Forum Discussion
briansue
Sep 13, 2014Explorer
Is that why the U.S. auto workers lost their jobs and the factories moved to Mexico?
So if Mexicans quit there jobs on a whim, don't show up, call in sick, make petty wages is that why the quality of American cars made in Mexico has gone up?
I think the original post linked article stated it pretty clearly. Mexico now has the most modern up-to-date manufacturing equipment and trade agreements with many countries. Labor costs are certainly a factor but the article indicates this is not the main factor. Here are some selected quotes..........
The reason is simple: Mexico has some of the most liberal free trade arrangements in the world, and it’s making the most of them. While Washington spent a decade obsessed with the War on Terror to the exclusion of economics-based foreign policy, Mexico was busy hammering out deals, and politicians like Lozano were luring investors. Today Mexico has free trade agreements with 44 countries, making it an ideal export base for automakers from Europe, China, Japan and, yes, America. The U.S.? We have agreements with only 20 countries, and Beltway protectionists have helped ensure we haven’t enacted a new one since 2012. Negotiations on the ambitious 12-nation Trans-Pacific Partnership remain pathetically slow.
The result is what you’d expect. Eighty percent of the cars built in Mexico are exported to other countries, about two-thirds of them to the United States. “I can export duty free to North America, South America, Europe and Japan,” says Volkswagen of Mexico Vice President of Corporate Affairs Thomas Karig. “There’s not another country in the world where you can do that.”
Today automakers still like the young (average age: 24) and comparatively cheap (about $40 per day) workforce. But there are plenty of other reasons. European carmakers say Mexico’s dollar-dominated currency gives them a natural hedge against fluctuating exchange rates. For Japanese manufacturers like Mazda, Nissan and Honda, the rise of the yen against the U.S. dollar has made Japan much more expensive than Mexico to produce vehicles.
VW’s luxury unit, Audi, considered the U.S. when it was deciding where to build the hot-selling Q5 sport utility in North America, says Bernd Martens, the company’s board member for procurement. Mexico had a $500-per-car labor cost advantage, but that was offset by higher transportation costs. The clincher was Mexico’s trade policy. Specifically, the U.S. lacks trade agreements with Japan, the European Union and Brazil. Added tariffs mean a car exported from Tennessee to Brazil costs 55% more than one exported from Mexico.
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