WHAT ELSE CAN GO WRONG?

Joe Van West, President of Appliances Unlimited in Mexico, was thinking about his arrival in Mexico City and his life during the last six months as he was sitting in his office. He remembered getting the phone call late one evening while sitting in front of the TV in his house in Taipei, Taiwan, where he was Operations Manager of the local subsidiary of Appliances Unlimited, a Belgian firm. The phone call was to tell him that Mr. Brian Hodges, the President of the Mexican subsidiary of Appliances Unlimited, had a major heart attack and would retire immediately. Mr. Van West had met Mr. Hodges several times at meetings, but he did not know him very well. The caller, his friend at headquarters, Stijn Verckens, indicated that management at headquarters was looking for a speedy replacement for Hodges, and that Joe Van West should talk to the President of the International Division at Headquarters immediately. Van West had always wanted to run a subsidiary. It would be a great opportunity, and he did tell Verckens that he would think about it.
Van West had gotten excellent reviews for his work as Operations Manager in Taipie. He was ready for the next step. He had hoped that there would be an opportunity in Canada or the United States, but he, an American citizen, and his wife, a native of Belgium, had decided a number of years ago that they would go wherever the opportunity presented itself. Van West talked to several people at headquarters, including the president for International. He applied for the job in Mexico, and was excited when he got the appointment. Being president of a subsidiary in a major market like Mexico was a big promotion and also financially rewarding. He looked forward to the new assignment.
When Van West arrived, he met with all the major players at the plant. He listened carefully and asked lots of questions about production, marketing, and sales. He sent e-mails to headquarters as well as had lengthy conversations on the phone with executives there. He went to Brussels twice to discuss the plans for the plant in Mexico.
By all accounts, his family had adjusted well. Antonio Hernandez, the Vice President for Manufacturing, had been wonderful in helping his family get settled. Mr. Hernandez and his wife had introduced Van West and his wife to one of the best clubs in the city, as well as many influential families in business and politics. The two women had become good friends. Mrs. Hernandez had helped with the everyday orientation, which consisted of things like shopping, schools, and house hold personnel. Mrs. Van West was grateful for all the assistance. The adjustment to Mexico City had been so much easier than the one to Taipei a few years earlier.
Everything had started so well that Van West had a hard time figuring out just what had gone wrong. Now he was facing major production problems, and the threat of a strike! Looking back, he could see the signs of problems building, when they first appeared they had not seemed like major issues. Well, he had to get a handle on this, or he might as well pack his bags and look for another job. He reviewed each problem in turn.

