is seen as a key to success under the proposed free trade accord. But some workers, citing their low pay, are balking.

Mexicans have a ready reply for bosses who gripe about low productivity: “If you pretend to pay me, I’ll pretend to work.”

Mexico’s $4-a-day minimum wage, which some American businesses find enticing but U.S. unions fear, is resented by workers here. They remember when their paychecks bought twice as much as they do today, and when they did not have to take a second job or sell tacos on the weekend to support their families.

Complaints that workers produce too few goods, or that their work is poor quality, simply adds to the resentment.

Now Mexican authorities are trying to persuade people that the days of prosperity could return if they would be more productive.

The average Mexican worker is about half as productive as his U.S. counterpart, according to a study by the Mexico City-based Xabre Productivity Institute.

Virtually everyone agrees that Mexico must increase worker output to compete in the proposed North American free trade zone, much less the world market. It cannot attract investment simply on the basis of lower wages.

The disagreements begin when it comes to deciding how to achieve higher productivity and how the rewards from it are to be shared.

Take the question of why Mexican productivity is so low in the first place.

Feather-bedding and outdated work rules, say employers.

“The main problem is management,” counters Tomas Martinez, an official at the Union Center for Advanced Studies at Mexico’s largest labor federation, the CTM.

Underlying the finger-pointing are decades of labor-management distrust and the entrenched interests of union busters and labor’s own hired guns who have flourished under a system of confrontation and class consciousness.

That system--not workers or management--is really to blame, said Jose Giral, director of the Interdisciplinary Seminar on Development at National Autonomous University of Mexico and author of the Xabre study.

To illustrate his point, Giral notes: “The 15 million Mexican workers who go to the United States do not have the same kinds of problems they have here. They are just as productive as anyone else.”

Conversely, when U.S. companies set up shop in Mexico, they usually are about as productive--or unproductive--as neighboring factories. “The company depends on Mexican vendors and supplies the Mexican market, which does not demand a quality product,” he said.

Same workers, same companies, different productivity. And the only variable is a move across the border.

To Giral, this means, “What we need is a change in organizational culture.” That will require changing deeply embedded idiosyncrasies of Mexican society, such as class discrimination, he added.

Ezekiel Garcia Vargas, a 35-year-old lathe operator at Sealed Power Mexicana, Mexico’s biggest piston ring maker, can attest to how deeply that discrimination runs and how it affects workplace relations and, ultimately, productivity.

Just after he had gone to work at the factory near Mexico City 13 years ago, the union negotiated a subsidized lunch program for workers. Once the cafeteria was finished, it was opened to all employees. But office workers said they wanted a separate section with a different menu.

Management refused, to the union’s delight. “To us it meant we all work together, we all eat together--and we eat the same thing,” recalled Garcia Vargas, a stout man with thinning, dark curly hair and a mustache.

That was the beginning of a new respect between labor and management that became critical when the company’s biggest customer, Ford de Mexico, raised quality standards in 1986 for parts produced in Mexico.

By 1989, SPM had met the higher standards. Along the way, workers were rewarded with pay raises. They now earn $11 to $27 a day, plus benefits that nearly double their wages. That is top pay in the Mexican auto parts industry.

But these days, besides quality, the company has to think about productivity. Ford can import piston rings from the Far East or the United States at prices lower than SPM’s.

To help cut prices, workers are trying to reduce the $2 million a year in waste from broken rings. They have also become more flexible about moving to production lines where more workers are needed, although their contract still specifies rigid job categories.

Despite its success, SPM suffers from many of the problems that Giral cites when he discusses Mexico’s low productivity.

Over the last two decades, Mexican economic policy has switched direction more often than a barnstorming pilot. With each swoop and turn, hundreds of companies changed hands, causing a rapid management turnover that has left workers distrustful.

Controlling interest in SPM was sold to the Mexican conglomerate Condumex in 1981. Then, last year, Carlos Slim, one of Mexico’s leading entrepreneurs, bought control of the parent company. Workers are wary of the new management.

Other problems arise as companies try to improve productivity by importing new equipment. One computerized electronic machine at SPM has been idle for two months because no one in Mexico knows how to fix it and the technician has not arrived from the United States.

What SPM has achieved that is rare in Mexico is labor-management cooperation in addressing productivity issues.

For decades, Auguascalientes-based furniture make J. M. Romo has emphasized management-driven productivity. The company operates with a system of group leaders--one for every six workers--who make certain that the plant’s skilled craftsmen have the tools and materials needed to do their jobs.

Workers receive raises every quarter, based on productivity increases. To help make sure wages cover household expenses, workers’ wives are taught to sew and warned against spending money on things such as stereos.

“A worker can afford to buy a stereo, but we teach them what is really costly are the records,” company founder Jesus Maria Romo once told a researcher. “It’s cheaper for them to play their own music. Their wages would never be enough unless we teach them to manage money and avoid bars, loan sharks and bad company.”

That top-down view of productivity is well-suited to the autocratic management style that predominates in Mexico. But its success has been limited, as the current concern about productivity clearly indicates.

The new idea is for management and workers to cooperate to boost productivity and for the company to share the results of increased productivity with workers.

Getting the word out on this new concept of productivity is considered so important that President Carlos Salinas de Gortari has met separately with labor leaders and industrialists to encourage them to change.

However, there is still a chasm between management and labor on productivity issues.

CTM’s Martinez envisions both factory-wide production bonuses and individual bonuses for workers in key jobs, where bottlenecks tend to develop. Both would be tied to previously negotiated targets in productivity.

Employers have balked at such deals. “Establishing formulas with automatic pay increases could create commitments that companies could not meet and that would put them in danger of ruin,” said Hector Larios Santillan, spokesman for the Mexican Employers Federation.

Most companies still tend to seek higher productivity the way Volkswagen did, only to be faced with a 17-day strike last month by its 14,000 auto workers. Management imposed a plan that eliminated hard-won worker control over production rates, work force distribution, promotions and safety measures.

The new contract split one of the most militant unions in the Mexican automotive industry, provoking a wildcat strike that left workers glad to get their jobs back after the company threatened to fire them all. It was a bitter defeat for a union that four years ago got its members the third-highest wages in the Mexican auto assembly industry--an average of $10 a day, plus fringe benefits.

The example business owners most often cite as a model for improving productivity is Ford Motor Co.’s 6-year-old Hermosillo plant, 175 miles from the Arizona border, where management and labor have adopted a cooperative relationship. Its workers turn out exports that consistently win U.S. recognition for quality.

The Hermosillo plant has the most flexible work rules of any Ford factory in the world, according to automotive labor expert Kevin J. Middlebrook. It also claims the Mexican automotive industry’s best-educated, best-paid labor force.

That is the key, workers say.

“You cannot achieve quality and productivity by decree,” said lathe operator Garcia Vargas. “You have to convince workers, and that means rewarding us. You cannot expect first-world quality on fourth-world wages.”

SH How Mexico Compares

Mexico’s low productivity compared to other nations and regions is caused by a combination of outdated technology and idle time on the job. Productivity is expressed as a percentage of full capacity.

Country: Productivity

Southeast Asia: 95%

Japan: 90%

Europe: 85%

United States: 80%

Mexico: 40%

Source: Xabre Productivity Institute