No matter what happens, Mexico will continue to attract U.S. manufacturers

Despite all the talk of renegotiating the North American Free Trade Agreement (NAFTA) and bringing jobs back to the USA, Mexico remains a good option for manufacturers looking to serve North, Central and South America. Mexico continues to have attractive benefits: A young, well-trained workforce; lower manufacturing costs; proximity to the entire North American market; and access to emerging markets in Central and South America.

An article published by the Wall Street Journal on Feb. 9 noted that Mexico is a good move for many U.S. manufacturers (“For Some Manufacturers, Mexico Still the Best Move). The WSJ listed a number of companies whose plans still include facilities in Mexico, despite all the hype from President Trump about bringing jobs back to the United States. For instance, Charlotte, NC–based steel maker Nucor plans to build a new plant in Mexico; Manitowoc Foodservice Inc. is moving ahead with plans to move its soft-drink dispenser manufacturing plant in Sellersburg, IN, and shift most of that work to facilities in Mexico; and CTS Corp., a maker of electronic components, continues its phase-out of work at its Elkhart, IN, plant by mid-2018 and “shift production to China, Mexico and Taiwan,” said the WSJ article.

Of course, there are the usual players in the automotive industry that PlasticsToday has written about numerous times: Ford Motor Co. and General Motors are both moving more production to facilities in Mexico. However both are also adding jobs and plants in the United States.

Then there’s Caterpillar Inc., maker of heavy construction and mining equipment as well as “on-highway vocational trucks,” which moved much of its work at a Joliet, IL, facility to a new factory in Monterrey, Mexico, as announced in March 2015. That plant represented a $550 million investment, according to Caterpillar's information.

But wait—there’s more! In August 2015, Caterpillar announced a decision to move construction equipment manufacturing from a plant in Mexico to an existing Cat site in Victoria, TX, two hours south of San Antonio and close to the Mexico border, where Cat manufactures excavators. It will bring 200 jobs to manufacture “on-highway” and “vocational trucks.” Production was set to begin in the first half of 2016.

It seems that the Rio Grande border is a happening place, as OEMs and their suppliers move plants and manufacturing back and forth like so many chess pieces on a board. And it will continue, according to Doug Donahue, Principle and Vice President of Business Development at the Entrada Group. Entrada offers small to midsize manufacturers a proven turnkey system for manufacturing in Mexico by managing key admininstrative functions as well as handling all issues with the Mexican government.

“Current clients are not changing plans and future clients are being smarter about their move to Mexico, with many saying they’re not moving plants but will continue to manufacture in Mexico,” said Donahue, commenting to PlasticsToday about how President Trump’s talk of NAFTA renegotiation might impact U.S. companies there. “Most of our clients currently operating in Mexico are moving full-steam ahead and making investments. Those who are not there yet are cautious. “The lack of visibility [with regard to Trump’s plans] has people in a wait-and-see mode,” Donahue added.

Even some large U.S. corporations that have plans to move to Mexico are being a bit cautious. Nucor’s CEO John Ferriola said in the WSJ article: “We’re watching the situation in Washington very, very closely” as the company’s plans could change depending on whether Trump makes any moves toward taxes or tariffs in any new trade deals.

Donahue commented that “the [NAFTA] agreement can use updating, but the devil is in the details. The Canadians, Americans and Mexicans all want the borders to work better and more efficiently, and that would benefit everyone.

“However,” Donahue added, “Mexico will adapt to whatever happens. The question is, can we create some stability so U.S. companies can take advantage of the benefits, or let the Europeans and Japanese get a stronger beachhead in Mexico? We’ll all adapt, but we’ll need clarity and stability to see how we’ll adapt.”