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GM and Chrysler are expanding their production facilities in Mexico -- where labor is $3 an hour -- while reducing production at US plants where labor is $25 an hour, and, while seeking bailout cash from US taxpayers.

Read on.::

According to this article by Bloomberg:

Dec. 17 (Bloomberg) -- General Motors Corp., the biggest automaker in the U.S. and Mexico, increased production of $12,625 Chevrolet Aveos south of the border while seeking a bailout to keep domestic plants from closing.

The Detroit-based company and competitors such as Ford Motor Co. shifted more manufacturing to Mexico this year to capitalize on wages less than an eighth of those in the U.S. and factories that make fuel-efficient models. Through November, Mexican plants turned out 5 percent more vehicles than a year earlier, versus an estimated decline of 30 percent in the U.S.

The article goes on to describe how most of the production at GM, Ford, and Chrysler plants in Mexico is small, fuel-efficient vehicles -- which means that Mexican plants are positioned to produce the vehicles that are more likely to be the big sellers in the future.

Lower labor costs in Mexico are not the only reason US manufacturers are moving there:

Lower labor costs are the biggest advantage. At around $3 an hour, the average Mexican wage is less than one-eighth of those in the U.S.’s $25.34 and one-seventh of Canada’s $21.38, according to Sergio Ornelas, the president of industrial park operator Intermex, which provides real estate services to auto and car-parts producers. Ornelas cited information compiled from the Boston Consulting Group, the U.S. Department of Labor and The Economist Intelligence Unit during a recent conference in San Luis Potosi.

Auto companies contribute to a government-run health system and mandated individual retirement accounts for each worker, which keep health and pension-benefit costs low compared with the U.S., Ornelas said.

Got that?  ". . . government-run health system and mandated individual retirement accounts for each worker."

Other important points in the Bloomberg article are:

-- Carmakers from China, South Korea, and India are looking at establishing plants in Mexico while Toyota increased production at its Mexican facilities.

-- Mexican car output is increasing while US output is dropping.

As if that's not enough, check out this comment:

If GM and Chrysler are forced to declare bankruptcy, it may speed up the transfer of production to Mexico as carmakers seek to slash expenses, said Nick Criss, executive director of industrial services in the nation for real estate broker Cushman & Wakefield Inc.

"Mexico tends to be the core manufacturer for many companies because it’s a low-cost center," Criss said.

Perhaps the death of the US automobile manufacturing industry is inevitable -- we cannot compete with $3 an hour labor, smaller benefit costs, and -- I suspect -- lower environment and worker safety expenses found in Mexico.

Originally posted to Old Redneck on Thu Dec 18, 2008 at 02:48 AM PST.

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Comment Preferences

  •  They were told... cut costs or cut your throat. (7+ / 0-)

    Off shoring is the American way.  You got a complaint?  Tell it to Obama.  He's the one who is "delaying renegotiating NAFTA".  Change the incentives, and you change the game.  

    They're asking for another four years -- in a just world, they'd get 10 to 20 ~~ Dennis Kucinich

    by dkmich on Thu Dec 18, 2008 at 02:55:01 AM PST

    •  What? (2+ / 0-)
      Recommended by:
      Special K, pinkbunny

      I give a tip to everyone, but how can you reasonably blame Obama.  He can't renegotiate anything right now, and there is no congress that could pass it.  Some of you guys really need to tune into reality.

      •  Funny how you loyalists can twist everything, (8+ / 0-)

        and it always ends up with Obama being the victim.   Did I say yesterday or this minute?  Show me where.  

        Obama is the one who said he was going to "delay" renegotiating NAFTA for a couple of years.  Not me, not Detroit.  The sooner he changes the rules, the sooner off shoring becomes less lucrative. The less lucrative it becomes, the less it will be done.  Trying to fix the economy without fixing trade is like trying to fill a bath tub without putting the plug in.  

        They're asking for another four years -- in a just world, they'd get 10 to 20 ~~ Dennis Kucinich

        by dkmich on Thu Dec 18, 2008 at 04:22:44 AM PST

        [ Parent ]

        •  Exactly! Economic stimulus won't work until... (4+ / 0-)
          Recommended by:
          dkmich, Pozzo, ppl can fly, chrome327

          you correct our outsourcing of U.S. jobs.  

          "...America can change. Our union can be perfected." President-Elect Barack Obama

          by Jack Dublin on Thu Dec 18, 2008 at 04:51:35 AM PST

          [ Parent ]

        •  Not the only thing wrong with this diary (3+ / 0-)
          Recommended by:
          wanderindiana, dkmich, hyper

          Pretty obvious this diarist doesn't realize that the businesses GM has that are making money are keeping the American operations open.

          Yeah.  Think about it: those Aveos, which sell at a profit, bring CASH back to a cash-poor corporation so it can pay American workers.

