Business TrendsAffecting McAllen &

Reynosa

City of McAllen

The City of McAllen and M.E.D.C. work withGlobal Companies planning a strategic move orexpansion to service their industry from a cost

competitive market.

18 Year History

Since 1988 We Have Recruited:

Companies Jobs Square Footage Occupied To Date

McAllen Metro 229 20,000 16,000,000Reynosa Metro 310 100,000 25,000,000Total: 539 120,000 41,000,000

International Relationships

The City of McAllen & M.E.D.C. maintains a strong international relationship with Mexico. We work closely with Mexican officials in Reynosa, Tamaulipas, to attract new investment, develop infrastructure, enhance workforce education and training, and promote the construction of worker housing.

International Clients

CANADA:EMU PlasticsProgressive Molded ProductWindsor Mold

DENMARK:Unomedical, Inc.

ENGLAND:BSN MedicalTI Group Automotive Systems

CHINA:Ganzhou China/Import Export

FINLAND:Nokia Mobile PhonesPerlos Inc.

FRANCE:Cinch ConnectorsHutchinson AutomotivePechiney PlasticsValeo Electornics

GERMANY:Autech DraexlmaierLandis & GyrSiemens EnergySiemens VDOKern Liebers

KOREA:LG Electronics (Zenith)

International Clients

ITALY:Haemotronic

JAPAN:AlcomAlps AutomotiveBigston CorporationFujitsu TenGSWJVCMatsushita Electronic MikuniPanasonic Service CompanySharpShin Etsu Polymers

MEXICO:Galvotec AlloysSabritasSelect Elastics

NORWAY:Kongsberg Automotive

SWITZERLAND:Siemens-Landis & Gyr

SWEDEN:Atlas Copco GroupKuehne & Nagel

TAIWAN:King’s Prosperity Industries

UNITED STATES:Bissell, Inc.Black & DeckerBrunswickC.R. BardCorning ScientificDelphi AutomotiveEaton CorporationEmersonEscalade SportsHoffman EngineeringJabilJohnson ControlsKimballMaytagR. R. DonnellySymbol TechnologiesTRW

McAllen Residents

Reynosa Residents

TI Automotive

MikuniDelphi

Corning Cable Systems

Fujitsu TenSymbol Technologies

ARC AutomotiveDraexlmaier

National Worker Deficit

• Shortages of labor constitutes the foremost challenge confronting U.S. manufacturers

• In 2005 90% of manufacturers surveyed by the National Association of Mfg. reported moderate to severe shortages of production workers and 65% indicated a moderate to severe shortage of scientists and engineers; 54% say this is causing moderate to high negative impact on customer service.

• NAM estimates U.S. mfg. will face a deficit of 10 million workers by 2020.

• According to a recent article in Forbes magazine it was stated that currently there is a person turning 60 yrs of age every 7 seconds in the U.S. and in 3 years 40% of the existing work force will reach retirement age.

Future National Worker Deficit

APPROACHING DEFICIT OF WORKERS: THE NATIONAL PICTURE

Future Texas Workforce

APPROACHING DEFICIT OF WORKERS: THE VIEW FROM TEXAS

0

200000

400000

600000

800000

1000000

1200000

1400000

2000 2005 2010 2015 2020 2025 2030 2035 2040

Future McAllen Workforce

Greater McAllen Region Working Age Population (Ages 18-64)

Population Density

Source: CIESIN, Columbia University

Population

10 Million People Within a 150 Mile Radius

Population with College Education 2000 % Share

0.0 5.0 10.0 15.0 20.0 25.0

Acuña

Agua Prieta

Tecate

Nogales

Tijuana

Matamoros

Juárez

Nuevo Laredo

Piedras Negras

Reynosa

Mexicali

Guadalupe

Guadalajara

Chihuahua

Torreón

Monterrey

Population with High School Education 2000 % Share

0.0 5.0 10.0 15.0 20.0 25.0

Acuña

Juárez

Nuevo Laredo

Piedras Negras

Agua Prieta

Matamoros

Chihuahua

Tecate

Reynosa

Tijuana

Guadalajara

Torreón

Monterrey

Mexicali

Guadalupe

Nogales

75

85

95

105

115

125

135

145

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Reynosa

Juarez

Chihuahua

Tijuana

Matamoros

Laredo

Unit Labor Cost

L

P

L

WULC

0

50

100

150

200

250

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Reynosa

Juarez

Chihuahua

Tijuana

Matamoros

Laredo

Export Market Share

• Companies have found a way to compete with low cost areas outside North America by encouraging customers to custom order with a short turn around time (24-72 hours)

• Increases customer satisfaction, reduces finished goods inventory, increases margins

Manufacturing Trends – Speed to Market and Customization

This fundamentally changes how companies compete in the Global Marketplace

• Past Minimum Requirements

• Cost control, Total quality, Continuous Improvement

• Future Current Requirements

• Flexibility

• Collaboration

• Boundary spanning organization, and

• Rapid response Extended Production Enterprise

• Past Minimum Requirements

• Cost control, Total quality, Continuous Improvement

• Future Current Requirements

• Flexibility

• Collaboration

• Boundary spanning organization, and

• Rapid response Extended Production Enterprise

Rapid Response Manufacturing Center

Viper Pro SLA System

Emerging New Global Logistic Routes/Distribution Trends

New Global Shipping RoutesNew Global Shipping Routes

• 25% cost reduction over traditional routes

• Avg 3 day reduction over traditional routes

• Distribution of globally produced products from one point

• Makes Texas the “3rd Coast”Provides direct connectionfrom one of the largest Cities in the world to thepopulation centers of Texas.

Distance from Reynosa To: Miles KmMonterrey 140 225Manzanillo 833 1341Altamira 316 508Mexico City 636 1024

Current Distribution Channels

Mexico Produced Goods

Current Asia

Goods arrive at

U.S. Ports

Current South

American goods

arrive at U.S. Ports

Current European

goods arrive at U.S. Ports

The requirement to ship complete orders to customers require companies to have multiple distribution centers – Products must be

moved to those cities to be staged for sale

Emerging Distribution Channels

Inventory maintained in piece part state – manufactured per

customers specification – shipped directly to

customers regional DC; stores, or home.

Estimated cost reduction of a minimum 12% over

current system.

Ports of Manzanillo And Lazaro Cardenas

Port of Altamira

Regional Multi-Modal Center for South

Texas

• Procure funding to construct a Regional-Multi Modal Center adjacent to the McAllen Foreign Trade Zone, and only minutes from the Pharr/Hidalgo ports of entry, and the soon to be constructed Anzalduas Bridge.

• Funds will be used to build upon existing infrastructure and to improve the flow of Northbound goods through Hidalgo County to major U.S. population centers throughout the U.S..

Project Description

• Establish a Regional Multi-Modal Center to achieve the following:

• Improve the cost competitiveness of our local manufacturers

• Minimize wear and tear on Texas and national highways

• Reduce fuel consumption

• Reduce truck emissions

• Create Direct and Indirect jobs for our community

• Establish alternate mode of transport for auto assembly plants

• Support efforts to establish south Texas as a major North American

• logistics and distribution hub with global access through Mexico ports (3rd Coast concept)

Strategic Objective

•Enhanced motor carrier

•Non-conventional intermodal

What is Bi-Modal Transportation?

Contractors will pick up loaded trailers from shippers and take

them to a train assembly terminal in the McAllen Foreign Trade Zone

Road Railer Technology

RoadRailer's® unique air ride system lifts the trailer as it is backed over the bogie. It then lowers the trailer and lifts and locks the tires above the tracks.

Air Ride System

Contractors hookup and deliver trailers, providing premium service for their customers.

Local Delivery

Immediate:

- Road Railer assembly facility

- Cross docking

- Equipment Storage / Maintenance

Long Term:

- “Double Stack” container services

- RVSC overflow / Constructive Placement

- Container Freight Station

Multi-Use Facility

Ware Rd

23rd St

Proposed Site

Military Highway

FTZ

Legend

Hub Cities

Port Cities

Rail Traffic

Truck or RailTraffic

Existing Rail

Intermodal Intermodal YardYard

Anzalduas International Trade Bridge

2007

Reynosa, Mexico

Sharyland PlantationSharyland Plantation

N

State Highway

Monterrey Federal Highway

Monterrey Federal Highway

Del Norte Del Norte IndustrialIndustrial

Villa Florida Villa Florida IndustrialIndustrial

Proposed AssemblyPlant Site