It’s small cars, not auto jobs, making the big U.S. move to Mexico

October 19, 2016 | By Tim Mullaney | CNBC 

U.S. auto employment, including parts makers, has risen 50 percent, to about 925,000, since the aftermath of the 2008 recession.

Susana Gonzalez | Bloomberg | Getty Images
An employee works on the assembly line producing the new Ford car at the Ford Motor plant in Cuautitlan Izcalli, Mexico

 

Before Donald Trump takes to the debate stage Wednesday night for one last chance to prove U.S. trade policy is letting Mexico steal Michigan and Ohio’s auto jobs, he might want to do some research on manufacturing trends in the global auto industry.

Mexico’s biggest and fastest-growing carmakers aren’t American brands like Ford and General Motors‘ Chevy. The biggest Mexican carmaker is Nissan, and the newest plants belong to Audi and Kia, with big BMW and Toyota plants in the pipeline.

For a candidate who argues that free trade has led to the hollowing-out of U.S. manufacturing, the most ironic cut may be that car companies are building in Mexico rather than the United States, largely because it has freer trade than the United States does with the rest of the world. Critics of the North American Free Trade Agreement, who are placing all the blame on it, are denying the reality of global auto manufacturing.

“That’s what gets lost in the narrative,” said Bernard Swiecki, director of the automotive communities partnership at the Center for Automotive Research in Ann Arbor, Michigan. “Free trade agreements are driving BMW and Audi, but they’re not free trade agreements with us. Blame NAFTA all you want — it wasn’t the trade agreement that made that happen.”

“Free trade agreements are driving BMW and Audi, but they’re not free trade agreements with us. Blame NAFTA all you want — it wasn’t the trade agreement that made that happen.”-Bernard Swiecki, director of the automotive communities partnership at the Center for Automotive Research

Automakers from outside North America have invested at least $13.3 billion in Mexico since 2010, more than half the $24 billion invested in total, according to the Center for Automotive Research, which receives funding from corporations and government sources. Money from outside the NAFTA zone includes new plants for BMW 3-series sedans and Audi Q5 crossovers. By contrast, Ford’s announcement Sept. 15 that it would move small-car production to Mexico from a Michigan plant that will switch to making pickups and Broncos was the first new assembly plant in Mexico announced by a Detroit 3 carmaker since the 2008 financial crisis.

There’s no obvious patriotic reason for Munich-based BMW or Yokohama-based Nissan to base new factories exclusively in the United States, Swiecki said. Both companies make cars in America already. Nissan has plants in Tennessee and Mississippi that make about 1.1 million Altimas, Leafs, Muranos and other vehicles annually and employ more than 10,000 workers. BMW’s Spartanburg, South Carolina, plant makes about 450,000 vehicles, mostly SUVs from BMW’s X-series lines. Spartanburg wasn’t seriously considered for the 3-series sedan production line, because it’s running at its maximum efficient capacity, BMW spokeswoman Sandra Schillmoeller said.

Put foreign automakers who import from Mexico together and they make up a large and growing chunk of the $23.4 billion worth of finished autos the U.S. imports from its southern neighbor each year — $20 billion more than the $3.1 billion of passenger cars the United States ships to Mexico.

Nissan made 571,490 cars in Mexico in the first seven months of this year, according to the Mexican Automotive Industry Association, and says it sends about 40 percent of them to the United States — the rest stay in Mexico or are shipped duty-free to South America. The Detroit 3 of Ford, General Motors and Fiat Chrysler are the three next-biggest car producers in Mexico.

The trade deficit in vehicles and parts is more than the entire $42.2 billion U.S.–Mexico trade gap. In all other goods and services combined, the United States has a trade surplus with Mexico, according to U.S. statistics.

View full article at CNBC 

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