Mexico to the Rescue As Suppliers Resume Operations

Matt Posky
by Matt Posky
mexico to the rescue as suppliers resume operations

Mexico is attempting to accelerate parts production to ensure North American automakers have enough components on hand to stay operational. The response to the pandemic saw manufacturing stalled worldwide as governments assessed whether or not we’d soon be living through a plague of biblical proportions. While fate decreed a repeat of the Black Death would not be necessary, untold damage resulted in numerous business sectors.

The automotive industry hardly went unscathed. Lockdowns stopped sales in many markets for months and plunged supply chains into turmoil as OEMs shut down to ensure staff were helping to “flatten the curve.” With the public’s interest shifting rapidly away from coronavirus mandates toward demonstrations about police brutality and racial justice, or simply devolving into riots because people are pretty angry about how poorly 2020 is playing out, suppliers and automakers are gradually moving back to more normal production schedules.

This has been easier said than done. But it is being done, and that’s the important thing.

As the United States looked to be turning a corner in terms of infection rates, it practically begged Mexico to resume funneling parts northward. Keenly aware of its own economic hardships, Mexico seemed to be receptive. Still, the road to recovery remains burdensome, posing new risks as COVID-19 persists with an economic doomsday clock ticking in the background.

This has also been the case in the United States, but Americans seem to have moved on for the most part. Despite numerous state governments imposing aggressive coronavirus countermeasures that shuttered factories, social pressures eventually forced governors to make a few exceptions for manufacturing hubs — provided they adhered to new social distancing and sanitation rules.

There have been disagreements, of course. Many health experts claimed reopening the country will make us vulnerable to secondary outbreaks (even with safety measures), urging caution. Meanwhile, economists now suggest returning to business as swiftly as possible before even more jobs vanish. In Mexico, it’s an almost identical situation, just with fewer cases overall and and a viral curve that still seems to be rising, but waiting any longer could be a death sentence for some suppliers. Not surprisingly, this has spurred a variety of opinions on what should be done.

Part suppliers are in a worse situation than automakers due to having significantly smaller cash reserves — a fact not lost on Mexico, whose federal government green light the resumption of automotive-related manufacturing on May 18th. The phased reopening was intended to provide a buffer period for new safety protocols to be put in place as factories gradually ramp up production schedules. Having seen the protocols for ourselves, they’re fairly lax and put the brunt of the oversight on foreign entities. Fortunately, they appear to be working well enough to get factories humming again.

However, things still look precarious south of the border, with local officials worried about being in charge of future hot spots and infection rates that seem less than idyllic. “It’s a slow and delicate return,” explained Eduardo Solis, an industry consultant and board member of Mexican industrial chamber Concamin. “Producers are going to start at 5 percent to 10 percent and increase production day by day. I think they will be recovering production over the course of June, but we won’t be back to pre-coronavirus levels.”

Solis, who used to head the Mexican Automotive Industry Association (AMIA), wanted Mexican suppliers to open in tandem with U.S. and Canadian facilities to ensure supply chains were in sync — something President Andrés Manuel López Obrador also wanted. But it’s actually a few weeks behind, on average, with some regions backed up a little further.

“This is not the fault of Mexico or any other country,” he recently told Automotive News. “But with Mexico being the No. 1 parts supplier to the U.S., it’s very important that suppliers return to production and the majority of them have.”

From Automotive News:

The complexity of the moment can be glimpsed in the Mexican state of Puebla, which is home to a sprawling Volkswagen assembly complex, a 4-year-old Audi plant and hundreds of suppliers. While Mexico’s federal government approved a May 18 date for the country to start a gradual return to auto manufacturing, Puebla Gov. Miguel Barbosa is resisting at the state level because of virus cases there. Puebla is now targeting mid-June for a restart.

The good news last week was that Mexican parts suppliers — who shipped about $70 billion worth of components to the U.S. last year — have mostly restarted production. And automakers such as General Motors, which makes popular pickups and crossovers at Mexican plants, are gradually increasing their output to replenish U.S. inventories. Likewise, Ford, Fiat Chrysler, Toyota, BMW, Nissan and others said they had returned to auto production there, or will this week.

[Image: Chess Ocampo/Shutterstock]

Join the conversation
  • ToolGuy ToolGuy on Jun 01, 2020

    I have installed a lot of parts on my [extended] family's fleet in the past two years. The parts from Mexico have generally been excellent.

  • Lorenzo Lorenzo on Jun 01, 2020

    This is the beginning of the end for Chinese-sourced auto parts. It's also the beginning of the end for a lot of other Chinese-sourced products too. Mexico is going to be a big beneficiary, along with southeast asian countries. With auto parts, there will be shortages at first, until other suppliers step up. The auto industry isn't going to increase production to former levels with weak sales, so there's time for those suppliers to ramp up.

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