Martin's Textiles
Case #1- Martin’s Textiles The survival of Martin’s Textiles is very much in doubt with the enactment of the North American Free Trade Agreement (NAFTA), which would not only eliminate tariffs but also allow an increase in the quota for Canada and Mexico to ship textiles to the United States. Compounding the issue, Martin’s Textiles has been registering small losses the past several years and is in danger of losing major customers. Therefore, John Martin, CEO of Martin’s Textiles, has to decide whether to move production of his company to Mexico in order to lower labor costs or keep production in the United States, where the company has good labor relations with its employees. In regards to the dilemma that Martin’s Textiles face, I would recommend that the company move its production base to Mexico in order to lower labor costs and stay competitive within the industry. Martin’s Textiles was founded in 1910 and has spanned four generations of the Martin family. However, with the implementation of NAFTA, all tariffs between the United States, Canada, and Mexico would be eliminated within the next 10 to 15 years with most tariffs cut in 5 years. Especially impactful for Martin’s Textiles was the plan’s provision that all tariffs on trade of textiles among the three countries would be removed within 10 years. Even more devastating for the textile industry was that the quota for Mexico and Canada to ship clothing and textiles to the United States each year would rise slightly over the first five years of the agreement. Thus, many textile competitors moved operations to Mexico in response to increased cost competition since the textile industry involved low-skilled and labor-intensive business. In order to cut costs, John Martin needed to lower his labor costs and the only surefire way to do so would be to move production south to Mexico. However, Martin’s textiles has always had great labor relations with its workers and John Martin prided himself on