GlobalAutoTV
Click to watch Graeme Maxton -
Click to watch Graeme Maxton -
global resources
Need an office somewhere in the world? Office suites, meeting rooms, virtual offices, network access



free downloads
GLOBAL: "Global Automotive Executive Survey 2013: Managing a multidimensional business model" report

GLOBAL: "Global Automotive Executive Survey 2013: Managing a multidimensional business model" report. 68-page report by KPMG.

proceed to download
eJournals




back to index backGLOBALtalk December,  2014


Chasing Low-Cost Labor in Mexico: Is VW Chattanooga the Last New U.S. Auto Plant?

During the 1992 presidential campaign, Ross Perot quipped that the North American Free Trade Agreement (then being negotiated) would create a giant sucking sound” of jobs leaving the US for Mexico if it ever became implemented (which happened in 1994). The lure of low cost labor would entice manufacturers to relocate production away from high cost US and Canadian labor. And that sucking sound – quiet at first – has now become a roar as automakers rush into Mexico not just for low wages but also to take advantage of its 55 free trade and economic cooperation agreements.

During the automotive bailout of Detroit, a frequent argument mentioned by those opposed to government support of GM and Chrysler was that the US already had a buoyant auto industry owned by foreign automakers. This was found in the South with its numerous new auto plants from foreign automakers (along with their existing plants in the Midwest) that were doing just fine in early 2008 before the recession hit. In 2013, vehicle production from foreign automakers in the US topped 5.0 million units (of which 3.4 million units came from the South) compared to less than 3.8 million units in 2006 lending credibility to that argument. Foreign automakers were lured to the South for new auto plant investment by low wages, right to work laws, and generous financial incentives that created a competitive advantage relative to the Detroit 3. But we are now seeing that incentives like the $550 million or so given to VW are not enough.

Most likely Volkswagen’s Chattanooga assembly plant, opened in 2011, will be the last one located within the borders of the United State for years or even decades to come. (VW will add additional production to that location with the addition of the proposed CUV). Instead, automakers have now focused on Mexico as the ideal location for new assembly plants. Kia’s announcement this week that it will invest $1 billion for a new small car plant in Mexico just adds to the total of recently completed and planned automotive investment in that country of $10 billion within the last two years.

Despite Mexico’s drug-related crime, higher energy costs, and inadequate infrastructure, the lure of cheap labor and a raft of free trade agreements are just too good to pass up. And the expectation is that Mexico will continue to improve where it has a relative disadvantages (particularly energy costs) that will offset the eventual rise in wages.

With every automaker today offering high quality, attractive design and comparable content, cost competition becomes even more important to the bottom line. At one time the logic was that small cheap cars were not profitable but for low Mexican wages…but now among the country’s newest investors are Daimler, BMW, Audi, and Infiniti to build luxury vehicles to join recently completed investments from Honda, Mazda, and Nissan. And with these assembly plants, a massive wave of investment by their component suppliers will follow. It’s only a matter of time before Toyota joins the parade and the Detroit 3 favor more investment there than here.

Source: Maryann Keller & Associates LLC
- GAI




previous page

go top
search our site


Loading

GLOBALtalk

Other articles from the same issue (December,  2014).

Managing global compensation: the quest for compliance
play read on

How to Lead a Successful Global Team
play read on

2015 Global Recruiting Trends: LinkedIn’s 4th annual report
play read on

The Untapped Value of Overseas Experience
play read on

The Future of Management: More Agile, More Digital, More Global
play read on

Insights on the changing global workforce
play read on

US and China Extend Visas to 10 Years
play read on

"How I Manage Across Cultures and Companies" by Carlos Ghosn, Chairman and CEO, Renault-Nissan Alliance
play read on

EU sees annual growth in labor costs
play read on

US Boards Lack Global Insights
play read on

Chasing Low-Cost Labor in Mexico: Is VW Chattanooga the Last New U.S. Auto Plant?
play read on

Management Capability Index India 2014 Report
play read on

German Labor Costs Growth Accelerates In Q2
play read on

US: The United Auto Workers on the Skids?
play read on

Guide to China Market Salaries
play read on

German Government May Say 'Nein' To After Work Emails
play read on

Bridge the Gap: Rebuilding America’s Middle Skills
play read on

Canada: 'Paid to learn': Facing skills shortage, manufacturers invest in training youth
play read on

US: Some employers face higher federal unemployment taxes on Jan. 31
play read on

Indonesia Companies Need to Capitalize on Improving Employee Engagement Trends
play read on

UK Immigration Update – Changes to immigration rules
play read on

US Renews Workplace Rights Agreements with LATAM Countries
play read on

Malaysians now required to pass English to graduate
play read on

Spain: Changes to the taxation of employee share plans
play read on

China: Lessons for employers on the risks of unwritten contracts and minimizing overtime liability
play read on

Long-term Trends Reshape China's Talent Landscape
play read on

U.S.: State Minimum Wages Going Up in 2015
play read on

Latin American Travel Management Challenged By Data Deficiencies
play read on

Chinese companies in US urged to learn the employment laws
play read on

Hong Kong employers risk jail time for “blind” job ads
play read on

Managers Wanted: War for Talent Heats Up in China
play read on

Study Finds Brazil Lost US$400 Billion to Fraud
play read on

Brazil Has Created 700,000 New Jobs in 2014. One Million Are Expected Till End of Year
play read on

Latin America – Pensions: Addressing the Ticking Time Bomb
play read on

Global Skills - Skilling India
play read on

Singaporeans feel “obliged” to work long, hard hours
play read on

US: IRS initiative to test company compliance around deferred compensation plans and increased focus on employment tax compliance
play read on

China: Unilateral termination of striking employees was illegal: Employers should consider the reason for strike action before dismissing
play read on

UK: KPMG's Guide to Directors' Remuneration 2014
play read on

Why This Expat Loves Living In Singapore
play read on

Cost of Living Allowances: Strategies for Relocation Success in a Changing Environment
play read on


Our Free eJournals
GlobalAutoExperts

To visit GlobalAutoExperts Directory, click here.


©2008 GlobalAutoIndustry.com | HCI Group, Ltd.
101 West Big Beaver Road, Suite 1400 | Troy, MI 48084 USA
USA Tel: +1.248.687.1060 | USA Fax: +1.248.927.0347
Fax UK: +44.(0)845.127.4765 | Fax Europe: +31.20.524.1659 | Fax Asia: +852.3015.8120