By on August 12, 2011

Around the time of the founding of the United States, the Mexican state of Guanajuato became home to of the one of the biggest silver mines in the world, which produced as much as 2/3rds of the world’s supply of silver at its peak. Today it’s not precious metal that’s driving Guanajuato’s booming economy, but cars, as the world’s automakers flock to Central Mexico. Between 2005 and 2008, GM, Ford and Michelin dumped $1.8b into production in the state, and the expansion is still picking up steam. In the last year, Volkswagen invested $800m in engine production capacity in Silao, Pirelli built a $210m facility and Mazda just revealed it would build a new compact car plant there in June. Toyota is said to be the next to set up shop in Guanajuato, but for the moment Honda is the latest automaker to announce new operations in Guanajuato, as Automotive News [sub] reports the Japanese automaker will spend $800m on an assembly plant there. Honda, which is fleeing a strong yen which has battered Japanese exports, will start building 200k subcompacts per year in 2014. Clearly Guanajuato’s got it’s automotive mojo flowing… but are the days of new Japanese transplant factories in the US over? Is it only a matter of time before the coyotes start smuggling Detroiters into Silao, Celaya, and the Puerto Interior??

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39 Comments on “Honda Joins The Guanajuato Gold Rush, Toyota On The Way?...”


  • avatar
    bumpy ii

    “are the days of new Japanese transplant factories in the US over?”

    Yep. The Japanese makes who sell here in enough volume to make localized facilities worthwhile are already here. The US market has found its saturation point, so there is no appreciable growth to be had and hence no need for additional facilities.

    About the only changes going forward will be the continuing shrinkage of GM/F/C’s footprint to match their sustainable business, and maybe one or two more factories to bring the bulk of H/K’s North American volume stateside.

    • 0 avatar
      geozinger

      Frankly, the Japanese transplant public relations (PR) factory lottery was over before Mercedes built it’s PR machine in Alabama. Mexico has long been gaining production in North America and NAFTA has been a supercharger for that effect. Any factory built in the USA after the enaction of NAFTA is purely PR. I’m mildly surprised that Toyota bothered to build the San Antonio plant or that VW and H/K did the same in light of this fact.

      I’m not a CEO of a car company, but it seems logical that a facility in a low wage, low regulatory, centrally located in a free trade zone country would be a pretty safe choice.

      Why bother with training folks who want to earn something close to UAW wages, when you can go several hundred miles away and pay them a fraction of what US workers make? With the free trade zone and the relative cheapness of shipping and what has to be much less interference from regulators (EPA, OSHA) why wouldn’t you set up shop in Mexico?

      It seems to me no one cares where stuff is built, and some companies are quite happy continuing on their perception of quality, whether it exists or not. Viva la Mexico!

  • avatar
    Robert.Walter

    From what I understand, currency relationship betw MXP and BRR, as well as favourable trade agreements betw BR and MX makes shipping components from MX to BR quite attractive. Maybe built-up cars following the same model are part of the key to this investment?

    • 0 avatar
      OldandSlow

      In addition to getting away from building vehicles where workers get pain Yen, the key reason is building a plant in Mexico allows the automaker to kill two birds with one stone.

      Mexico is part of NAFTA. So, these vehicles can be sold North of the Border without any tariff hassles.

      The FTA that Mexico has with Brasil allows the manufacturer to sell their output in what is now the 4th largest auto market.

      The risk is that the security situation in Mexico could deteriorate to the point that doing business there becomes a nightmare. Obviously, that scenario hasn’t happened yet, but is a risk.

      • 0 avatar
        MikeAR

        Unless it has changed greatly in the last couple years, Guanajuato is one of the best states in Mexico. It has a pretty good population of expat Americans because of the quality of life and security. I don’t think the cartels have much of a hold there unlike in the border states. That could change if Mexico itself becomes a narco-state but hopefully that won’t happen.

