Businessweek Archives

Now It's Export Or Die


Cover Story

NOW IT'S EXPORT OR DIE

ILUSION TEXTILES

Former President Carlos Salinas de Gortari constantly preached to Mexican businesses that they had to "modernize or die." The Romano family, owners of the Textiles Tizayuca cloth and garment-making complex, took him at his word.

At their plant in Tizayuca, about an hour's drive from Mexico City, they have assembled an impressive array of state-of-the-art machines. The looms whir and hum 24 hours a day as they take raw yarns and spin them into lace and silky fabrics. In an adjacent facility, more than 600 seamstresses fill a cavernous room. Their sewing machines turn the materials into some 1.2 million slips, camisoles, bras, and panties each month. Most are sold under the Romanos' Ilusin brand.

Companies like Ilusin, which marry technology, intensive labor, and exports, could be a model for Mexican economic development, especially if the peso remains low. "The more labor a product involves, the better it is for Mexico," says David Romano, 36, an industrial engineer who helps manage the factories. "That's where our strength lies."

The Romanos are among the few proprietors of Mexican textile companies who have invested big recently. Last year, they took delivery of $4 million in new Italian and German-made equipment. The last crates were delivered just weeks before the currency devaluation that sent Mexico's economy into a nosedive and their business into a slump.

But at a recent breakfast of fried eggs and frijoles in the factory dining room, the Romanos insisted they were not discouraged. "We still believe in Salinas--not in him as a person, but in his proposals for changing the economy," says Benjamn Romano, 40, the marketing and advertising director. "Salinas was pushing the country to be prepared to compete. This has been a tough year, but our new infrastructure is ready to fly."

LOOT OF THE LOOMS. Ilusin, founded 45 years ago by the Romanos' parents, had never exported. But within weeks of the devaluation, they began courting distributors and department store chains in the U.S. They now send 10% of production to the the U.S., Central America, and the Caribbean--hoping to boost exports to 20% next year. Ilusin employs about 1,350 people. Wages for their blue-collar workers range from a minimum of $120 a month to $240.

Of course, the peso crisis has not left Ilusin unscathed: The family-owned company won't reveal its earnings but concedes that sales were down 8.9% through September. "We'll make a lot less than in other years," says David, "but it will be better than break-even."

Ilusin had been growing 15% to 20% a year before the devaluation, thanks to the slow-but-sure expansion of Mexico's lower and middle classes. Yet the Romanos expected that the opening of Mexico's markets would let in a flood of inexpensive Asian-made undergarments, so they invested regularly in new equipment that would increase the quality of their garments and lower costs. Many other textile companies that did not bother to upgrade went belly-up as they lost out at home and were unable to export.

So far, Ilusin's U.S. sales are mainly to Hispanics who know the company's brand name. When the Romanos began taking samples to buyers at U.S. department store chains, they were amazed to discover that some were unaware that tariffs on Mexican-made garments had been eliminated under NAFTA. And many seemed reluctant to deal with a Mexican company without a U.S. sales office.

One U.S. chain that has expressed interest is J.C. Penney, which sent representatives to the factory in Tizayuca several times. The companies have worked together to improve quality-control procedures.

As its export business expands, Ilusin is continuing to invest. It is spending $600,000 on a water-treatment plant to reassure U.S. customers of the company's observance of environmental standards. There's no doubt about their plans for their company: The Romanos plan to be around for a long time.By Geri Smith, with Stanley Reed, in Tizayuca


Burger King's Young Buns
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus