Maquiladoras run low on Chinese supplies due to coronavirus, send hundreds of workers home

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Experts say full effect of Chinese shutdowns will be felt mid-March; industry leaders say it's time to bring supply chain closer to home

In this March 23, 2017 photo, workers check screens for faults in Pantos logistics, a “maquiladora” LG flat screen television assembly plant in Reynosa, Mexico, across the border from McAllen, Texas. Many maquila workers making only $50 to $60 for a six-day work week rely on a few hours of daily overtime to make ends meet, according to Gilberto Lozoya, a maquila worker in Nuevo Laredo. (AP Photo/Rodrigo Abd)

EL PASO, Texas (Border Report) — Some assembly plants in Juarez are curtailing operations while others stockpile materials from China, as the coronavirus scare disrupts industrial operations on the border.

A handful of U.S.-run plants have sent home a combined 600 workers due to “technical stoppages” and more could follow once supplies from China run scarce, said Miguel Angel Calderon, director of the Juarez Chamber of Industry.

“Some factories stopped getting materials from China to restock their inventories and implemented technical stoppages, telling workers to go home for a few days. This could go on for two to three weeks, but if it drags on they might have to lay people off,” Calderon said.

Five COVID-19 cases have been confirmed in Mexico — none in Juarez and on Tuesday Chihuahua state chief epidemiologist Gumaro Barrios Gallegos said three suspected cases have been ruled out locally.

At least 20 provinces in China ordered a shut down of factories and other businesses last month to curtail the spread of the coronavirus, or COVID-19. Some factories are beginning to reopen, but experts writing for the Harvard Business Review predict the peak impact on global supply chains won’t be felt until mid-March.

Workers at a Mexican border assembly plant check a newly manufactured television monitor. (AP file photo)

Some 330 mostly U.S.-run assembly plants, known as maquiladoras, employ nearly a quarter of a million people in Juarez. About half manufacture automobile parts for GM and other carmakers while the rest produce electronic components for computers and appliances or medical equipment. At least 90 utilize raw materials from China, Calderon said.

The idle workers still get a paycheck but will forego attendance, punctuality, production-goal and transportation bonuses, the industry spokesman said.

In El Paso and New Mexico, management is scrambling to stockpile inventory so production at their factories in Juarez doesn’t stop, said Jerry Pacheco, president and CEO of the Border Industrial Association.

“Everybody is being affected to a certain extent. Some companies are starting to build inventory so there’s no glitch in the supply chain,” Pacheco said. “The other thing I’m seeing in the region is increased demand for temporary leasing space because a lot of these companies don’t have room (for storage) and have to find overflow space.”

The missing goods from China include electronic components, steel, aluminum, chemicals and plastics.

China is struggling to reopen its factories after a prolonged shutdown due to the coronavirus scare. (AP photo)

“Everybody is concerned because we don’t know when this stops or how far it goes. I don’t think there’s a panic right now, but there’s a general concern and discussions going on in many firms as to what Plan B is. That is going on right now,” Pacheco said.

Taking the supply chain out of China and bringing it to the border

But amid turmoil, some see opportunity. For some American companies that Plan B might contemplate reducing reliance on China and shifting the supply base closer to home, Pacheco and other industry leaders say.

“Our region is heavily dependent on a worldwide supply chain, especially in the automotive and electronic sectors,” said Jon Barela, CEO of El Paso-based Borderplex Alliance, a binational economic development association. “We don’t want to take advantage of a crisis, but we should position the border area as an alternative to and a diversification from Asia and China.”

America’s dependence on China isn’t confined to industry, he noted. The U.S. imports most of its pharmaceutical products — and up to 80 percent of its antibiotics — from China.

“It should be shocking to all Americans that 80 percent of the U.S. supply of antibiotics are made in China,” he said. “We as an organization, are looking at how we can persuade companies to move these supply chains away from China and to our border area, especially in light of the U.S.-Mexico-Canada Agreement being all but ratified.”

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