      • 0 avatar
        Pch101

        Mexico is part of NAFTA. So, these vehicles can be sold North of the Border without any tariff hassles.

        Tariffs aren’t much of an issue for US sales. The US import tariff on cars is 2.5%. There is the 25% “chicken tax” on trucks, but there are workarounds to avoid it, so those aren’t much of a deterrent, either.

        Assembly plants need suppliers. As more suppliers go to Mexico, it becomes easier for new companies to add their own assembly plants in reasonable proximity to them.

        A key problem for the Japanese is the strength of the yen. Recent macroeconomic events would make it seem that the prospects of being able to count on a weak yen are low. That makes foreign plants appealing to them, especially for Honda because it is not part of the keiretsu system. If the political and monetary situation are stable enough, that can make Mexico appear to be attractive.

  • avatar
    Nostrathomas

    This might not be as relevant in a globalized world, but I wonder if poor build-quality, or the perception of poor build-quality, will be an issue for consumers for all these cars built in Mexico.

    It might not mean what it used to, but “Manufactured in Japan” to me says “attention to detail and quality craftsmanship”. Being built in Canada/USA is one thing, but will that Japanese reputation be hindered by goind down south, or will nobody care if it means a cheaper product? Fair or not, Mexico doesn’t scream quality to most people…and that perception of quality is what Toyota and Honda have built their reputation on.

    • 0 avatar
      stuntmonkey

      > This might not be as relevant in a globalized world, but I wonder if poor build-quality, or the perception of poor build-quality, will be an issue for consumers for all these cars built in Mexico.

      One word… “NUMMI”. Scrung up the the “This American Life” podcast for how the Fresno plant used to be before GM hooked up with Toyota. Quality is an issue of corporate culture and management… one wonders if the perception of Mexican quality would be different now if Toyota got there first before VW.

    • 0 avatar
      eldard

      Mexico car > Alabama car

      • 0 avatar
        MikeAR

        Mexico car > Alabama car > eldard

      • 0 avatar
        eldard

        eldard > United States of Banana Republik

      • 0 avatar
        MikeAR

        Eldard = nothing

        Not much in the way of long discussions are you? I’m guessing that you aren’t American, just remember one thing you ought to be showing us a lot of gratitude, after all at some point we either saved you ass or kicked it. Either way you are better off for us being around.

      • 0 avatar
        eldard

        MikeAR = boring

        You mean your grandfather kicked or saved? You’re certainly kicking ass in the middle east now. The funny thing is, you’ve conquered nothing. lol

      • 0 avatar
        MikeAR

        Come on over here big boy if you dare. We’ll see what happens.

        By the way, when we really wage war instead of nation build, we do ok. You ound like a spoiled baby, jealous of his betters. Go away kid.

      • 0 avatar

        MikeAR:

        “Come on over here big boy if you dare” could be understood as a threat of violence. BIG YELLOW CARD. One more transgression, and you are out.

        Everybody: Please maintain a civil discourse. We can all have different opinions. We will voice them in a civilized way, or else.

      • 0 avatar
        MikeAR

        Bertel, it wasn’t intended as a threat, just a response to a bigot for his anti-Southern slur. We’ve had quick and justified responses to the use of a derogatory word for Japanese and to me, Eldard’s first post was the same as that. I’ll be glad to apologize to anyone but I shouldn’t be held to a higher standard than anyone else.

      • 0 avatar
        eldard

        That is correct. I am extremely jealous of your massive unemployment. lolz

        And you’ve won before only because of your immense size.

      • 0 avatar
        MikeAR

        Just curious, what country are you from? Sounds like your side lost. The differnce between your country and mine is that we will sooner or later replace our leadership and we will turn things around.

      • 0 avatar
        eldard

        Yeah. Good luck with that.

    • 0 avatar
      PintoFan

      Oh, it will continue. You can blame VW for that. But Toyota and Honda were already on a quality slide anyways, so I’m not sure that this move really affects the trajectory of history. Their market share loss is only going to increase, regardless of where they build the cars.

  • avatar
    highdesertcat

    Moving production to Mexico is the smart move. With all the uncertainty in the US, the constant harping of the UAW about right-to-work states, and the NLRB forcing American companies to set up shop only in unionized states, the smooth move is to take production OUT of the US. Even Ford and GM recognized that.

    I would like to see ALL foreign transplants leave the US for Mexico. That would stop the constant whining of the UAW and it would keep more Mexicans in Mexico instead of coming here illegally draining our social resources.

    • 0 avatar
      steeringwithmyknees

      Highdesertcat, the last sentence of your post is a bit simplistic and i cant stop myself from responding.

      There is no question they (along with everyone else) are draining social resources (that they pay into along with everyone else).

      “First and foremost, [illegal immigration] it’s a source of value added. The total goods and services that they consume through their paycheck, plus all that they produce for their employers, is close to about $800 billion. They’re also producing at relatively lower costs because the undocumented population typically gets about 20% less in wages than if they were legalized. That leads to lower prices for us and higher profits to employers. In addition, they’re obviously a huge consumer base. We’ve seen that 90% of the wages that the undocumented population gets are spent inside the U.S. Remittances are sent abroad, but that only represents about 10% of immigrants’ income. The numbers are becoming quite huge. We estimate about $50 billion dollars in remittances this year. That means that total consumptive capacity remaining in the U.S. is $400 billion to $450 billion. If you took away the undocumented population, it would be the worst economic disaster in the history of the U.S.”

      Raul Hinojosa July 18, 2005 BusinessWeek interview titled “A Massive Economic Development Boom”

      • 0 avatar
        Robert.Walter

        If those are the benefits, of having 30 million people living outside the system, I’d rather pay higher prices.

      • 0 avatar

        I wonder (well, not really) if Raul Hinojosa, professor of Chicano/a Studies, has ever criticized the racism of La Raza, which means, “the race”.

        FWIW, any “academic” discipline whose name ends in “Studies” is most likely worthless.

        I wonder if I can get a degree in Automotive Studies.

      • 0 avatar
        PintoFan

        Hey, I can make baseless, racially-tinged assumptions about both college majors and the writers of articles, all without forming an intelligent response to the information laid out in front of me. I can also browbeat my opponents as “leftists” and “socialists” for disagreeing with my narrow worldview.

        So where’s my offer to be a TTAC contributor?!?!

      • 0 avatar
        MikeAR

        Business Week itself is hardly a crediblle source for anything other than the usual crony capitalism, big government, reditributionist crap of the sort that used to be in the Daily Worker. The only difference is that they pretend to be a business magazine.

      • 0 avatar
        PintoFan

        MikeAR, Ronnie was the one that asserted that all “-studies” majors were worthless. So why don’t you ask him for some evidence that they are, rather than asking me to disprove a negative? I know plenty of people who have majored in social studies, African studies and other similar fields that have done fine for themselves. Just because a subject has no value to you doesn’t mean that someone else might find it interesting or useful to their planned career. You automatically assume that everything the author says is a “fraud” because it doesn’t fit your particular worldview or cater to your argument. But that wouldn’t be the first time that you’ve done it. What Hinojosa says about illegal immigrants adding to the economy isn’t controversial at all. It’s no mystery that illegals are paid lower wages, pay income and other taxes, and buy things.

        As for what Ronnie said, I would like to know what the concept of “La Raza” has to do with anything presented in this article, or the basic economic sense behind it. Just admit that you trotted out accusations of bias, completely unrelated to the topic at hand, because you either couldn’t our wouldn’t respond to steeringwithmyknees in a sensible manner. Instead, you poisoned the conversation with accusations of racism that are totally unsubstantiated and form a distraction from what ought to be a purely economic argument.

      • 0 avatar
        OldandSlow

        If this is the same Rolando Hinojosa whose books I read in 1980, he used to go by Rolando Hinojosa – Smith. Man, I can’t believe that was 30 years ago.

        Anyway, La Raza is the mixing of two races after Europeans in America arrived in 1492. If you are 100% Indio, you aren’t La Raza. The same is true if you are of 100% European. So, the term La Raza – which pre-dates Mex-Am Studies means Meztizo.

        If you are from Kansas or where ever, let me say that Spanish names of places or class structures can date back by as much as a few hundred years.

        From a Texas viewpoint, Hinojosa-Smith is correct that the hiring of undocumented workers resulted in lower prices and higher profits to employers.

        My main beefs to this type of immigration is that these workers are basically migrants, predominantly males separated from the families with no long term interest in becoming a part of the normal community in which they live. In short, they are temps.

        If you ever drive through New Mexico, South Texas or Southern Colorado, you soon realize that not everyone’s family came over on the Mayflower. This is just a personal observation. The work of Hinojosa-Smith and others documents a parallel culture that existed in these states from about mid-1700′s until the 1940′s, where families had been settled for generations. Worth a good read, but keep in mind this part of Latino culture has been in steady decline since the advent of television.

      • 0 avatar
        steeringwithmyknees

        Pinto fan – Nail > Head.

        regardless the source, i think that had some fair information to consider. I used the source because it put ideas into words in a more eloquent way than i could.

        I am not going to deny that the source is extremely biased, but what about the point being made? There are many people who are respected in many fields who agree with this argument, just like there are also many respected people in many of the same fields who disagree.

        You cant honestly believe that there wouldnt be major upheaval in this country if everyone who didnt have papers just got up and left. My argument is that saying “illegal immigrants use up our resources” is simplistic. There would be a huge ripple effect throughout the US economy if millions of people making up a giant share of the agriculture, manufacturing and service industries just got up and left their incredibly underpaid jobs. They do pay taxes – in the case of social security, they see no return. They do buy things while they are here. Their work does enable a multitude of businesses large and small to make profits.

        Some of the characterizations of undocumented/illegal workers/aliens are extremely dehumanizing and people spouting those views, in my opinion tend to miss the forest for the trees. Further, it’s rare that i hear a thoughtful argument instead of some tunnel vision viewpoint motivated by irrational fear of The Other.

      • 0 avatar
        MikeAR

        Pintofan, now I’ll ask you something. How can you say that the different ethnic and gender studies programs and majors produce graduates who are qualified for any real-world career except academia or perhaps government work? Would you let someone who was a wimmins studies (their spelling, not mine)major do your taxes? Or someone from another studies department operate on a family member? Those departments also lead the league in academic fraud, except for global warming studies that is. Do you remember Ward Churchill from UC Boulder?

        That’s pretty much as far as I’ll go now because it’s a tiresome subject and it is only a small part of the higher education system in this country that needs to be reformed. I will say this, those programs are only a small part of the problem. The biggest problem is that there are too many students by probably 80-90% in college and too many colleges by the same percentage.

      • 0 avatar
        highdesertcat

        steeringknees, for the record I am a descendant of LEGAL immigrants to America. My dad came here LEGALLY from Portugal and my mom came here LEGALLY from Germany, so I value the contributions that immigrants have made, and those, who like me, spent 20 or more years serving their country in the US military.

        I object to people from all nations, not just Mexico, waltzing into the US and then assuming squatting positions while contributing nothing to the financial well-being of my nation. Paying sales taxes at Wal-Mart does not offset paying social security taxes, workmen’s comp taxes, medicare taxes, property taxes and road taxes, which all legal residents in the US have to pay in one form or another.

        That said, the thread deals with more companies, among which Honda, setting up shop in Mexico (not more plants in Canada). There is a reason for that. Canada is much like the US in its economic and unionization policies and stifles manufacturers and other providers of jobs with high taxes and overburdening mandates and regulations.

        I firmly believe that if more companies and businesses invest in setting up plants and factories in Mexico, more Mexicans will stay there instead of coming over here ILLEGALLY.

        I’m all for LEGAL immigration. I think that the H-series of visas is the greatest thing going for America, attracting highly educated, highly qualified individuals to America for the betterment of America. Face it, if America had the same highly qualified, highly educated people, there would be no need for the H-series visas.

        Factoid here: many highly educated, highly qualified Americans seek their fortunes elsewhere, like Japan, China, India, where they are highly prized and highly valued. One of my sons spent eight years working in Japan at a Japanese International investment bank. Pay was triple in Japan in relation to what he would have been paid in the US for the same job.

        BTW, one of my daughters-in-law was born in Mexico and she came here at age 12, smuggled into the US by her other illegal-alien family members. They sent most of their money home to Mexico to support their Mexican relatives living in poverty in Mexico. So much for spending that money here in America and America deriving a benefit from their spending habits.

        Since marrying my son, decades ago, she has become a US citizen, a tax-paying and job creating business owner, and mother of four Americans, now fully grown and contributing to OUR society and economy, and being bi-lingual. You bet, they are looking at highly paid executive opportunities in Mexico.

        The sole purpose of any business or corporation is to make money for its owners and shareholders. And how they do that is to go where the greatest opportunity exists. American companies, both large and small recognize that the greatest opportunity to succeed and make money these days, is in Mexico. Honda is just the latest to gravitate in that direction.

      • 0 avatar

        PintoFan,

        I don’t care if it’s even American Studies or Jewish Studies, they don’t need their own department or disciplines. My academic major didn’t end in “Studies” but the word was in there somewhere and frankly the degree is only useful in the academic world or to impress someone impressed with degrees.

        Frankly, most degrees outside of STEM are just credentials needed in a credentialist world. FWIW, along with Charles Murray, I think that 2/3rds of college students are wasting their time in college, with about 1/2 of that 2/3 not actually having the intellectual horsepower to do true college level academic work. If all you can get are Bs in high school, maybe you’re not smart enough for real collegiate work.

        The man is a professor of Chicana/o studies and you accuse me of making a racially tinged comment? My God, the guy is a professional “Hispanic”. He’s the opposite of disinterested scholarship. But then, most “Studies” are agenda driven and hardly disinterested.

        If they’re academically worthwhile, I’m sure that those courses would fit in the Sociology or Anthropology departments. Otherwise they’re just an attempt to give the imprimatur of scholarship to something that isn’t that scholarly. In the case of the various ethnic studies departments, they also serve the function of appeasing the diversity gods and in today’s therapeutic mindset, help students be prideful about their ethnicity.

    • 0 avatar
      steeringwithmyknees

      HDC – sure, maybe you do want the “illegals” to go away. But if they do, only the immigrants that “arent supposed to be here,” the economy will be facing turmoil on an unimaginable scale.

      Dont try to mask your fear/prejudice/xenophobia by using personal anecdotes. What matters in conversations like this, if they are to be productive conversations, is what happens on the large scale – not what happened to your daughter in law. Maybe she/her family did send most of the money to another country, but i know people who spend most of it here and i would guess (dont have time to find a source, so this is only a guess) that most spend most of the tiny amount of money they make on necessary costs of living in this very expensive country.

      If you would like some interesting reading about how distorted arguments about the economic impact of illegal immigration can become (along with more accurate numbers), see: http://www.factcheck.org/2009/04/cost-of-illegal-immigrants/

      and that source doesnt even get into the profit some corporations make by hiring people they can pay a fraction of what a legal immigrant can make. And most of us, we can’t claim ancestry in this country going back THOUSANDS of years, so are we “legal immigrants,”?

      And those companies making absurd profits — what about the taxes they should pay (but dont because they have armies of CPAs, lawyers, and lobbyists)

      and those of you who are thinking “ugh factcheck.org is totally biased communist pinko lefty part of conspiracy to make the US a socio-facist state that takes its orders from George Soros or whoever the hell… … name me one better site that corrects lies and distortions found in the media and online.

