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Published: 6/10/2010

Detroit 3 may speed shift to Mexico plants

BLOOMBERG

MONTERREY, Mexico - Mexico's share of North American auto production may rise at a quicker pace as General Motors Co., Ford Motor Co., and Chrysler Group LLC seek out workers making less than 10 percent of what their U.S. counterparts earn.

The lower labor costs may help the U.S. companies build smaller cars profitably amid demand for fuel-efficient vehicles in the wake of last year's recession. Mexico's gains will come at the expense of workers in the United States and Canada, said Dennis DesRosiers, president of DesRosiers Automotive Consulting.

"There is going to be more capacity put into North America, and Mexico is going to get more than its fair share," Mr. DesRosiers said.

Moves to Mexico may speed up after Chrysler and GM lessen some of the political pressure they face by paying back government bailout money, said Michael Robinet, vice president of global forecasting for CSM Worldwide in Northville, Mich. The U.S. government has distributed about $80 billion in the Auto Industry Financing Program to support the industry.

Mr. DesRosiers said Mexico's share of North American auto production will rise to 19 percent over the next decade from an average 12 percent from 2000-09. Over the same period, the United States will lose 7 percentage points to 65 percent of the market and Canada's share will hold at 16 percent.

GM workers in Mexico earn daily wages and benefits of $26.40 on average, or less than $4 an hour, said Tereso Medina, head of the union for GM's 5,000 workers in Saltillo, a city that makes one in four Mexican autos. Ford workers in the United States earn about $55 an hour with benefits, compared with $50 an hour for Toyota Motor Corp.'s U.S. workers, according to Lewis Booth, Ford's chief financial officer.

U.S. Rep. John Dingell (D., Trenton) said U.S. automakers that received government aid should work to preserve U.S. jobs.

"I understand the economic argument for the off-shoring of production, but I think the practice is reprehensible," Mr. Dingell said. "U.S. automakers have benefited greatly from federal largesse and should feel morally compelled to retain and create as many domestic jobs as possible."

In addition to labor costs, automakers are attracted to Mexico because of the North American Free Trade Agreement and its proximity to the United States, Mr. Robinet said.



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