outlook
Things are Looking Up South of the Border
S
itting nearly halfway between the North Pole and the Equator, Traverse City, MI, has been the site of the Center for Automotive Research’s Management Brief- ing Seminar for 50 years. One of the hot topics at this year’s event put on by the Ann Arbor, MI-based organization was focused on a spot much closer to the Equator, Mexico. That country has become the place to manufacture vehicles in North America. And it will draw in even more auto- motive manufacturing before this decade is over. According to Bernard Swiecki, CAR senior project manager,
OEMs are attracted to our southern neighbor by a variety of fac- tors. Lower costs, particularly for hourly workers, is chief among them. Add to that the country’s trade position—it has free trade agreements with better than 40 countries (the US has about half that), proximity to the large population of South America, and the ability to export across both the Atlantic and the Pacifi c— and a favorable quality-to-price ratio and it’s easy to see why Mexico’s annual auto manufacturing capacity is slated to grow from roughly 3.2 million vehicles today to 5 million by 2020. And of course, where automakers go, their suppliers are
sure to follow. Swiecki said that in a survey of suppliers the primary
reason for expanding into Mexico was at the behest of the suppliers’ OEM customers. In fact, 90 of the 100 top Tier One suppliers have set up shop in Mexico.
The lower cost of doing business in Mexico, particularly for hourly workers, defi nitely pays off. Swiecki reported that it amounts to a $647 advantage for a subcompact built in Mexico compared to one built in the US. The advantage of building and exporting a car to Europe can amount to as much as $4500, mostly because a Mexican-built vehicle arrives there duty free while a US-built vehicle does not. Ironi- cally, the cost of overland transportation of vehicles to the US is high, wiping out about $500 of the $647 cost advantage on that subcompact.
Still, he noted, Mexico does have some other serious drawbacks as a place to do business: crime, corruption, an ineffi cient legal system and a high employee turnover rate.
James D. Sawyer Yearbook Editor
While that high turnover rate exists among those em- ployed on the line, it also, surprisingly, exists among the au- tomakers’ white collar workers. These workers are paid pretty much on par with their US counterparts, both Swiecki and Juan Manuel Solano Morales (the Mexican consul in Detroit), said. In a country where the average salary is only about a third of what it is in the US, a US-level wage can provide a quite comfortable existence. With such a cushion white collar workers, too, feel free to switch jobs when working condi- tions are not agreeable or a better offer comes along.
In a survey of suppliers the primary reason for expanding into Mexico was at the behest of the suppliers’ OEM customers.
And Mexico is doing as good a job of turning out white collar workers as it is in manufacturing automobiles. Both Swiecki and Solano Morales said that Mexico is turning out as many—if not more—engineering graduates as the US. The affl uence enjoyed by white collar workers has not trickled down to their hourly brethren. While hourly wages in China have been rising smartly as the country has industrial- ized, wages remain fl at in both Mexico and the US (although, according to Joe Carlier of Penske Logistics, the Mexican average is $8 per hour while it is $38 per hour in the US). If Mexico is an automotive industry winner, who are the
losers?
Canada for one. It has seen auto production drop by 300,000 units over the last 10 years, according to numerous sources, and could lose 50% of its current level by the end of the decade. The US in that same 10-year span lost about 200,000 units of production, but is expected to grow by 800,000 units by 2020. That’s not a bad position to be in, but not nearly as good as the one predicted for Mexico, where production is ex- pected to grow by about 1.8 million units.
27 — Motorized Vehicle Manufacturing 2015
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140 |
Page 141 |
Page 142 |
Page 143 |
Page 144 |
Page 145 |
Page 146 |
Page 147 |
Page 148 |
Page 149 |
Page 150 |
Page 151 |
Page 152 |
Page 153 |
Page 154 |
Page 155 |
Page 156 |
Page 157 |
Page 158 |
Page 159 |
Page 160 |
Page 161 |
Page 162 |
Page 163 |
Page 164 |
Page 165 |
Page 166 |
Page 167 |
Page 168 |
Page 169 |
Page 170 |
Page 171 |
Page 172 |
Page 173 |
Page 174 |
Page 175 |
Page 176 |
Page 177 |
Page 178 |
Page 179 |
Page 180 |
Page 181 |
Page 182 |
Page 183 |
Page 184 |
Page 185 |
Page 186 |
Page 187 |
Page 188 |
Page 189 |
Page 190 |
Page 191 |
Page 192 |
Page 193 |
Page 194 |
Page 195 |
Page 196 |
Page 197 |
Page 198 |
Page 199 |
Page 200 |
Page 201 |
Page 202 |
Page 203 |
Page 204 |
Page 205 |
Page 206 |
Page 207 |
Page 208