American Automakers Outsourcing Jobs to Mexico
Despite receiving billions of dollars from the federal government to keep them afloat, iconic American automakers Chrysler and General Motors are increasingly taking advantage of the free movement of labor allowed by the North American Free Trade Agreement and outsourcing jobs to Mexico, according to Bloomberg News.
Were it not for an $80 billion investment of taxpayer money in the companies, neither would even exist today. Yet, both have turned their backs on those very same American taxpayers by exploiting the cheap labor available south of the border.
In some cases, Mexican workers in an auto factory make just 10 percent of their U.S. counterpart’s wages. In the typical GM factory in Mexico, an autoworker makes just $4 per hour, including benefits. Your typical American autoworker, on the other hand, makes roughly $62 per hour when benefits are calculated into the equation, according to PolitiFact.
NAFTA has been instrumental in the flow of manufacturing jobs to Mexico. By knocking down trade barriers, U.S. businesses are forced to compete with foreign businesses, most of whom have much lower labor costs. In order to compete on a somewhat level playing field, many companies are forced to move production to nations where labor is cheaper. In fact, some of those competitors are aided by the same U.S. government that put America’s automakers in an uncompetitive situation in the first place in the form of tax abatements and other incentives given to foreign automakers to produce in America, putting further pressure on The Big Three.
Due to enormous political pressure, those companies have been slow to move production to Mexico while still owing the government billions of dollars. That could all change once they have repaid their government loans and are no longer partially owned by the American taxpayer.
GM has shuttered eight plants since 2005, and its bankruptcy-mandated restructuring plan called for the company to shed 22,500 U.S. jobs and 13 plants. Meanwhile, the company has invested $3.67 billion into Mexican production and built a new plant there. If production increases to the point that GM needs to create thousands of jobs, they most likely won’t be in America.
The other bailout recipient, Chrysler, is shelling out $550 million to prepare a factory to manufacture a Fiat model to be sold mainly in South America.
Ford, although it received no government assistance through the course of the downturn, has been guilty of outsourcing as well. The automaker has closed four plants since 2006 and intends to close four more by the end of next year. That hasn’t stopped the company from investing heavily in Mexico, where it has invested $3 billion in the past two years, reopened a factory and created 2,000 jobs.
Some experts believe that Mexico’s share of North American auto production will continue to rise. From 2005 to 2008, output steadily rose in Mexico while declining in the U.S. Over that time production in Mexico increased from 1.6 million to 2.1 million. In the U.S. production fell from 11.5 million to 8.5 million over that same time.
According to Bloomberg, some experts believe that the U.S. share of North American production will fall by as much as seven percent over the next decade while Mexico’s will increase proportionately.
“There is going to be more capacity put into North America and Mexico is going to get more than its fair share,” Dennis DesRosiers, president of DesRosiers Automotive Consulting Inc, told Bloomberg News.
The lure of free labor and tariff free imports and exports is probably enough to ensure that the trend continues. That doesn’t mean everyone likes it.
“I understand the economic argument for the off-shoring of production, but I think the practice is reprehensible,” Rep. John Dingell (D-MI) said, according to Bloomberg News. “U.S. automakers have benefitted greatly from federal largesse and should feel morally compelled to retain and create as many domestic jobs as possible.”