Workers assemble Honda Fits at a new factory in Celaya, Mexico, last year. Ford and Toyota plan to spend $3.5 billion on new factories and expansions in Mexico, helping fuel an auto industry boom in the country. (Honda)
On April 18, 2015, Jerry Hirsch writes in the Los Angeles Times:
Investment in the Mexican auto industry is soaring as automakers take advantage of low labor rates, an increasingly sophisticated workforce and a plethora of free trade agreements.
Ford Motor Co. said Friday that it will spend $2.5 billion to build and expand engine and transmission factories in the Mexican states of Chihuahua and Guanajuato, creating 3,800 jobs.
Ford’s investment follows Toyota Motor Corp.’s announcement earlier this week that it will spend $1 billion to construct a new factory in central Mexico, where it will build Corolla compact cars.
“The Mexican auto industry is coming of age,” said Mike Jackson, an analyst at IHS Automotive, an industry research firm.
To be sure, wages top the list of Mexico’s auto manufacturing advantages. Workers at the auto assembly plants south of the border earn an average $5.64 an hour compared to $27.78 for their U.S. counterparts, according to the Center for Automotive Research, an industry think tank in Ann Arbor, Mich. Those at the parts suppliers earn just $2.47 an hour. Workers at U.S. auto suppliers average $19.65.
But that’s just one factor, Jackson said. The Mexican auto industry is turning out more sophisticated vehicles than it could a decade ago. That’s why luxury automaker BMW also revealed plans for a $1-billion plant in San Luis Potosi last July. Mercedes-Benz and Nissan are building a joint, $1.4-billion plant in Aguascalientes. Audi is constructing a $1.3-billion factory near Puebla.
Altogether, auto companies and suppliers have announced almost $5.5 billion in factory expansion and construction so far this year, according to the Center for Automotive Research.
Ford aims “to make our vehicles even more fuel-efficient with a new generation of engines and transmissions our team in Mexico will build,” said Joe Hinrichs, Ford’s president of the Americas.
Already, Ford manufactures engines and assembles the Fiesta, Fusion and Lincoln MKZ in Mexico. The transmission plant to be built in Guanajuato will be Ford’s first in Mexico.
The Mexican auto industry has grown to the point at which it generate jobs beyond the assembly lines.
Automakers and suppliers report increasing reliance on Mexico for engineering, according to Jay Baron, chief executive of the Center for Automotive Research. That is turning the nation into a “key competitor” for high-paying white collar jobs provided by automotive research and development operations, he wrote in an industry report.
Baron and other analysts said Mexico’s auto industry growth is accelerated by a web of free trade agreements. The country has pacts with more than 40 nations that, combined, represent 70% of the world’s gross domestic product, according to the Center for Automotive Research.
The number of vehicles Mexico produces annually is expected to rise 54% from last year’s level to nearly 5 million in 2022, according to IHS Automotive. U.S. production will rise 7% to a little more than 12 million during the same period.
Mexico’s geography — easy access to both the Atlantic and Pacific oceans — bolsters its position as an automotive export hub.
“No other country in the world boasts an equivalent export environment,” Baron said.
Already large numbers of Mexican-assembled Volkswagen and Nissan vehicles are going to Europe, South America and other global markets, Jackson said.
Much of what gets built in Mexico will be exported north to the United States and Canada.
“The lion’s share of what we will export from Mexico will be for the rest of North America,” said Jim Lentz, chief executive of Toyota North America.
But the trade is not completely one-sided. The United States is feeding the Mexican auto industry with billions of dollars of materials. In 2013, the United States had a trade surplus with Mexico of nearly $7 billion exporting plastics, according to the Center for Automotive Research. It also has big surpluses in other raw materials, including steel and aluminum.
Even as the Mexican auto industry grows, automakers continue to invest in the United States. The car companies announced $10.5 billion in U.S. plant investment, according to the Center for Automotive Research. That compares to $7 billion in Mexico and just $800 million in Canada.
Virtually all of the U.S. spending is on retooling, reconfigurations and expansions of existing factories. That’s far different from Mexico, where much of the spending is on new factories.
Auto companies have announced no new assembly plant plans in the United States since 2009. (The Tesla Motors factory in Fremont, Calif., is considered a reopening since it is on the site of a former joint Toyota-GM plant.) During that same time, six new auto factories were announced in Mexico, representing a combined investment of more than $8 billion, according to the Center for Automotive Research.
Toyota’s new factory in Mexico will be its first anywhere for years. The automaker stopped building factories in 2013, saying that it needed to get more cars out of its existing plant network before investing in new facilities.
The pause also has given the automaker time to rethink how it will construct new plants. Toyota said the cost of manufacturing a vehicle at the new factories will be approximately 40% less than what it spent to produce a car in 2008.
The factory will employ 2,000 workers and will be built in the state of Guanajuato. It will be the first to employ the use of what the automaker is calling “Toyota New Global Architecture.”
“This will be adding our newest technologies to build the best vehicles for customers around the world,” Lentz said. “This is not just about low labor cost.”
http://www.latimes.com/business/autos/la-fi-hy-ford-toyota-mexico-factories-20150417-story.html
This is a story that should depress every American––the further outsourcing of jobs and natural resources as the American auto manufacturing industry invests in new factories in Mexico, under existing free trade agreements.
Auto companies have announced no new assembly plant plans in the United States since 2009. (The Tesla Motors factory in Fremont, California, is considered a reopening since it is on the site of a former joint Toyota-GM plant, though it does entail substantial technological retooling and reconfiguration.) During that same time, six new auto factories were announced in Mexico, representing a combined investment of more than $8 billion, according to the Center for Automotive Research.
Toyota, who is investing heavily in Mexico, said the cost of manufacturing a vehicle at the new factories will be approximately 40 percent less than what it spent to produce a car in 2008 due to a significant savings in labor costs ($2.47 to $5.64 an hour compared to $27.78 for their U.S. counterparts. Because of the nature of global competition, ALL American auto manufacturers must follow suit.
Still, according to Center for Automotive Research, even as the Mexican auto industry grows, automakers continue to invest in the United States. The car companies announced $10.5 billion in United States plant investment which includes retooling, reconfigurations and expansions of existing factories. That compares to $7 billion in Mexico and just $800 million in Canada. Of course, “retooling” and “reconfiguration” is really robotic super-automation employment housed in existing factories that will expand to accommodate technological efficiency.
Americans remain ASLEEP as the industrial prowess of the United States is sabotaged by a wealthy ownership class who seeks to further concentrate productive capital asset ownership while seeking the lowest possible wage and operational costs to maximize profitability.
But let’s not completely blame those American capital owners for not insisting on exclusive investment within the United States in the technological innovation that is exponentially shifting the technologies of production and negating the necessity for labor workers while devaluing the worth of labor. The blame also should be put on our so-call “political leaders” for not implementing economic policies that would facilitate the rapid technological growth of the United States economy, while simultaneously creating new capital owners and “customers with money” to buy the products our economy is capable of producing. Such implementation MUST provide insured, interest-free capital credit to finance retooling, reconfigurations and expansions of existing factories as well as finance the building of new factories, owned by employees and citizens using Employee Stock Ownership Plans (ESOPs) and Capital Homestead Accounts or “CHAs” (a super-IRA or asset tax-shelter for citizens) extended to EVERY child, woman, and man by their local bank to purposely acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income.
The media and academia also are the blame for not educating Americans about why OWNING productive capital assets that build wealth and produce income is SO CRITICAL to their future. For example, no where in this article did the author, Jerry Hirsch, even mention OWNERSHIP or question WHO WILL OWN these new productive capital assets. If he had, he would have had to come to the realization that the already wealthy ownership class will just get RICHER and RICHER by monopolizing ALL future economic growth.
Oh, but wait, Hirsch did mention that somehow we should be “cheering” because the web of free trade agreements will enable the United States to feed the Mexican auto industry with billions of dollars of raw materials, such as plastics, steel and aluminum––in other words, depleting our natural resources without directly benefiting Americans owning the new productive capital manufacturing assets. Again, this bolsters the earnings and wealth building of an exclusive wealthy ownership class that is steadily acquiring ALL of AMERICA and creating tremendous economic inequality, both income and wealth ownership.
WAKE UP AMERICA!! WAKE UP Jerry Hirsch, WAKE UP Los Angeles Times and take responsibility for your lack of actionable responsibility. And let’s not leave out all the politicians who just play us with memes and slogans that really never delve into solutions other than coming up with ways to take from those who already own, instead of empowering EVERY child, woman, and man to contribute productively to the FUTURE economy through their OWNERSHIP of “tools,” as well as their labor when necessary. In this way we can build a future America that can support general affluence for EVERY American by putting us on the path to inclusive prosperity, inclusive opportunity, and inclusive economic justice.
