The Wall Street Journal-- Friday, July 23, 1999
Choctaw Chief Leads His Mississippi Tribe Into the Global Market
AMONG CHIEF executives, Phillip Martin is unique. Thats not only because he runs a conglomerate that does everything from make auto parts to run casinos. And its not because he is a real chief, as in chief of the Mississippi Band of Choctaw Indians.
He is noteworthy because over the past 30 years he has helped to bring a wealth of jobs within the border of the 25,000-acre Choctaw reservation scattered over patches of land in nine counties of central Mississippi.
Now that so many local Choctaws are earning too much to compete for low-wage factory work, he is doing what so many U.S. CEOs have done. He has taken his business to Mexico, making Chahta Enterprise the first Native American-owned company to leave the reservation and take a giant step into the global economy.
"We started in this business competing with the Japanese, but now all our competition is coming from Mexico," says the 73-year-old chief, now in his seventh term as leader of the tribe. Mr. Martin says the North American Free Trade Agreement that went into effect in 1994 meant that Chahta had to join the migration south or lose its contracts.
The Choctaw factory, located 300 miles south of Tucson, Ariz., in this small town in Mexicos Sonora state, makes electric-wire harnesses for car switches for Ford Motor Co. This labor-intensive, relatively low-tech work has been a staple of Native American "minority" contracting for decades. Ford, like many private companies, has pledged to buy some supplies by minority-owned firms, in this case at least 5% of its needs.
NOWADAYS, HOWEVER, few Mississippi Choctaws want to spend their days threading strands of electric cables through plastic sprockets. The profits from Chief Martins enterprises have given them employment choices they had before, and they have elected to send low-skilled work south and bring higher-paying jobs to their community.
Over the past 20 years, average annual household income on the reservation has jumped from $2,500 to $24,100. Unemployment has dropped to around 2% today from 75% in the mid-1970s. Hundreds of members of the 8,300-strong band have completed college and entered the professional class. The Choctaws now have to draw on surrounding communities to supply 80% of the labor force for the reservation jobs.
Chahtas Mexican operations, expected to gross over $100 this year, help fund investments that have created a variety of jobs: in tribal schools and in the hotels, casinos and golf courses that now dot the reservation thanks to Chief Martin. He brought an American Greetings Co. printing operation to the area, and plans to have a plastic-molding facility up and running sometime next year.
The federal government never encouraged independence among Indians, says Chief Martin, "but we believed we could create our own economy right on the reservations and we could do it with jobs."
The economics of the auto industry are changing rapidly. As big carmakers merge operations, they are looking for similar economies of scale- and ever more competitive prices- from their contractors.
"We want our suppliers to be competitive, and we dont treat minority suppliers any differently," says Ron Iori, a spokesman for Ford in Michigan. Our suppliers have to go global now."
The Choctaws opened their factory here last year, and today 1,400 employees- none Choctaws- assemble wire harnesses for the Ford Taurus, Mercury Sable and light trucks. A second Chahta plant, making car stereo components, will open in the same industrial park later this year.
CHAHTA HAD to invest more than $1 million to build a factory that meets Fords price and quality demands. The air-conditioned space sits amid those of competing harness firms like Memphis-based Thomas & Betts Co.
A typical employee at Chahta is Yaqui Indian Antonia Choqui, who works on an assembly line where wires are woven into the clusters that will later be installed under a car chassis.
Grabbing five strands of pre-cut electrical wire at a time, the 28-year-old Ms. Choqui inserts each cluster into a plastic casing at a rate of one assembly every 60 seconds. She makes $6 a day for work that would cost $7 to $12 an hour in Mississippi. (Ms. Choquis wage is somewhat lower than the average in Mexico but in line with the region.) Hers is the first of 17 steps required to make a single harness- a cheap one Chahta will sell Ford for about $8.
Clutching a bouquet of colored wires that will power the automatic door lock on a Ford Taurus, the manager of the Sonora plant, Tommy Yarbrough, explains how the economics of the industry have forced the Choctaws to relocate in Mexico.
"Today, we get paid $50 for one of these clusters." he says. "Five years ago, it would have been $65 or $70. And the car makers keep pounding away for every penny we can give back."
At full production, Chahta expects to employ 2,000 workers in Sonora, twice what the tribe employed in its harness factory back in Mississippi. When it relocated in Mexico, most of its Mississippi harness factory staff switched over another Choctaw factory, CEM, which assembles mostly replacement parts for the industry.
"Business never stands still, and manufacturing is always changing," Chief Martin says. "The challenge now is to diversify. But believe me, were in a better condition to compete than we ever were before."