US Auto Manufactures to Shift More Production to Mexico

Detroit’s Big Three automakers are accelerating plans to produce more small cars for the North American market in Mexico as they seek to reduce labor costs, while using higher-paid U.S. workers to build their very profitable trucks, sport utility vehicles and luxury cars.

New versions of several of their popular U.S. compact cars are expected to be made in Mexico, people familiar with the companies’ plans said. They include General Motors Co’s new Chevrolet Cruze hatchback, a successor to Ford Motor Co’s Focus compact and a replacement for Fiat Chrysler Automobiles NV’s Jeep Compass compact SUV.

The decisions are prompting three major automotive research firms, who are often used by the automakers and their suppliers for industry forecasting, to project a big increase in Mexican output of small cars by the three companies.

AutoForecast Solutions estimates that GM, Ford and Fiat Chrysler will collectively produce 45 percent of their small cars for the North American market in Mexico by 2020, up from 18 percent in 2014. LMC Automotive sees the 2020 figure at 37 percent, also against 18 percent last year, while IHS Automotive projects the Mexican percentage going to 42 percent in five years time, though it calculates the 2014 level at a higher level than the others, at 25 percent. In response to questions from Reuters, the three automakers declined to discuss their specific plans.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza