Polk Audio Inc. will shift most of its remaining production to Tijuana, Mexico, and lay off 34 Baltimore workers by mid-May, the Baltimore-based manufacturer of loudspeakers announced yesterday.
The main reason for the action: Polk's U.S. workers receive an average of $14 an hour in wages and benefits, while Mexican workers get about $2 an hour.
"In Baltimore, we pay people American-type wages, and in Mexico we pay them Mexican wages," said George M. Klopfer, president and chief operating officer of the company.
"And the differential is enormous."
Mr. Klopfer stressed that the company was not dissatisfied with the U.S. work force. "We've certainly for many years enjoyed very good labor relations," he said. "It's excellent work force, good work ethic, good people."
Even though it is eliminating most of its local manufacturing -- leaving only about 10 workers to make premium speakers -- the company's headquarters in Northwest Baltimore will still have about 125 workers involved in administration, distribution, engineering, sales and marketing.
"I would stress that the headquarters of the company remains in Baltimore," Mr. Klopfer said, adding that there are no plans to move the headquarters in the Seton Business Park to San Diego, where the company has a 12-person distribution center.
"It would cost a fortune, and there is really no economic incentive to consider a move like that."
The company's Tijuana plant, which has about 138 workers, is expected to expand by about 30 workers because of the manufacturing shift, Mr. Klopfer said.
The move comes as Polk, which makes high-quality speakers for audio enthusiasts, is enjoying record profits. Its net income during the nine months that ended Dec. 25 was $1.3 million, or 78 cents per share, a 93.9 percent increase from a year earlier.
Sales during that period rose by 24.8 percent, to $30.9 million.
The result helped boost the company's stock by 35 percent, from $10 a share on Jan. 16 to $13.50 a share on Feb. 9.
Yesterday it closed at $11.75 a share, down $1.
Despite the record earnings, Mr. Klopfer said, Polk is under continuous pressure to keep its costs low to remain competitive with other consumer electronics companies.
"You have to watch all your costs very carefully," he said. "We have an awful lot of competitors that price sharp, and we have to price sharp, too, to stay in the game."
The Tijuana plant, which has been making products for Polk Audio since 1988, is managed by Cal-Pacifico Inc., a San Diego-based company that runs Mexican plants for U.S. companies.
That plant, which started with only a few dozen workers, has expanded over the years while the Baltimore manufacturing operation has shrunk from 140 workers to its current work force of about 44. At the same time, the nonmanufacturing positions in Baltimore have grown from 50 to 125, with 47 added in the past two years.