U.S. Losing Race For Auto Jobs To Mexican Factories

July 7, 2015 by No Comments

In the race to win North American auto manufacturing, Mexico is not just keeping pace with U.S. plants, but gaining fast in 2015. And Detroit, which has long been the auto capital of North America, is losing out on new jobs this year to both southern U.S. states and Mexican factories.

auto manufacturing

Although the U.S. still exports more cars than Canada and Mexico, auto manufacturing jobs are increasingly heading south of the borders — both the Mason-Dixon line and the U.S.-Mexico border. Mexican factories produced one in five cars built in North America in 2014, a number that has doubled since 2004.

“Over half the capacity and 80 percent to 90 percent of investment dollars are going to the U.S. South or Mexico,” said Dennis DesRosiers, president of DesRosiers Automotive Consultants.

Here’s how the numbers break down:

  • In 2004, 11.6 million cars were built by U.S. laborers, 2.7 million in Canada, and 1.4 million in Mexico, according to WardsAuto.
  • In 2014, U.S. factories produced 11.4 million vehicles, while Mexican factories produced 3.2 million.
  • Already, Mexico is the fourth largest exporter of vehicles in the world. In 2020, experts say Mexico will produce one out of four cars out of a projected 18.6 million North American vehicles.

Mexico has two main advantages over its northern neighbors — a much cheaper labor force and a surging domestic auto market. Although Obamacare has brought down the cost of U.S. labor in recent years, the average U.S. auto worker makes about $60 per hour ($40 per hour south of the Mason-Dixon line). In Mexico, the average worker makes just $10 per hour or less, and the company’s reputation for quality manufacturing grows every year. Plus, the market for vehicles in Mexico could grow by more than one million a year.

According to the latest July auto sales report, SUV sales are surging on both sides of the border in 2015. A few years ago, hybrid sales were rising, with two out of every four hybrid vehicles sold worldwide purchased in North America. But as fuel prices stay low, SUV sales have dominated purchases in the U.S. and Mexico, particularly crossover SUV’s.

And automakers like Honda, Volkswagen, and Audi recently invested a combined $3 billion to manufacture crossover SUV’s in Mexico. In addition, even the Detroit Big Three are investing heavily in Mexican factories. This year, Ford, General Motors, and Chrysler are spending billions accelerating their manufacturing activity in Mexico.

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