Production Issues
The plant in Mexico manufactured small household appliances, such as toasters, electric irons, blenders, and coffee machines. In addition, the factory produced parts for washing machines to be assembled by the subsidiary of an American multinational company. The small appliances were mostly for the domestic market, while the washing machines were both for the domestic market and for export, mainly to other NAFTA countries. Over the last two years, the production lines had been upgraded to make use of the latest manufacturing technology. Projections called for future expansions and increasing profits.
A few weeks ago Van West had received a phone call from the production manager of the American subsidiary manufacturing the washing machines. He voiced concern over the quality and the delivery schedule of the washing machine parts. The number of defective parts had increased considerably over the last three months, and five times the parts had been delivered late enough to affect production schedules for the washing machines.
Van West had talked to Hernandez about the issue, but Hernandez did not seem to think it was a big deal. Just the same, he promised to look into it. Even with Hernandez’s reassurances, Van West was concerned, and he started checking a bit on his own. He went to the factory floor. In the past, he had never gone by himself; Hernandez had always been with him. Van West felt a bit uncomfortable and intimated. His Spanish was limited; he had three years in high school, and although he had started taking private lessons after his arrival in Mexico, it was slow going and he was self-conscious about making mistakes. The line supervisor, Durate Gonzales spoke enough English to lead him around.
Gonzales mentioned some difficulties with some of the new machines and the reasons they had broken down several times. He also indicated that some of the newer employees were different and not as dedicated as the long-time employees. Gonzales did not talk about Hernandez, but Van West picked up that their relationship was a bit tense. He grew concerned that Hernandez had never mentioned any of these problems, and he decided to talk to Hernandez again to emphasize the importance of quality and timeliness of delivery.
He phoned Hernandez, who was out to lunch and would not be back until the next day. As he walking back to his office, it occurred to Van West that Hernandez was gone frequently. He had never paid much attention to this before but decided to keep a closer watch on Hernandez in the future. When Van West talked to Hernandez the next day, Hernandez brushed the issue with the washing machine parts aside. Gonzales was exaggerating the problems. Sure, there had been some problems in the past, but nothing to worry about. Things would be just fine. However, he also pointed out that Van West would have to make some concessions to local work attitudes. He said: “You know things are looser here. You just cannot expect the same performance you are used to. Take it easy; everything will be fine. Just don’t worry. Leave it to me. I know how to take care of things.”
Hernandez came from a distinguished Mexican family. His grandfather had been a prominent surgeon, and his father was a well-known lawyer. Hernandez himself had gone to the best schools in Mexico and had received an MBA from the University of Michigan. He knew everyone of importance in the business circles of Mexico City. But Van West was increasingly concerned about his nonchalant attitude towards day-to-day affairs at the plant. At the same time, he did not know how to best approach Hernandez. Their close social contacts made it difficult to criticize his performance. Van West was also wondering how involved and how knowledgeable Hernandez was about the production process and the new technology.
In the following weeks, Van West went several times to the factory floor when Hernandez was absent. He started to get a clearer picture of the production issues even though his limited Spanish slowed the discussions with Gonzales and the line supervisor.
After Van West had first arrived in Mexico and received a thorough briefing, he had asked Hernandez to deal with the day-to-day issues until he was settled and comfortable. He had shared his management philosophy with the management at the plant: to delegate as much as possible and include employees in the decision making process. He felt that he could use his expertise and talents best by paying attention to the big issues. Everyone had agreed with him and thought that this was a good approach.
Worker Unrest
As Van West was contemplating what to do, Vincente Garcia, in charge of Human Resources, came to inform him that the workers were getting agitated and had started to meet in small groups to discuss their opposition to the implementation of new computer programs to monitor the quality of output, evaluate production costs, and track efficiency. While the updating of production equipment over the past few years had improved the quantity of output, cost overruns had remained a problem. Furthermore, efficiency levels and quality of output had not improved as much with the new equipment as headquarters had hoped. As a result, headquarters had been pushing for the installation of state-of-the-art computer systems to monitor all phases of operations.
Van West’s predecessor had not been very familiar with computer programs. Infact, he had been very apprehensive about all the software and programs headquarters had been pushing. Finally, a year ago, headquarters had sent an expert to supervise the installation and implementation of the latest technology. Hodges had announced that Jones would be at the plant for a while and that he would work on installing technology to track performance. Frank Jones, the technician, was in his thirties. He certainly knew his stuff and was happiest when he could talk about computer technology. He had little direct contact with the workers. Whenever he had to talk to employees, he would go through the Vice President for Manufacturing. If Hernandez was not available, he would talk to Gonzalez.
Hodges had not paid any attention to Jones. When Van West arrived, he was briefed about the technology update, but with everything else going on, he had not taken the time to familiarize himself with any of the details. Things seemed to run just fine. Jones indicated that the system would soon be ready for testing and fully operational in a few more weeks. However, as employees learned a bit more about what Jones was doing, they grew concerned and uneasy. Some of the senior workers talked to Raoul Cortez, who worked with Jones, about their concerns and the new system. Cortez hinted that the new system could certainly be programmed to identify specific production problems and track individual work performance. Jones was not aware of the workers concerns and their talks with Cortez. When an article in a local newspaper discussed layoffs after the introduction of new technology at another plant, the employees at Appliances Unlimited became very alarmed. They were not going to sit there and wait to lose their jobs. Several of the leaders were talking of forming a union and perhaps even calling a strike. Van West was not familiar with the Mexican union process and union legislation, but any disruption sounded terrible.
Thinking about the possible strike, Van West was in disbelief. He had been told that the workers at the plant were happy and dedicated. Nobody had ever talked about a union, at least not in public. Labor relations had been good, and Appliances Unlimited was known for excellent pay and benefits. A shutdown at this point would seriously affect delivery contracts. It would also affect negotiations with new clients.
Van West knew he had to do something. But what? He decided to call a meeting to discuss options. He asked the following people to attend a meeting the next morning at 9 a.m.: Hernandez, Gonzales, Garcia, Jones, Gortez and Sanchez.

1. What are the underlying cultural issues contributing to the problems?
2. What should Van West have done when he first came to Mexico?
3. How should he deal with Hernandez
4. How should he deal with the labor issue?