Last Friday the second largest automaker – Ford Motor – announced it would further invest $2.5 billion in Mexico to start the assembly of a new generation of high mileage engines and transmissions, delivering in the process 3,800 new jobs.
General Motors not long ago also decided it would spend $5 billion in Mexico, with the decision coming from the two largest US carmakers triggering a bitter response from the United Auto Workers union which called the actions one of the major subjects to be discussed during the upcoming labor negotiations with the Detroit Three – in their view the jobs should have been created in the United States, not Mexico. Dennis Williams, the UAW president, called Ford’s move “disappointing, but not any more disappointing than GM’s decision to invest $5 billion in Mexico,” or the fact that each of the six best-selling automakers in the U.S. market have recently increased their expenses in the neighboring country. Mexico is attracting billions of dollars in investments due to its strategic geographical position – at the crossroad between South and North America, proximity to the rising US market, the lower labor costs and the myriad of trade agreements with numerous regions.
The Mexico relocation of forces is a complication for the UAW, since Mexico factory workers are paid less than their counterparts in the US, complicating the union’s drive to both increase base salaries and safeguard US jobs at all three Detroit automakers. Besides Ford’s investment strategy, the string of announcements of investments in Mexico was recently complemented by Toyota’s decision earlier last week to end its self-imposed three year expansion freeze with a Mexico-built factory worth one billion dollars.