The big names in Costa Rica's industrial landscape include computer chip maker Intel, sports equipment provider Rawlings, and a privately owned automotive supply company headquartered in Norristown, PA. The company in question, Seton Co., a supplier of leather seating and leather-wrapped interior components, entered Latin America in 2002.
Flash back to 1994 and all of the company's manufacturing work was done in the United States to supply General Motors, Ford, Chrysler, and Nissan. After 1994 Seton added Mercedes-Benz and BMW to the customer list with the acquisition of two companies, and from that point the company founded in the U.S. by a German immigrant was on a global march.
There's no denying that some of the plant openings were because of cost pressures and the need to be price-competitive to our customers," said Seton's Rodney Hammond, Vice President and General Manager of the Americas and Asia. Today, the 102-year-old company sells to 23 OEMs and has manufacturing operations in the U.S., Germany, Hungary, China, South Africa, and Costa Rica. Nicaragua is in line for a facility, and Vietnam is under consideration.
Economics and the business climate in Costa Rica (population 4 million) heavily influenced the decision to shut down Seton's production operation in Mexico. "We saw the costs going up in Mexico at a much faster rate than those costs were going up even in the United States. Costa Rica has much better stability. There are no big fluctuations between the local currency and the U.S. dollar," Hammond said.
Worker turnover rates also played a role in the Mexican operations' 2007 closure. "On the cutting and sewing side of our business, it's pretty labor-intensive," Hammond said. "We spend lots of time training people, so when we were dealing with 20% turnover rates it was very difficult to have continuity of quality. The work force in Costa Rica is also highly literate."
Earlier this year, manufacturing space doubled with the addition of finishing equipment at the Costa Rican plant, which is a five-minute drive from the capital city of San Jose. The finishing operations provide the "colorful, durable coatings to the leather," said Hammond. In addition to the 17,950-m2 (193,000-ft2) center's 420 employees, Seton employs 11 people in the country to handle information technology and global purchasing.
"All of the company's main items are purchased through the office in Costa Rica. On average, we buy 5 million hides a year. The hides are from cattle that are primarily grown for beef, and those hides come from Europe, South Africa, Argentina, Brazil, the U.S., and Australia. We also purchase the chemicals needed to convert the hides into leather through our Costa Rican office," said Hammond.
Seton has about a 25% market share for leather automotive seating in the U.S., and it is the market share leader in Europe and in South Africa, according to Hammond. "We're in competition with about 70 different companies, with about six of them being active globally," he said. "We were the first supplier of automotive leather to move beyond our home base of operations and open a facility in Europe, the first in South Africa, the first in China, and the first in Costa Rica."