          That goes for the Buicks they sell in China, too; benefits from those sales do come back to the business here in the states.

          The diarist also hasn't been paying attention to the fact that GM of Mexico also shut down plants from Dec. 22 through early January -- they haven't taken that step in other locations of the world, where they also make smaller, fuel efficient vehicles.

          The reason Aveos are made across the border isn't just because labor is cheap; it's because those cars are more likely to sell in that market, being one of the least expensive vehicles in GM's line up.  Ask yourself what do Mexican workers drive?

  •  Does this really surprise anyone? (4+ / 0-)

    They are are corporation with the interest of their stock value in mind.  The Democrats that bought into this being about the autoworkers were just as foolish as the Republicans who thought it was about the labor unions.

    •  I Drive A Car That Isn't American Made (4+ / 0-)
      Recommended by:
      Wino, ShempLugosi, SciMathGuy, Dr Teeth

      was built in Germany and put on a boat and brought here. I tracked the darn thing in real time. I love the car. You'd have to take me out back and put a bullet in my head to make me thing otherwise.
      Oh I also own a 65 Mustang. Now that is a nice car.

      "We are what we repeatedly do. Excellence then, is not an act, but a habit." - Aristotle

      by webranding on Thu Dec 18, 2008 at 03:05:42 AM PST

      [ Parent ]

  •  wow... (4+ / 0-)
    Recommended by:
    tovan, SciMathGuy, Dr Teeth, FarWestGirl

    just motherfucking wow dude. I wish we could just bailout the people working for GM and not the company. Those fucking bandits.

    Barack Obama: A man after my own heart.

    by rexymeteorite on Thu Dec 18, 2008 at 03:00:04 AM PST

  •  Globalization, ain't it grand? (7+ / 0-)

    The only way to rein it in is to find some way to rein in the multinational corporations.  Their sociopathic behavior hurts everyone, not just American labor.

    The Bush Legacy Project: Mission Impossible

    by tovan on Thu Dec 18, 2008 at 03:06:11 AM PST

  •  what's ridiculous is if the Mexicans got (9+ / 0-)

    paid a decent wage, then we would be able to uplift the income and living standard of developing countries like Mexico, so that they could also consume more US exports.

    Moreover, we would see a better equalization of labor between US and Mexico.

    Perhaps the death of the US automobile manufacturing industry is inevitable -- we cannot compete with $3 an hour labor, smaller benefit costs, and -- I suspect -- lower environment and worker safety expenses found in Mexico.

    As long as that holds true, it is inevitable.

    Wage and environmental standards have to be upheld as well. That's what this administration should push for.

    "Lead, follow, or get out of the way" - Thomas Paine

    by pinkbunny on Thu Dec 18, 2008 at 03:38:38 AM PST

  •  I'm surprised they don't go to Africa. (5+ / 0-)

    If GM (and many, many other American corporations) could find a way to manufacture in the poorer parts of Africa, they'd be in hog heaven. They could pay less than a dollar a day, with no benefits, and they'd have their preferred kind of workforce - one that would be entirely beholden to them. The costs of bribing the local government and the leaders of assorted warring factions, plus the costs of building roads to get the vehicles to a port, would be much less than even paying Mexicans to do the work for them.

    I wish this was a snark, but it's not. As soon as a way can be found to keep a manufacturing plant "safe" (free from being blown up by the "locals") and get the goods to a port without having them blown up, too, American corporations will be lining up to exploit the poorest of the poor in Africa. If they could get their cars (or other goods) built for free, they'd grab it.

    Are you aware that 70% of smokers who die are nagged to death?

    by SciMathGuy on Thu Dec 18, 2008 at 03:51:02 AM PST

  •  The Reagan-Bush-Clinton free trade... (3+ / 0-)
    Recommended by:
    ppl can fly, chrome327, Floande

    insanity must end!

    "...America can change. Our union can be perfected." President-Elect Barack Obama

    by Jack Dublin on Thu Dec 18, 2008 at 04:10:59 AM PST

  •  So, GOP does support national health... (4+ / 0-)
    Recommended by:
    bronte17, JeffW, chrome327, FarWestGirl

    just not in the U.S.  Most GOPers love free trade.  But the article says the auto makers contribute to Mexico's national health.  So they do support national health, just not in the U. S.
    The dirty fuckers.

    "...America can change. Our union can be perfected." President-Elect Barack Obama

    by Jack Dublin on Thu Dec 18, 2008 at 04:36:09 AM PST

  •  The Real Implications (3+ / 0-)
    Recommended by:
    bronte17, chrome327, FarWestGirl

    International labor standards are on the agenda for the next Secretary of Labor.  And for the State Department and Trade Representative negotiators.

    Just dealing with NAFTA only sends production somewhere else.

