With one foot in San Diego, the other in Tijuana, and an arm in Mexicali, one might think that businessman Tom Plein is playing a game of Twister.
Far from falling down, the chief executive officer has been successful in turning around AMS Plastics by keeping the company headquarters in the county and opening production facilities in Mexico. The company manufactures custom injection molding for consumer electronics, telecommunications, industrial and other products.
With sales in excess of $20 million last year, the San Diego-based company is a far cry from the $2.5 million it rung up in 1992, he said. The company also employs about 350 people who mostly reside in Mexico.
The 17-year-old company was originally headquartered in El Cajon and had production facilities there. In the early ’90s, the company found its customers moving to Tijuana, Plein said.
While AMS Plastics shipped the parts for a time, Plein realized that another professional molding company might take their clients away if they set up shop in Mexico. A Mexican facility would have an advantage since it would not have to deal with customs, brokerages, and shipping over an international border, he said.
– Production Plant
Opened In Tijuana
In order to avoid possible competition, Plein opened a production plant in Tijuana in 1993. Finding this to be a good move, AMS Plastics opened another facility in Mexicali, in 1997.
Since most customers were in Mexico, the expansion was logical for Plein, who ended up selling the El Cajon plant in 1998. At the time of the sale, production at the plant had dwindled down to about $1 million in business, he said.
“We moved to be next door to our customers and to give them a higher level of service,” he said.
While everything has worked out well for the company, Plein has had to deal with several challenges unique to a U.S. business with divisions across the border.
Without being unique to international business ventures, Plein said the No. 1 challenge has been finding good, qualified people to run the plants and fill other high-level positions.
The business was also faced with learning things unique to the language, law and other business considerations, he said.
– Difficult To Find
Financial Support
While these challenges could be overcome with time, Plein said one of the biggest obstacles was in finding lenders.
This is a challenge that many companies face when portions of the business are housed in Mexico, according to Dino D’Auria, senior vice president and regional manager for Imperial Bank in San Diego.
When banks look at loans and financing for things like equipment, banks consider primary and secondary sources of repayment. The primary source is usually the company’s cash flow and the second is the equipment itself, he said.
In his own research, he has found that equipment housed in Mexican facilities is not necessarily a sure source of repayment due to differences in law, he said.
As a result, it can be difficult for a bank to enforce a lien on property across the border, he said.
With this in mind, banks usually look at an individual’s net worth or other U.S. property as secondary sources of repayment, D’Auria said.
– Outside Financing
Off To Slow Start
Confronted with this, Plein took it upon himself to finance the plant in Mexico for the first few years. During that time, he talked to several different banks and shared his forecasts, plans and results.
Updating the information on a quarterly basis, Plein hoped that as the company grew so would its “bankability,” he said.
The strategy proved itself when three banks made offers to AMS Plastics in 1995. Plein chose to work with D’Auria, who at the time worked at Wells Fargo Bank.
Plein said that D’Auria had taken a keen interest in the company, understood the business, and commented on forecasts and progress, even though AMS Plastics was not a client.
D’Auria said that he has watched Plein turn around the business and make good business decisions.
AMS has had a good track record and always does better than is expected, he added.
With both men acknowledging the importance of a trusting business relationship, it is no surprise that Plein moved his business relationship to Imperial Bank about a year after D’Auria started working there.
Currently, Plein has his sights set on expansion. He is already considering adding two additional plants and is also adding more high-level positions in engineering, administration and sales, he said.
