Mexico's auto industry stirred to life last week after the long coronavirus shutdown. But frustrating delays resulting from the government's shifting policy over a definitive restart date mean U.S. automakers will see parts shortages affecting their own production, and dealers will see falling inventories for popular Mexican-made pickups and crossovers.
General Motors is a good example. The company said last week it was restarting its engine and transmission lines at its Silao pickup factory in central Mexico and its Ramos Arizpe crossover plant in the north. But the return to vehicle assembly at those two plants still depended on the status of its own Mexican parts suppliers, GM said.
In turn, the lack of components from Mexico could delay the resumption of second shifts at GM truck assembly plants in Fort Wayne, Ind., and Flint, Mich., Reuters reported last week. U.S. plants for several automakers, including Hyundai and Mercedes-Benz, are monitoring their parts supplies from Mexico and beyond as they seek to increase output.
The Mexican restart is also likely to be choppy as local authorities grapple with rising coronavirus cases, particularly in urban areas that are home to major vehicle assembly plants and supplier factories. As of last week, the nation reported 59,567 infections and 6,510 deaths.
The governor of Puebla state, Miguel Barbosa, said Friday that he would postpone the restart of the auto industry there because of rising COVID-19 cases. Volkswagen and Audi have large operations in the state, as do suppliers. But it was unclear whether Barbosa can legally overrule the federal decree that allowed the industry to resume activity last week once its worker-safety plans are approved.
Mexico makes about 20 percent of all vehicles produced in North America, according to IHS Markit, including Ram and Toyota pickups, plus popular crossovers from GM, Volkswagen, Mazda, Nissan and Audi. Mexico's National Auto Parts Industry group estimates U.S.-built vehicles have an average of about $5,000 worth of Mexican parts from 1,500 supplier plants.
One of those suppliers, seating and electrical systems maker Lear Corp., called back some workers to its Rio Bravo plant in Ciudad Juarez on Friday, May 22, for activities including safety training, according to a message seen by Reuters.
But Mexico is starting up late compared with the U.S., where international automakers started running plants two to four weeks ago.
Auto industry leaders in Mexico were talking about the need to restart by May 11 — one week before the Detroit 3 — in order to feed the supply chain and replenish vehicle stocks. But with coronavirus cases still rising in Mexico, last week's restart was a better scenario than the June 1 date initially floated by health authorities.
"There's no question about the fact that it's necessary, particularly with the way the market is moving in the U.S.," said Guido Vildozo, senior manager for Americas forecasting at IHS Markit. "We do run a risk of seeing some trim lines potentially running low on inventory as a result of the fact that sales have performed better than expected stateside."
Mexico waffled on a restart date for major industries, initially putting it at May 18 but later changing to Monday, June 1, so manufacturers could develop safety plans for their workers and reorganize plants for social distancing. Under pressure from hurting industries, the government moved the approval process to last week.
Vildozo said just as in the U.S., where there already have been temporary production suspensions because of worker illness from COVID-19, Mexico's auto parts and assembly plants likely will be stop-and-go. "Chances are we may have a hiccup or two in Mexico over the next month or so. This is going to be one of the challenges we have in the region as a whole," he said.
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May 25, 2020 at 11:00AM
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Delays in Mexico to impact automakers resuming US production - Automotive News
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