In or Out: the Corning/Vitro Joint Venture

Topics: Negotiation, Best alternative to a negotiated agreement, Joint venture Pages: 17 (5304 words) Published: April 28, 2011
This case simulation focuses on the response of two North American firms -- Vitro and Corning -- to the challenges presented by economic integration and globalization. Some of the information and observations are draw from the author’s personal experiences. The case is not intended to support a particular approach to management, nor is there a correct solution to the case analysis. Key issues include international strategic alliances and joint ventures, corporate response to trade liberalization, organizational and national culture, and cross-cultural management and negotiation.

INTRODUCTION/SUMMARY
During the NAFTA negotiations, many U.S. firms were concerned about the reduction of U.S. tariffs on flat glass, which averaged 20%, and the perceived competitive advantages Mexican glass firms would have in the event these tariffs were removed. In the fall of 1991, in the midst of the NAFTA negotiations, Vitro, S.A., the $3 billion Mexican glass maker, signed a tentative $800 million joint venture with Corning Inc. in which two mirror companies were established – Corning-Vitro and Vitro-Corning – with each company taking an equity stake in each of these JV firms. In addition, the two parent companies agreed to a series of marketing, sales, and distribution relationships to support the activities of each of the new companies. Just two years later, the joint venture was under distress, with some of the interested parties suggesting that it be dissolved.

VITRO AND CORNING
Vitro Sociedad Anonima is a 100 year old Mexican company with roughly $ 3.5 billion in sales and 40,000 employees. As Vitro positioned itself to take advantage of the emerging North American market, CEO Ernesto Martens Rebolledo described the tightrope the company must walk: "We don't want to lose our identity as a Mexican company with a unique culture and relationship with our employees, but we don't want to be battered in the world marketplace either." In 1989, Vitro completed a hostile takeover of Anchor Glass Container Corporation and in 1992, Vitro laid off some 3,000 workers, an unusual move in Mexico at that time, given traditional notions about labor-management relations and job security.

Corning is an Upstate- New York maker of glass that traces its routes back to the mid-1800s In recent years, Corning has diversified into fiber optics and other high technology applications of glass, ceramics, and composite materials. During the 1980s, Corning’s business increasingly relied on sales of fiber optics to telecommunications firms. These firms were beginning construction of the new infrastructure to support higher-speed voice and data transmission. At the same time, sales of household, flat glass, and other traditional glass products remained important to the company.

NAFTA AND GLASS
During the early part of NAFTA negotiations (1989-1991), U.S. makes of household and flat glass products expressed concern about their ability to compete against cheaper Mexican imports, and some even accused Corning S.A of unfair trading practices. Guardian Industries Corp., a Michigan based manufacturer of float glass, the high quality flat glass used in mirrors, insulated windows, furniture and automobiles complained that Vitro, the only Mexican producer of float glass, was engaged in anti competitive practices by trying to intimidate a Mexican glass distributor who was considering buying a product from Guardian. Vitro exported approximately $120 millions in float glass and related products to the United States in 1990. Other glass makers argued that even with present U.S. duties averaging over 20% on household glassware from Mexico, after duty prices of the Mexican products were significantly below those of U.S. producers, owing in large part to considerably lower labor and energy costs.

In February of 1991, the International Trade Commission issued a report regarding these allegations, finding that although. Vitro Crisa (an...
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