    Eliminating the possibility of labor arbitrage where there are structural differences in the economies makes more sense.  That can happen by a race to the bottom or by enforceable international labor standards for minimum wage, maximum hours, overtime, minimum age of employment--and mechanisms to enforce compliance.   This will not solve the immediate issues and will probably take a generation but it must begin now.

    And guess what.  Those Mexican automobile plants are experiencing the same downturn in demand as Detroit.  Even if their production goes more to Latin America than to the US.  Definitely is their production goes to the US.

    Renegotiating NAFTA is not the first thing Obama has to do.  First, he has to get the American economy out of the toilet so that there is an American auto market at all again.  While  that is going on, his administration will have to figure out how they want to proceed with a variety of international agreements.  He is not going to do to NAFTA what Bush did to Kyoto; there will be backchannel discussions.

  •  Mexican auto workers make $3.00/hr. No wonder... (3+ / 0-)
    Recommended by:
    JeffW, chrome327, FarWestGirl

    they are flooding the U.S. with illegals.  An illegal worker, even working under the table, can make more than that.

    "...America can change. Our union can be perfected." President-Elect Barack Obama

    by Jack Dublin on Thu Dec 18, 2008 at 04:48:36 AM PST

  •  union busting (2+ / 0-)
    Recommended by:
    JeffW, chrome327

    Free trade is union busting, plain and simple. Instead of hiring "scabs" to do the work, the powers simply made Americans compete with third world countries in wages. And so, we should be surprised by this current meltdown? We blame it on the banking mess, which was but a symptom. The real cause for our current economic downturn is realignment with the global wage scale. Did you notice that we now have disinflation? Hmmmmm. . . I wonder why that is???!!!

  •  Under current (3+ / 0-)
    Recommended by:
    Pozzo, JeffW, chrome327

    circumstances, they probably couldn't make the Aveo cheap enough here or in Canada to sell them.  I don't like it any more than anyone else, but it's part of the trend.  Suppress wages here, which means products must be cheaper to sell (or more credit available..).  Manufacture products in low cost countries to keep cost low and maintain profit margins (margins on these kinds of cars are very small).  It's really a race in the wrong direction.  I don't buy that the people in these countries are really benefiting from this, as they still can't buy the products they build.  

    I don't know when this trend really started, but what I can say is that Mexico (and other) countries didn't start shipping their product here, we went there looking for low cost.  The rules have to be made fair or this will never stop.  When one country gets too expensive, they will move on to the next.  It's harder for a complete vehicle to be outsourced over long distances, but smaller items have been on this trend for a long time.  

    By the way, I'm sure further outsourcing would be great to those who want to include wage concessions in any bailout.  A national health care and pension scheme in this country would greatly help level the playing field.  A public that chose products only made in the USA (with incomes that would allow it) would also help.  But you aren't going to get a $12000 car made in the US.  At least, it would be very difficult.

  •  Sub-Compact cars.. (5+ / 0-)
    Recommended by:
    bronte17, PaulVA, Pozzo, JeffW, chrome327

    for any car manufacturer are not made in this country from anyone:

    Tooyta Yaris: Japan
    Ford Fiesta (American version): Mexico
    Chrysler (soon to be named): made by Nissan manufactured in Japan
    Nissan Versa:Japan
    Honda Fit: Japan/Ontario
    Hyundai Accent: South Korea

    What all of these locations have in common is universal healthcare of some form. Why the heads of the D3 won't speak up about this crisis and how its killing manufacturing is probably political since the Rethugs will be against anyone who is for it.

  •  Loving Corporate Patriotisim.....and...... (1+ / 0-)
    Recommended by:

    Loving the race to the bottom........

    So if we are all unemployed because all the products we need/want are made in the lowest wage countries will we be able to afford them?

  •  This is more because of... (1+ / 0-)
    Recommended by:

    shifting demands.  People are buying more efficient (and cheap) cars, and you can't change an assembly plant overnight.  Notice that the article says "increasing production," not "expanding" or "starting construction" of an assembly plant.  

    GM is also suspending production in three other Mexican assembly plants, but there is no mention of that in the article.


  •  GM to open plant in Brazil (0+ / 0-)

    General Motors Corporation (NYSE: GM) will be building a new vehicle engine and parts plant in Brazil at a cost of $200 million, the automaker said this week. The new plant will bring about 500 new employees to the automaker at a time when it's winding down the closure of quite a few vehicle assembly plants all over the U.S.


    We're being robbed by these corporations.

  •  We need to introduce payroll deficiency taxes (0+ / 0-)

    $12,000 car

    $400 of $12-40/hour labor (all middle-management)

    expected $12-40/hour labor (25%) = $3,000

    payroll deficiency tax = .23x$12,000x($3,000-$400)/$3,000

    Estimated payments to be due on IRS estimated tax dates starting in April 2009.

    Payroll deficiency tax returns to be due August 15, 2010 and every year thereafter.

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