Start Me Up: As Industry Slides Into Gear, U.S. Requests Industrial Assistance From Mexico

Matt Posky
by Matt Posky

Mexico is considering reopening factories after May 18th, now that automakers and the U.S. government have requested it resume production at plants serving the American market. With supply chains needing time to catch up, vehicle assembly will be precarious until parts can be reliably sourced. And Mexico is an essential part of that industrial recovery plan, necessitating some light coordination with the United States.

Despite seeing a spike in new COVID infections, Mexico released a plan to ease restrictions on Wednesday. Making sure U.S. manufacturers have what they need has been incorporated into that strategy, with a few conditions. While industrial employees will soon head back to work, Mexico made no assurances that it will prioritize supplying the rest of North America with automobiles or their components.

Still, the country looks to be heading in that direction; the latest from Reuters hints that Mexico could relaunch supply chains anywhere between May 18th and the start of June. Officially, the country has enacted a plan to begin allowing mining and construction industries to resume operation. Manufacturers of transport equipment are also included in that list. However, President Andres Manuel Lopez Obrador dodged questions specific to the automotive sector. They’re likely to be greenlit on a case-by-case basis, especially since a few have served as contagion points in the past.

Mexico’s Office for Economic Affairs has been similarly cagey, thus far, though the plan is fresh and it’s doubtful anyone has a completely clear idea of how it’s supposed to progress. The United States has seen frequent political bickering between those wanting to remain locked down while the economy crumbles and those vying to get back to work and suffer infections as a calculated risk. Mexico is no different. The country has seen routine infighting between public officials as to how the pandemic should be managed.

From Reuters:

Lopez Obrador is trying to strike a balance between limiting economic damage and saving lives, but some lawmakers are worried at the speed that Mexico is moving to reopen businesses.

They include Benjamin Carrera, a lawmaker from Lopez Obrador’s ruling MORENA party in the state congress of Chihuahua, home to the northern industrial hub of Ciudad Juarez.

He has urged authorities not to allow manufacturers to open before June 1 in Ciudad Juarez, a border city where many maquiladoras, including auto parts makers, are located and 146 people have died of the coronavirus, including factory workers.

“Juarez couldn’t survive without the factories. But right now, the life of a worker is much more important than a job,” he said. “A job can be recovered. People’s lives can no longer be.”

Carrera may be able to test that theory if shutdowns are extended, however. Mexican auto output for April wasn’t just small, it was borderline nonexistent, and Juarez is likely to be the last region allotted normal living.

Despite a few factories reopening last week, American manufacturers and government are getting impatient. In late March, the U.S. launched a campaign to encourage Mexico to reopen assembly plants, suggesting the supply chain of the North American free-trade zone could be permanently marred if they didn’t resume production. A couple of weeks later, Mexico said it was working on a joint plan with the United States and Canada to safely reopen auto plants.

Even though the entire industry wants to get things moving, it’s the Americans who are most eager. Volkswagen previously stated that it would reopen facilities in June. General Motors, on the other hand, is acting more like a dad crazed by the concept of making “good time,” reportedly telling Mexican workers to be ready for duty by May 18th. All manufacturers have been careful not to seem overeager in the public sphere, lest they incur an unsightly PR mishap.

Wanting to get back to work is fine, but saying that’s what you want is out of the question — unless you’re Elon Musk.

Supply chain issues will absolutely be problem for equipment manufacturers and automakers reentering the mix. Going in too hard will create bottlenecks, so pretty much every player intends to ramp up production gradually (be it in Mexico or the U.S.).

“[Factories] are going to start out at a 25 [percent] to 40 [percent] production rate, they’re going to go as slow as they can to not create snags in the supply chain,” said Phil Annese, a senior director at Pilot Freight Services, which moves car parts for Ford. “If they get that supply chain stuck, that’s more trouble than anything they can have. Starting and stopping lines, that’s where the cost comes in.”

[Image: Chess Ocampo/Shutterstock]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

More by Matt Posky

Comments
Join the conversation
2 of 4 comments
  • Arthur Dailey Arthur Dailey on May 13, 2020

    We, as in the federal governments of Canada and the USA should be using this as an opportunity to restore manufacturing to our nations. The pandemic has demonstrated that in times of crisis that we cannot rely on the international supply chain to provide us with the required quantities or qualities of manufactured goods. Time to restore trade restrictions and require production 'on the home front'. However free market capitalists, investment brokers, etc will lobby just hard enough to prevent this from happening.

  • Schmitt trigger Schmitt trigger on May 14, 2020

    Absolutely correct; During WW2, the World's greatest industrial war, the US automobile manufacturing was perhaps the most important element of America's mighty "Arsenal of Democracy". It is safe to say that products built by this segment were used in every single war theater, by all of the Allied combatants. There was absolutely no way that the Axis powers could out-produce the US.

  • Wolfwagen Is it me or have auto shows just turned to meh? To me, there isn't much excitement anymore. it's like we have hit a second malaise era. Every new vehicle is some cookie-cutter CUV. No cutting-edge designs. No talk of any great powertrains, or technological achievements. It's sort of expected with the push to EVs but there is no news on that front either. No new battery tech, no new charging tech. Nothing.
  • CanadaCraig You can just imagine how quickly the tires are going to wear out on a 5,800 lbs AWD 2024 Dodge Charger.
  • Luke42 I tried FSD for a month in December 2022 on my Model Y and wasn’t impressed.The building-blocks were amazing but sum of the all of those amazing parts was about as useful as Honda Sensing in terms of reducing the driver’s workload.I have a list of fixes I need to see in Autopilot before I blow another $200 renting FSD. But I will try it for free for a month.I would love it if FSD v12 lived up to the hype and my mind were changed. But I have no reason to believe I might be wrong at this point, based on the reviews I’ve read so far. [shrug]. I’m sure I’ll have more to say about it once I get to test it.
  • FormerFF We bought three new and one used car last year, so we won't be visiting any showrooms this year unless a meteor hits one of them. Sorry to hear that Mini has terminated the manual transmission, a Mini could be a fun car to drive with a stick.It appears that 2025 is going to see a significant decrease in the number of models that can be had with a stick. The used car we bought is a Mk 7 GTI with a six speed manual, and my younger daughter and I are enjoying it quite a lot. We'll be hanging on to it for many years.
  • Oberkanone Where is the value here? Magna is assembling the vehicles. The IP is not novel. Just buy the IP at bankruptcy stage for next to nothing.
Next