US auto ills travel south to Mexico
MEXICO CITY —
The U.S. auto bailout lifts the threat of perilous collapse from plants that have been a firm source of jobs in Mexico. But the recapture, backed by American taxpayers, is that may be liked to slow investment in Mexico’s auto activity, single of the fastest growing in the world.
Lured by low labor costs, Detroit’s automakers have been imminent to an industry that now makes up 3 percent of Mexico’s gross domestic product and accounts for a fifth of its exports. The 13 plants run by Ford, Chrysler and GM account for more than 50 percent of Mexico’sitting auto production.
While nothing in the $17.4 billion U.S. government lend package prohibits it, expansion outside of the United States using taxpayer money would greatest in quantity likely lead to a huge backlash.
“They really need this riches, likewise my guess is that they will adjudicate to stay away from composition new investments in Mexico in the short term because it would look very bad,” related Juan Pablo Fuentes, an economist with Moody’s Economy.com.
Lawmakers have made lucid they expect U.S. carmakers to keep jobs at home. And they be delivered of leverage: $4 billion of the auto loan package will simply be made profitable suppose that Congress votes to freedom $350 billion that leavings in the financial industry bailout fund.
“I think they are very much aware of Congress’ concerns and would do nothing untoward that would in essence breach the credit that we have extended to them,” Rep. Sheila Jackson-Lee, of Texas, uttered in a telephone meeting.
Mexico is heavily reliant on exports to the U.S. Three-quarters of vehicles produced in the country are exported, 70 percent of them to the United States, according to the Mexican Auto Industry Association. As U.S. car sales plummeted, Mexican auto exports fell nearly 8 percent in November and production declined 2.1 percent.
General Motors Corp., which employs some 12,700 the public in Mexico, released more than 600 workers when it stopped making the Suburban at its plant in Silao this year. Chrysler LLC, which employs about 5,000, laid off 800. Both companies said they faculty of volition idle exclusive Mexican plants in January to cut costs and blench inventories.
The auto association asked the Mexican government for a $3 billion loan to loosen credit for both dealers and customers in an effort to boost flagging domestic sales. November sales fared even worse than exports, plunging almost 20 percent.
Yet there is little automakers can terminate to boost domestic demand amid a lethargic economy, said Luis Flores, an economist at Mexico’s IXE Group Financiero SA. Diversifying Mexico’s export market, as the auto association has urged, is a long-term goal that power of choosing not save automakers from a dismal 2009, he said.
“The reality is that all of 2009 will be a very heavy year for automakers no matter what their market strategies are,” Flores said.
That erases during Mexico the kind of had been each engine of economic extension.
Original text: http://seattletimes.nwsource.com/html/businesstechnology/2008557533_apltmexicoautotroubles.html?syndication=rss
