TribLIVE

| Business


 
Larger text Larger text Smaller text Smaller text | Order Photo Reprints

Auto plants help invigorate Mexico

On the Grid

From the shale fields to the cooling towers, Trib Total Media covers the energy industry in Western Pennsylvania and beyond. For the latest news and views on gas, coal, electricity and more, check out On the Grid today.

By The Associated Press
Saturday, Feb. 22, 2014, 12:01 a.m.
 

CELAYA, Mexico — Mexico is on track to become the United States' No. 1 source of imported cars by the end of next year, overtaking Japan and Canada in a manufacturing boom that's turning the auto industry into a bigger source of dollars than money sent home by migrants.

The boom is raising hopes that Mexico can gain enough jobs to pull millions out of poverty as northbound migration slows sharply, but critics caution that most of the new car jobs are low-skill and pay too little. Mexico's low and stagnant wages have helped keep the poverty rate between 40 and 50 percent since the passage of the North American Free Trade Agreement two decades ago.

An $800 million Honda plant that opened Friday in the central state of Guanajuato will produce more than 200,000 Fit hatchbacks and compact sport-utility vehicles a year, helping push total Mexican car exports to the United States to 1.7 million in 2014, roughly 200,000 more than Japan, consulting firm IHS Automotive says. And with another big plant starting next week, Mexico is expected to surpass Canada for the top spot by the end of 2015.

“It's a safe bet,” said Eduardo Solis, president of the Mexican Automotive Industry Association. “Mexico is now one of the major global players in car manufacturing.”

When NAFTA was signed two decades ago, Mexico produced 6 percent of the cars built in North America.

It now provides 19 percent. Total Mexican car production has risen 39 percent from 2007, to nearly 3 million cars a year. The total value of Mexico's car exports surged from $40 billion to $70.6 billion over that span.

“I congratulate Honda for its having confidence in Mexico, for having total confidence in the development of our country,” said Mexican President Enrique Pena Nieto, who attended the opening of the plant in the town of Celaya along with Honda CEO Takanobu Ito. “They're contributing to two basic objectives, generating wealth and creating jobs in this country.”

Manufacturing in Mexico is now cheaper than in many places in China, though the vast majority of the cars and trucks made in North America are still produced in the United States for domestic consumption and export to other countries.

And many of the vehicles built in Mexico are assembled with parts that are produced in the United States and Canada and cross the border without tariffs under NAFTA.

“There was a realization that there were some structural issues that had to be resolved in the auto industry to make it more competitive again. Moving parts, not all of the production, to Mexico was a good way to deal with that,” said Christopher Wilson, an expert in U.S.-Mexico economic relations for the Woodrow Wilson International Center for Scholars.

Mexico's government and the car industry say the automotive industry has become the primary source of foreign currency for Mexico, surpassing oil exports and remittances from immigrants in the United States.

 

 
 


Show commenting policy

Most-Read Business Headlines

  1. Large-scale batteries are integral in shift to renewable energy
  2. Open enrollment puts varied impact of health care law back in focus
  3. Mortgage in reach despite few dings
  4. Hackers rip into heart of open-source software
  5. Student loan debt presents paradox
  6. Energy Spotlight: Steve Anthos
  7. HBO unleashes streaming HBO Go from cable contracts
  8. Small businesses plan for profitable winter
  9. Amid market volatility, prognosis favorable for health care funds
  10. PPG to buy Westmoreland Supply paint store chain
Subscribe today! Click here for our subscription offers.