Carpenter Technology Corporation, Special Products Division (CarTech), located in San Diego, California, is studying the prospect of establishing a maquiladora manufacturing facility. CarTech's investigation covers cultural matters, labor issues, potential site choices, transportation concerns, possible operational forms, suitable transfer product candidates, financial implications, and resulting San Diego facility impact of such a move. The case concludes that the project is financially attractive, but CarTech must address certain issues to achieve long-term success. First, anticipate high employee turnover and implement turnover reduction strategies. Second, hire a native Mexican plant manager, in lieu of a U.S. manager, and train this person extensively. Third, provide full support from the San Diego based staff. The case recommends that CarTech go ahead with establishment of the maquiladora plant and use this experience as a model for additional future growth into Mexico. The appendixes provide detailed financial data for the base, best, and worst case assumptions. The financial analysis is split into upfront outlay, incremental operating costs, and financial results sections.
