By opening auto plants in Mexico, they are providing relatively high paying jobs for Mexicans which eventually increases the standard of living in that country. As the standard of living rises, the Mexican workers start wanting to buy some of the goods they make every day and are no longer willing to work for extremely low wages and then Mexican labor loses some of its competitiveness.
This has already happened in Japan and Germany which is the main reason Honda and VW started building auto factories in the States.
Ford (and many US companies) look very short term. AnY little bump in the economy the look at moving operations instead of spending the time fixing the situation here in the US. Itās alwatys whatās the easiest for the short term. Never looking 5 - 10 years down the road.
Workers in Germany are, to a large extent, also unionized
But thatās not the only reason those companies you mentioned built vehicles in the US
Those cars built here also happen to be classified as ādomesticsā
While Iām pretty sure that this is no longer accurate, back in the '90s, the US-built Mazda 626 had more ādomestic contentā than any other make of car, including the ones that people traditionally identify as āUSā brands. And, of course, quite a few of those supposedly āUSā models were actually being manufactured in Canada or Mexico at that point.
Monthly US exports are about $200 billion, while imports are around $240 billion. A little less than $30 billion is a deficit with China. The deficit with Mexico is $5 billion, or about 2.5%. I am concerned with the 15% trade deficit with China. I am not concerned with the 2.5% deficit with Mexico. Remember that while the small Ford cars will be assembled there, parts will often be manufactured in the US and sent to Mexico.
Right. I have several pairs of jeans that are āMade in Mexico from US materialsā. Mexico. like Canada, has an integrated car industry with the US.
US cars are mostly assembled in Mexico from many parts coming from the US.
Don Donaldo doesnāt want us to know that.
Wait till your chicken states product of USA, but processed in china, saw the old fashioned cement trucks in chicago, dumps out the back, was told it was a union thing as front discharge trucks only require 1 person. Outsourcing government duties has been found to be more expensive, but it continues.Our pd outsourced traffic ticket collection, they make 45% of funds recovered, Chicago outsourced parking meters, too many similar stories of lined pockets and regular guy cost.
Analysts determined the cityās parking meters were worth $1 billion more than they were leased for. That billion stayed with the Wall Street bank, not the people of Chicago.
Within months of the deal, parking rates in some areas of the city quadrupled. Since then, rates rose every year between 14 and 25 percent.
According to the terms of the agreement, should the city decrease the number of parking meters in a way that hurts profits, taxpayers will have to make up the difference.
A few months ago, there was a āstudyā published about which cars had the most ādomestic contentā
I believe the Toyota Camry, built in Kentucky, topped that list
Yes, it was quite detailed, and the Camry built in Georgetown, Kentucky came out the highest.
Without all of the background info, this discussion is like a bunch of people standing around marveling at the elegant design of some pick up sticks someone previously dumped out on a table.
Maybe, the reason so many are moving here is because the local authorities are giving them huge incentives to do so. No local taxes for the first 10 years, free building permits, no impact fees, etc etc etc. More expensive workforce can be offset by other savingsā¦
Iām fully aware of all the incentives the carmakers get in various locations around the globe. However, those plants are designed to be there for 30 years or so, and the labor and infrastructure factors as well as tax laws are all important. You donāt simply build a plant somewhere because of a tax incentive.
Northern Ireland has in vain tried to attract new industries. Although it has skilled workers, the poisonous worker/management environment has scared off many.
Similarly in Scotland. On a holiday tout there I passed many now closed plants. Wales same thing.
Notice than none of these new plants in the US are located in Michigan!
You donāt simply build a plant somewhere because of a tax incentive.
What planet are you from? GE just moved for EXACTLY that reason!
General Electric to Move Headquarters to Boston
GE set to get up to $145 million in incentives to leave Fairfield, Conn., its home since 1974
Granted thatās their headquarters but you think it doesnāt happen with production plants? I have personal experience with that. Designed to last 30 years? No, they have to revamp the insides more often that that. Buildings can be soldā¦
I havenāt studied all the comments but to tell the truth, arenāt they having to build small cars that people donāt want because of the federal CAFE standards? So if they lose money in the US making them, and demand is not sufficient to raise the price to make a profit on them, and they have to still have them to meet the average fuel standards, I would guess trying to get them made as cheaply as possible would be a solution. Lets gut the CAFE standards and see what happens. Might put a couple thousand folks in DC out of jobs but what the hey?
According to the WSJ small car sales were 2,007,795 for 2015. Midsize - 2,192,250. And Luxury - 654,232. So I wouldnāt say people donāt want them.
Well thereās your answer then. Raise the price a couple thousand to make a profit on them. Might lose 500,000 a year but at least will make money on them produced here. Remember the chicken farmer story where they decided to increase production the following year because they lost money the year before?
Moving headquarters is different from locating a plant. To attract a plant every geographic entity offers some kind of incentive to create employment. Many of these fail. The province of Quebec in Canada has seen first Toyota in the late 60s (Canadian Motor Industries), then GM in St; Therese, closed after Camaro/Firebird production ended, then $400 million incentive to Hyundai for a plant in Bromont to make the first Sonatas (closed after only a few years). Finally Mack Trucks near Montreal, close a few years after it openedā¦ Most or all closed because of an unhealthy manufacturing environment; none of the plants were worn out or obsolete.
Boeing moved their HQs from Seattle to Chicago for administrative business reasons, i.e. easier to conduct high level business.
Of course plant are constantly upgraded to keep up with the manufacturing technologies.
In my own manufacturing experience we constantly had to compete with plants in various countries, and would lose an order if a plant in Australia, Germany or France had a better cost structure. We took a lot of business away from those countries, as well as Britain which always had the worst cost structure.
During my 8 years in this environment we exported to Australia, Scotland, Wales, Israel, Argentina, Romania, New Zealand, Nigeria, Libya, Chile, Mexico (3 power plants), Thailand, Singapore, South Korea, Malaysia, the West Indies, etc.
Any plant expansion needed did not have to depend on government grants, but they were welcome just the same.
My planet is Earth, all of it.
Car makers canāt just increase the prices on small cars. ECON 101, raise price, sell fewer cars. They canāt afford to sell fewer cars because of CAFE standards. Sell one small car for little profit and then you get to sell one big pickup truck for a big profit.
1 Like
Exactly right. Ford (and some others) will LOSE money on small cars in order to meet CAFE targets, so the goal is to lose the least possible money. Raising prices is not an option.
1 Like