TRU Arizona Industry Perspectives

Manufacturing & Industry Consultants

"Arizona Opportunities for Expansion -Through Regional Rationalization"

in the Arizona Manufacturer - by Sonia Vohnout, TRU Group Inc, Tucson, AZ

GETEC TRIO jobs Mexico border industry outlook Tucson Phoenix Yuma Nogales economy manufacturing firms list UA University Science Park 

Arizona manufacturers have a unique opportunity to improve their position in the increasingly competitive global market. To retain or improve their competitiveness, these companies should take more advantage of their proximity to Mexico and the existence of the North American Free Trade Agreement [NAFTA]. Arizona already consistently ranks as the third largest USA exporter to Mexico - computers, electronics, electrical equipment, appliances, machinery and plastics. Mexico is Arizona's leading trade partner and the second largest trading partner of the USA. With a population of 105 million Mexico is an attractive and growing market for Arizona manufacturers.

But few Arizona companies take full advantage of the fact that Mexico, through its network of other Free Trade Agreements with more than 30 countries, has become the eighth ranked worldwide exporter. A manufacturer that regionally rationalizes its operations to cover both Arizona and Mexico for maximum profit can reap potentially huge collateral benefits by using Mexico as a gateway to the world for their American products. Arizona economy R&D

Rationalization could for example involve producing higher technology components in Arizona and the lower technology end-product in Mexico. In recent years Mexico has much improved its manufacturing environment, infrastructure, and laws that protect American intellectual property. Arizona companies can independently own, quickly start and efficiently manage the branch operation. Although labor in Mexico is not as low cost as in China, it is cheaper than in Arizona - a direct loaded labor hour in Arizona is about $18, about $3 in Mexico and less than $1 in China. As an Arizona company it is foolhardy not to take advantage of this readily accessible resource.

Indeed, Mexico is especially a good place to assemble some of your products if freight is a large part of your cost, you have tight order-to-output cycle time, require close communication with the assembly plant, and if you want to safeguard your technology. By making those products that make sense in Mexico, Arizona manufacturers gain competitiveness within NAFTA countries and obtain open access to Mexico’s free trade partners. The aim is to strengthen the home factory yet profit from the Mexican branch operation. Market share is better protected in the United States and world sales opportunities abound. Regional rationalization is a good offensive strategy for Arizona companies who will also benefit long term from a stronger Mexican economy. :Download Article in PDF file

Arizona Economy

Arizona has been the second-fastest growing American state over the past several decades, and is expected to continue riding the crest for at least the next few decades. Over the next 30 years, Arizona will more than double in size. We can only guess what Arizona will be like, but it’s clear that a great deal of change lies ahead. Much remains to be determined. Will Arizona be a leader in the industries of the future, or become an economic backwater? Will Arizona still be the low cost leader? Will it become an exclusive place to live or be the Ellis Island of the Southwest? Only time will tell.

Although with strong ties to Arizona TRU Group Inc is very much a private sector player and does not work with any government or city-connected group that may bias our ability to provide our clients with independent business advice. The opinion articulated in the above article and published in The Arizona Manufacturer should provide comfort to our clients that we operate only in their best interests as independent industry manufacturing consultants. Most TRU clients are out of state or international!  

Arizona - Greater Tucson Economic Council GTEC - Now TREO

The Greater Tucson Economic Council GTEC has been absorbed by a new group TREO Tucson Regional Economic Opportunities was formed in 2005 after a previous economic- development entity was disbanded. The Greater Tucson Economic Council began in 1989 as the spearhead for local economic-development efforts. Then in 2004, local government and business officials began discussing forming a new group with a broader reach. in 2005. TREO was formed by the consolidation of GTEC and the city of Tucson's and Pima County's economic development departments. Since then there is a strong focus on retaining and expanding existing Tucson metro businesses, rather than attracting new ones.  In its first year of operations, about 73 percent of TREO's budget was spent on retention and expansion of local businesses. GTEC was a private non-profit corporation funded jointly by the City of Tucson, Pima County, the Town of Marana, the Town of Oro Valley, and private business investors. GTEC’s Vision is to be a leader in uniting public and private community sectors for the primary purpose of promoting, attracting and recruiting targeted global corporate activity, thereby supporting the growth and maintenance of existing activity, and creating an increased standard of living and quality of life and place for the region’s residents and stakeholders. To meet the needs of a rapidly growing region TREO was formed to serve as the lead economic development agency for the greater Tucson area and its surrounding community partners.

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Recession continues to grip Arizona and several more months are likely to pass before the economy bottoms and then begins to recover. By the middle of 2009, housing markets should bottom, credit will once again be expanding, and consumers will begin to release some pent-up demand. The business cycle will turn up and by mid-2010, robust growth will return once again. In our annual update of the long-term forecast, we find abundant growth in Arizona’s future. Some 15 million people will call Arizona home in the year 2040, which may boost the state into the top five most populous. Recent evidence shows that Arizona’s economy continued to contract in the second quarter with little prospect for recovery in the near term. The financial crisis continues to deepen, housing markets continue to swoon, consumers are in full retreat, jobs are disappearing, inflation is accelerating, and wages are stagnating. Nonresidential construction, which provided support earlier as housing collapsed, is now headed downward as well vis-à-vis rising vacancies and restrictive credit. State and local governments are struggling to balance budgets, which are heavily reliant on sales taxes. The number of jobs in Arizona will more than double over the next 32 years as 3.7 million new jobs will be created, boosting the total to 6.3 million. Arizona’s employment to population ratio will remain below its peak established in 2000 (43.4%) and after dipping to near 38% in 2010, finishes in 2040 at 42.5%. Arizona’s ratio consistently runs about 3-4 points lower than nationwide. Per capita personal income relative to the nation continues its downward slide from 85% today to nearer 80% 30 years from now. This ratio peaked at 96% in 1981 and will dip below 78% during this recession .