More Key Tronic Production Jobs Headed Elsewhere, New Ceo Says

The shift of production jobs from Spokane to Mexico is a trend likely to continue under Fred Wenninger’s leadership of Key Tronic Corp.

To do otherwise, Wenninger says, is to risk the future of the whole company.

“Our facility in Juarez,” Wenninger says, “is essential to our survival.”

In January, Key Tronic shifted another of its product lines from production in Spokane to Juarez, following a pattern established by Key Tronic’s previous chief executive officer, Stan Hiller.

That strategy calls for the production of new products in Key Tronic’s Spokane County facilities. But once the problems inherent in start-up are worked out, the product goes to Juarez, where labor costs are much cheaper.

Soon, yet another low-cost production facility will be in place for Key Tronic.

“We have to have a (production) presence in the Pacific Rim,” Wenninger says. “We don’t know yet what its going to be, whether it will be an acquisition, a partnership or starting from scratch. But that’s sort of No. 1 on my list of things to do.”

Wenninger knows the loss of manufacturing jobs is tough for a work force and a community to swallow.

At the first meetings he held with local employees, Wenninger said the depth of feeling on the subject was clear.

“There’s almost the feeling here that Juarez is the enemy,” he said.

But one of the reasons Key Tronic struggled so from 1985 through 1991 was because it ran out of ways to reduce costs at a time when cheap foreign labor was driving down the market price of keyboards faster than Key Tronic could keep up.

In Spokane, labor is a huge component of a keyboard’s cost. In Asia and Mexico, labor costs are a fraction of those here.

“And it’s just naive to think you can compete with that much labor cost differential,” Wenninger says.

In Juarez, Key Tronic found a solution that in the long run helps preserve Key Tronic’s presence in Spokane. Juarez comes close to matching the labor costs in Taiwan, or even China, Wenninger says, but it’s only one time zone away from the corporate headquarters.

“And the Juarez factory is a first-class facility,” Wenninger says. “It doesn’t have to take a back seat to anyone in the world.”

Key Tronic once had a manufacturing plant in Taiwan, but it was a cost-cutting victim during the crisis period that preceded the Hiller administration.

“It’s amazing to me,” Wenninger says, “that we are a $200 million-plus company, with no presence in the Pacific Rim. We have no sales office there, we have no manufacturing operation there.

“And all of our customers are moving there.”

Several of the major original equipment manufacturers who buy from Key Tronic are shifting engineering operations to the Pacific Rim in order to be closer to their production facilities there.

“We have to be a worldwide company,” Wenninger says, “because our customers are worldwide companies.”

But the strength facilities like Juarez give Key Tronic will allow it to accomplish other things for the Spokane economy, Wenninger adds.

Hiller’s reorganization efforts initially resulted in net job losses locally. But overall growth fostered by his cost-cutting measures allowed enough hiring in other areas of Key Tronic’s operations here to recover and actually exceed those numbers during 1995. The company currently employs about 975 people in Spokane County.

Wenninger isn’t sure that the number of jobs here will continue to go up. But he does believe the value of the remaining jobs will eventually exceed the value of those that left.

“In Spokane, I think our labor rates are lower than they should be,” he says. “My belief is that as time goes on we will be able to raise the direct labor rates here. Maybe that will come with fewer people, but there will be more jobs in engineering, more jobs in marketing, sales and all those kinds of things.

“Those are jobs the community will be glad to have.”

“We are faced,” Wenninger concludes, “with the alternative of having no company, or having a company that serves customers by building things all over the planet.”

, DataTimes