R

eports of the maquiladora industry's death are greatly exaggerated, to borrow from Mark Twain. To be sure, plenty of U.S. facilities

Automotive Lighting, headquartered in Reutlingen, Germany, employs approximately 510 at its production center for the NAFTA region in Juarez. Its latest project is this 253,306-sq.-ft. (23,532-sq.-m.) complex on 18 acres (7.3 hectares).

investment shifted to China in recent years, but China will never have the proximity to the North American marketplace that Mexico has. If direct investment trends are any indication, U.S. investors now are expanding with that fact in mind. Investment in Mexico's maquiladora region will increase to about US$6 billion in 2005 from $4 billion in 2004.
      By some measures, China's competitive advantage in terms of labor costs is eroding relative to Mexican and even some U.S. locations; the farther from the border, the more this tends to be the case. Economist Brian Wesbury, the featured speaker at the opening general session of the Industrial Asset Management Council's (IAMC) Spring 2005 Professional Forum in Charleston, S.C., is among those holding this view.
      But several other factors are at work, from infrastructure improvements to advances in cross-border logistics capabilities to smart development on the Mexican side of the border that is catching the attention of U.S. and global investors.

Mike White of CB Richard Ellis says master-planned communities that incorporate industrial property are central to the new Mexican manufacturing model.

      "There was some investment outflow going to China in 2002 and 2003, and now some of that is coming back," notes Edward J. O'Neill, director of global real estate at Federal Mogul, a $6-billion automotive components manufacturer based in Southfield, Mich. "I see that continuing, but it depends on who the investor's customer is. Do you have to support them on a just-in-time basis or not? If it is just-in-time, then you need to be as close to the border as possible," where labor is pricier. If labor costs alone are the predominant site determiner, then 100 miles (161 km.) plus and farther from the border is where an investor will want to look, says O'Neill.
      Regardless of the cost of labor, establishing Mexican operations is a complex business, O'Neill points out, in part because of the impact a plant can have on a community there. To establish a facility in a town with several other plants already in place drives up the cost of labor faster than it may already be rising.
      "The alternative is to put a plant in a small town where you are it," he says. "The problem with that is if you should decide to leave, the impact on the town is that much more significant."