      Further and going back to legal vs illegal immigrant distinction, I live in a city that has an estimated half million non-hispanic undocumented immigrants. if this argument (not the discussion we are having on this blog, but the greater debate in this country) were truly about the law and not about a fear of brown people, why is it that the polish guy i know who has no papers is able to find job after job, and doesnt fear a cop pulling him over when he drives? If you really are honest with yourself and give it some thought the next time you read something about illegal immigration, think of the fearless polish immigrant and look for the racial bias. you will find it. if you are honest and looking for the truth and not some kind of support or affirmation for the things you want to believe are real.

      • 0 avatar
        highdesertcat

        We are each a product of our own personal experiences and while you may not like people’s anecdotes, they help shape that person’s outlook on issues. We all have a different outlook on issues based on our own experiences and beliefs, don’t we? Like with the issue of illegal aliens in America.

        We are all immigrants to America and the native Americans are suspected to have migrated from the orient in the distant past over a land bridge. So, does that give illegals the right to come and go and do as they please in America?

        No other country on earth allows illegals to infiltrate their country and their economy to the extent that America has let this fester. There is no free lunch and someone has to foot the bill for these free loaders. And it is the tax paying citizens that pay their way.

        If the illegals want to come here let them register and get permission to pay their own way instead of not paying income taxes because as illegals they cannot have a taxpayer id number and as non-citizens they cannot have a social security number.

        The only thing distorted about the argument is your insistence that illegals are somehow good for America and should be welcomed with open arms. The majority of Americans are against illegals of any nationality in America. All Americans should be for legal immigration. You condone breaking a law to be here. No doubt your views would be different if you are the victim of crime perpetrated by an illegal alien, or if you have to pay for services rendered to illegals.

        But that is not what this thread is about. It is about Honda and Honda opening an assembly plant in Mexico. And in that vein I hope more transplants follow and do the same. That would be good for the UAW. And what’s good for the UAW is good for America, que no?

      • 0 avatar
        MikeAR

        Steering, I’m going to do something here that you folks do everytime one of us links to a study to prove a point. At least I’m not going to whine Faux News and stuff like that. Your link to Factcheck.org is a great attempt to prove your point. But you really don’t. Factcheck is a part of the Annenberg Public Policy Center, a pretty liberal tax-exempt foundation with a point to prove one way or the other. If doctoring a study proves that point then maybe they aren’t above doing it for the greater good.

        Besides all that, do you really understand what HDC is saying? I don’t think so. Do you understand what the word illegal means? That is his point. Illegal is against the law, it’s illegal. If you do it you go to jail, it’s a pretty simple concept to most people. Maybe in your universe we should empty the jails and not prosecute criminals because of all the economic activity they’ll provide on the outside. So all your words, all your studies are worthless. Illegal is illegal, it’s not a hard thing to understand.

      • 0 avatar
        mike978

        Mike – the Annenberg foundation was setup by a former ambassador appointed by Reagan and was a large contributor to him in the 1980′s. So it is hardly very liberal – albeit that it doesn`t correspond to your view of conservatism or the orthodoxy happening now.

  • avatar

    Around the time of the founding of the United States, the Mexican state of Guanajuato became home to of the one of the biggest silver mines in the world, which produced as much as 2/3rds of the world’s supply of silver at its peak.

    It’s not widely known, but the Conquistadors brought back so much silver and gold from the New World that it deflated the value of those precious metals in Europe.

  • avatar
    MikeAR

    Having known some people from Guanajuato, I’ll say that the quality of the cars that they build will be fine.

  • avatar
    Bryce

    Once upon a time the words “made in USA” meant it would break just after it got home American made goods were rubbish, That outlook since transferred to Japanese goods during the 60s/70s then to Taiwanese goods and so on now its claimed Chinese goods are junk and some are but none of this is accurate and if car makers want to make cars in Mexico get used to it The cars wont be any worse than US assembled are now


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