Mexico's Front Seat In The Global Auto Industry

Mexico has become a crucial manufacturing hub for all the major global automakers. Access to markets and duty-free exports are a big reason why.

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President-elect Donald Trump criticizes automakers that do business in Mexico. Then both Ford and Chrysler announced plans to bring back jobs to the U.S. Still, Mexico is the largest car producer in Latin America and is increasingly important to the global auto industry. And as NPR's Sonari Glinton reports, Mexico's strengths involve a lot more than just cheap labor.

SONARI GLINTON, BYLINE: Auto executives get really uncomfortable when their world collides with the political. At the auto show in Detroit, executives were prepared to talk about self-driving, fuel economy, design - you know, typical car stuff. Instead, most car executives found themselves defending their investments in Mexico.

JOSEPH HINRICHS: Mexico has a lower cost base and a great trade agreement that allows it to sell into other countries without the kind of costs that we have in the U.S. for duties and tariffs.

GLINTON: That's Joe Hinrichs. He's president of Ford of the Americas, and he's explaining why Mexico is attractive to Ford. Now, his company got a lot of flak from the incoming Trump administration for moving jobs to Mexico. And since then, Ford has halted a plant that was in the initial stages of being built. Now, that's a move that Hinrichs and Ford's other leadership insist was not prompted by President-elect Trump.

HINRICHS: We're the fifth-largest manufacturer in Mexico, the first in the U.S. So we have a heavy amount of our production here in the U.S. for all the right reasons. We're committed to the market here. But Mexico is a balancing act in all that because consumers need a price point that works for them.

GLINTON: I caught up with Paul Eisenstein between the Lincoln and the Cadillac booths. He's the editor and publisher of thedetroitbureau.com. Eisenstein says wages are just one of the issues that make Mexico attractive. He says labor is a relatively small portion of the costs of a car overall.

PAUL EISENSTEIN: Here's where it gets complicated. Small cars right now, particularly passenger cars, are in relatively low demand.

GLINTON: OK, that's in the U.S., not so in Mexico. So there are buyers there, and production costs there are lower as well.

EISENSTEIN: Labor is only a small percentage of the overall picture. The more important issue is the fact that Mexico has more free trade agreements around the world than any other country than Israel. So that means Mexico is a tremendous base to produce cars for all over the world.

GLINTON: More than 40 car companies produce in Mexico, making more than 400 different models. Analysts predict its importance will only continue to grow. Rebecca Lindland is a senior analyst with Kelley Blue Book. She says car-wise, Mexico has kind of done all the right things. She says the United States is not losing because Mexico is winning.

REBECCA LINDLAND: Mexico is set up to ship things for logistics. So you can get product to a lot of different places fairly easily because of free trade agreements that Mexico has in other countries, because of the types of vehicles that are built there. They are in demand all over the world. But you're also servicing all of South America. You're closer in Mexico.

CARLOS GHOSN: We are the largest car manufacturer in Mexico. We're number one in Mexico.

GLINTON: Carlos Ghosn is CEO of Nissan. His company accounts for more than a quarter of the cars sold in Mexico. Ghosn says he's used to dealing with different approaches to trade depending on the government.

GHOSN: Obviously we operate in 160 countries, and every country has its own policy. And from time to time, there are changes in policy. And there are adaptations to be made. We're used to that.

GLINTON: Meanwhile, all this talk of Mexico has sent the Mexican peso into freefall and caused unrest there. And the talk about renegotiating or rebooting NAFTA has our neighbor frightened. Oh, I'm talking about Canada. They've sent representatives to remind the industry of the importance of NAFTA and Mexico to their economy. From the North American International Auto Show, Sonari Glinton, NPR News, Detroit.

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