Another U.S. auto company eyes more manufacturing in Mexico

Keeping an eye on the United Auto Workers union talks with the Detroit automakers, it's apparent that things aren't going smoothly. Several mainstream media reports note that the discussions aren't going well, even as both management and the union are attempting to strike a balance between the wants of both sides.

The Detroit Free Press reported that the "deal raises the top-tier wage, closes the gap between the two tiers (and does so by a larger degree than most expected) and forges an agreement to begin tackling the healthcare gap the union faces with salaried workers."

Mexico flag
Image courtesy Salvatore Vuono/

One bit of good news is that the contract will create a path for workers just starting their careers in the auto industry, something that the Detroit Free Press notes had been lost over the past decade. This career/wage path will be one in which workers can start at $17 per hour and eventually rise to $25.

However, there's always the trade off when unions get what they want—or most of it anyway. Management has options and it will play that hand in return. The plan calls for Chrysler to "move most of its small and mid-size car production to Mexico, but solidify the manufacturing of trucks, SUVs and crossovers in the United States. Those vehicles sell better and provide better margins for the company," stated the Detroit Free Press. "The risk, for workers, lies in a gas-price spike or economic downturn."

According to a number of reports, the mid-size Chrysler 200 and compact Dodge Dart would move to Toluca, Mexico, from Sterling Heights and Belvidere, respectively. A new Jeep crossover also would be manufactured in Mexico "to replace the discontinued Compass and Patriot, which are currently built in Belvidere."

In July, in another blog about the United Auto Workers and its talks with Ford Motor Co., I noted that Ford one-upped the union by announcing plans to shift some work abroad. Ford announced that the company will end U.S. production of its lower-margin vehicles—the Ford Focus and C-Max—in 2018, and move that work offshore, "possibly" (almost certainly) to Mexico.

Mexico has become an attractive option for automotive manufacturing. While most U.S.-based automakers have been manufacturing in Mexico for three decades, never has the threat of moving more manufacturing there provided as much leverage for management as it does today. That country's infrastructure has improved vastly, and it has a young, able and willing workforce supported by more than a dozen large trade schools.

It used to be easy for the UAW to get what it wanted without too much trouble—all it had to do was mention the word "strike," and things fell into place fairly painlessly. Not so much anymore. It's become a game of "take it or leave it," but "if you leave it, we'll take it to Mexico."

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