Mexico: The Next Great Automotive Battlefield
At the half-dozen or so international auto shows this year, nearly every major automaker unveiled new models that seemed tailor-made for American roads. Despite the seeing the rebirth of struggling American luxury brands and a host of cars that will hit U.S. showrooms sooner rather than later, the real target for these models is China. Everything from the new Ford Taurus to the flagship Cadillac CT6 has been designed to appeal to the world’s largest auto market, making America’s second-place status in auto sales seem glaringly obvious.
But China is only one part of the complex and expanding global auto market. Another transformation is taking place just south of the American border, and car makers are pouring billions of dollars into making Mexico one of the next great manufacturing centers in the world. In 2014, Mexican factories produced 3.2 million cars, exporting 82% of them (mostly to the U.S. and Canada) and becoming the seventh-largest auto-producing country in the world. For 2015, it’s projected that production will increase to 3.5 million vehicles, with analysts predicting that over five million cars could be rolling out of Mexican plants annually by 2020.
While executives from General Motors and Ford at the Shanghai Auto Show unveiled new international models to be built in Chinese factories, Hyundai announced a plan to build a factory in Mexico once its domestic sales reach 50,000 annually, a mark the company is projected to hit by 2018. It will join its sister company, Kia, which has begun construction on a $1.5 billion plant in northern Monterrey set to open in 2016.
Toyota followed suit a few days later by ending its three-year freeze on building new plants and announced a plan for two new centers in China and Central Mexico. Nissan, GM, and Volkswagen have long had manufacturing centers in Mexico, and Audi, BMW, Honda, and Mazda are constructing their own plants set to open by the end of the decade.
To put it mildly, this influx of automotive jobs into Mexico is a mixed blessing. The country’s low cost of labor and vast portfolio of free trade agreements has become too attractive for automakers to ignore. Mexico currently has agreements with 45 countries, making it easy for global companies to both invest and export from the country, keeping costs down and avoiding steep tariffs. And while the average American auto worker makes $58 an hour (workers at Volkswagen’s non-union Chattanooga, Tenn., plant make $38 per hour), comparably skilled Mexican workers are paid an average of $8 per hour.
Compared to Mexico’s minimum wage of $4.50 per day, this has been a boon to the 675,000 Mexican auto workers. The country’s automotive workforce has doubled in the past decade, contributing to the country’s steady return to economic stability. This trend looks like it will only increase, as Ford’s recent plan to open two new factories will add 3,800 jobs, while Toyota’s plant will add additional 2,000 jobs.
But this trend could create an uncertain future the American auto worker. Speaking with The Washington Post, Harley Shaiken, a professor of education and geography at the University of California at Berkeley, said, “Mexican auto factories and Mexican manufacturing offer First World productivity and quality at Third World wages,” something will be increasingly difficult for highly paid American auto workers to compete with.
Along with the influx of foreign automakers building non-union plants in the American South, the United Auto Workers has lost a great deal of influence in recent years, and as manufacturing shifts south, non-union workers could see their jobs being jeopardized even sooner.
But while Mexico continues to expand its automotive production, it’s still long way off from any kind of parity with the U.S. market. In 2014, a total of 11,660,699 vehicles were built in America. In contrast, Mexican factories produced 3,365,306 vehicles, less than one-third of American production. As the automotive market continues to evolve, this latest shift to Mexican manufacturing is proof that the decades-long battle over ethics, profitability, and labor will only grow in complexity as companies from Detroit, Germany, and Tokyo continue to expand globally.
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