Mexico's Auto Industry Accelerates

The fruits of free trade and global interdependence, to the consternation of anti-American, anti-globalization activists, to say nothing of anti-free trade protectionists.

And wow, the U.S. is running a $7 billion trade surplus with Mexico.

At the Los Angeles Times, "Giant Ford and Toyota investments help fuel Mexican auto industry boom":

Investment in the Mexican auto industry is soaring as automakers take advantage of low labor rates, an increasingly sophisticated workforce and a plethora of free trade agreements.

Ford Motor Co. said Friday that it will spend $2.5 billion to build and expand engine and transmission factories in the Mexican states of Chihuahua and Guanajuato, creating 3,800 jobs.

Ford’s investment follows Toyota Motor Corp.’s announcement earlier this week that it will spend $1 billion to construct a new factory in central Mexico, where it will build Corolla compact cars.

“The Mexican auto industry is coming of age,” said Mike Jackson, an analyst at IHS Automotive, an industry research firm.

To be sure, wages top the list of Mexico’s auto manufacturing advantages. Workers at the auto assembly plants south of the border earn an average $5.64 an hour compared to $27.78 for their U.S. counterparts, according to the Center for Automotive Research, an industry think tank in Ann Arbor, Mich. Those at the parts suppliers earn just $2.47 an hour. Workers at U.S. auto suppliers average $19.65.

But that’s just one factor, Jackson said. The Mexican auto industry is turning out more sophisticated vehicles than it could a decade ago. That’s why luxury automaker BMW also revealed plans for a $1-billion plant in San Luis Potosi last July. Mercedes-Benz and Nissan are building a joint, $1.4-billion plant in Aguascalientes. Audi is constructing a $1.3-billion factory near Puebla.

Altogether, auto companies and suppliers have announced almost $5.5 billion in factory expansion and construction so far this year, according to the Center for Automotive Research.

Ford aims “to make our vehicles even more fuel-efficient with a new generation of engines and transmissions our team in Mexico will build,” said Joe Hinrichs, Ford’s president of the Americas.

Already, Ford manufactures engines and assembles the Fiesta, Fusion and Lincoln MKZ in Mexico. The transmission plant to be built in Guanajuato will be Ford’s first in Mexico.

The Mexican auto industry has grown to the point at which it generate jobs beyond the assembly lines.

Automakers and suppliers report increasing reliance on Mexico for engineering, according to Jay Baron, chief executive of the Center for Automotive Research. That is turning the nation into a “key competitor” for high-paying white collar jobs provided by automotive research and development operations, he wrote in an industry report.

Baron and other analysts said Mexico’s auto industry growth is accelerated by a web of free trade agreements. The country has pacts with more than 40 nations that, combined, represent 70% of the world’s gross domestic product, according to the Center for Automotive Research.

The number of vehicles Mexico produces annually is expected to rise 54% from last year's level to nearly 5 million in 2022, according to IHS Automotive. U.S. production will rise 7% to a little more than 12 million during the same period.

Mexico's geography -- easy access to both the Atlantic and Pacific oceans -- bolsters its position as an automotive export hub.

“No other country in the world boasts an equivalent export environment,” Baron said.

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