Skip to comments.Japan auto companies triple Mexican pay rather than move to US
Posted on 07/06/2020 9:33:00 PM PDT by SeekAndFind
The new North American free trade agreement that goes into effect Wednesday was touted by U.S. President Donald Trump as an engine of American job creation. But Japan's automakers are largely opting instead to keep operations in place and pay Mexican workers more or even just pay tariffs.
The US-Mexico-Canada Agreement requires 40% or more of parts for each passenger vehicle be manufactured by workers who are paid at least $16 per hour as a condition to make them tariff free in the region. Trump hailed that feature as a way to boost production in the U.S., which has a higher hourly rate than Mexico.
However, this looks to be wishful thinking. The ratio of US-Canada parts among Mexican-assembled vehicles sold in the U.S. was 13.5% in 2018, according to the U.S. Department of Transportation Highway Traffic Safety Administration. Trump's theory was that U.S. production would inevitably increase to meet the 40% requirement, but Japanese automakers, which had already positioned their production bases according to the old NAFTA regime, are not simply willing to pull up stakes and redeploy.
One reason is the cost of moving production. Honda Motor-affiliated parts maker Keihin will raise the hourly wage of employees at a factory in Mexico to $16 by next month -- triple the average rate of a parts factory in Mexico, but still cheaper than making a move. Because the pandemic has hurt earnings, the cost of the moving production will likely be too burdensome over the foreseeable future.
Auto component maker Piolax, will also raise the hourly wage at its Mexican plant to $16 within the year. The company is also installing robots to mitigate rising labor costs, President Yukihiko Shimazu said.
(Excerpt) Read more at asia.nikkei.com ...
FROM THE ARTICLE:
U.S. research agency Center for Automotive Research estimates that 13% to 24% of all cars sold in the U.S. will be subject to tariffs. If automakers pass these costs on, prices will rise by $470 to $2,200.
The center also said U.S. car sales will drop by up to 1.3 million units annually due to the Trump administration’s trade policy — including sanctions on China. It estimates that 70,000 to 360,000 jobs will be lost, leading to a $6 billion to $30.4 billion reduction in gross domestic product.
I’m going to guess the Center for Automotive Research is a bunch of stinking Leftists.
I guess I will find the cars not subject to tariffs and purchase those.
Tomorrow I’m cycling 20 miles.
Then, I’m going to treat myself to an ice cream cone.
Would you move your operation to the US right now if you were doing well somewhere else and could stay while paying a less than US living wage? I wouldn’t.
Irrationally biased reporting.
No one will *immediately* replace production facilities- of course!
What a huge loss that would be!
Over the near to mid-term though...
Lock those vehicles out of the market. Don’t need to change the trade agreement to do that, neither the wage requirement nor the tariff value. Let’s see how they respond, in reality not theoretically.
I’ll take Mexican built cars over Chicom built cars. Mexicans making triple the old wage won’t have to come here for opportunity.
Yup. I suspected it and you confirmed it.
If factory workers in Mexico are making more, then I think that’s great. A better the Mexican economy is a plus for them and us, too.
Southbound traffic may be great.
Riding the TSLA shares roller coaster still looks like the best deal. :^)
TSLA(NASDAQ) Jul 6
1,371.58 +162.92 (13.48%)
After hours: 1,432.26 +60.68 (4.42%)
The company is also installing robots to mitigate rising labor costs ..... Money shot, right there. Get machines to do the work. Savings in labor more than offset the tariffs.
Wonder how long the Mexican government will allow the factory to stay in Mexico.
Would you move your operation to the US if there’s every chance that race riots and Antifa could burn it down?
Nice. Maybe now we’ll wall climbers jumping into Mexico for a change.
SHUJI NAKAYAMA and RYO ASAYAMA, the authors, are not familiar with American capitalism.
“The pandemic has hurt earnings.” Yeah, well, the pandemic is anemic and earnings are not hurt. Nice try, though, to find an excuse to blame America for something.
President Trump listens to the best experts in the auto, airline, restaurant, hotel, sports and medical industries.
I am going to say this is not without a silver lining.
Jobs in Mexico keep Mexicans in Mexico. Better paying jobs in Mexico will help to raise the people there out of poverty and stem the flow of ILLEGAL immigration into the US. People having good jobs and a future where they live will, hopefully, encourage them to take control of their country back from the corrupt politicians and cartels.
Is that worth $500 more for a Nissan?