WCA September 2015

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72 Wire & Cable ASIA – September/October 2015
From the Americas
Automotive
NAFTA almost 22 years on: united
under the trade agreement, the USA,
Canada and Mexico are fierce rivals over
automotive investment and jobs
“Mexico is the auto industry darling. Canada is struggling
to retain a manufacturing footprint. And the USA is a house
divided, with most of the new automotive investment and
jobs headed south of the Mason-Dixon line.”
Alisa Priddle and Brent Snavely of the Detroit Free Press
did not have to go into the relative fortunes of the parties
to the North American Free Trade Agreement (NAFTA) over
the years, with Mexico usually odd man out. But a shift has
taken place. Right now and for the foreseeable future, the
automotive reporters observed, “the farther south you are
located, the better.” (“Why Mexico is winning the auto jobs
war,” 14th June)
South here refers to both the southern USA and Mexico.
“[They] are winning the battle,” the Free Press was told
by Dennis DesRosiers, president of the Canadian firm
DesRosiers Automotive Consultants. “Over half the capacity
and 80-90 per cent of investment dollars are going to the
US South or Mexico.”
A united trading block under NAFTA – which took effect
on 1st January 1994 – the USA, Canada and Mexico
present highly individual characters to auto executives
who must decide where to invest in the latest equipment
and additional jobs. And these officials have made their
preference abundantly clear.
Of the vehicles built in North America last year, Mexico
produced about one in five, or double the rate from 2004.
WardsAuto, which tracks production data, expects that rate
to increase to one in four by 2020.
Conversely, Mr DesRosiers sees the Canadian auto industry
dwindling over the next decade or two, to five automakers
with a single assembly plant each — or about half its
current manufacturing footprint.
According to WardsAuto statistics for 2004, 11.6 million
vehicles were built in the USA, or 74 per cent of the
15.8 million NAFTA-zone industry total.
Canada built 2.7 million units, accounting for 17 per cent.
Mexico contributed only 1.4 million vehicles, or nine per
cent.
In 2014, signs were strong that the tide had turned.
Mexican production had more than doubled to 3.2 million
units, or 19 per cent of the 16.9 million industry total.
The advance came at the expense of the USA, which
dipped to 11.4 million units, or 67 per cent. Canada was
down to 2.4 million vehicles, or 14 per cent.
Wards sees a continuing trend. It forecasts new plants
adding 1.2 million units of capacity in North America by
2020 – but in an uneven distribution.
‘Massive untapped’ Mexican market
In 2020, Mexico is expected to build one in four vehicles
in a North American industry producing 18.6 million units.
The USA will hold its own at two-thirds of the output, or
12.2 million vehicles. Canada will be the big loser, down
to 1.6 million vehicles and nine per cent of the output.
The quality of the supply base in Mexico has also improved,
the WardsAuto industry analyst Haig Stoddard told the
Free Press. In a reference to Toyota’s strict standards, he
said: “The litmus test was when [the Japanese automaker]
said it would build there.”
Now, virtually every automaker is adding capacity in Mexico
– among them General Motors, Ford, Toyota, Honda,
Volkswagen, Audi, BMW, Hyundai and Mazda. In the view
of Mr DesRosiers, the Canadian automotive consultant,
Mexico is itself a “massive untapped market” that could
grow by another one million to two million vehicles a year.
Ms Priddle and Mr Snavely of the Free Press are aware
that all this manufacturing activity would not mean much if
Mexico were not prepared to follow up once the cars roll
off the assembly line. But they pointed out that it is. The
domestic market continues to grow, and Mexico’s ports and
its trade agreements with 45 counties have helped establish
it as a strong export hub to Europe and South America as
well as the rest of North America.
 By contrast, wrote the reporters: “The US has about
20 trade agreements, and Canada also has but a
fraction of Mexico’s pacts.”
“Mexico bested us on trade agreements,” said Sandra
Pupatello, a former Canadian politician who now
oversees business development for PwC Canada,
in Toronto, as well as the Windsor-Essex Economic
Development Corporation. “They quietly have been
negotiating trade agreements with the world.”
South Korean automakers make
‘astonishing’ strides in latest J D Power
initial quality survey
“The astonishing thing is the improvement rate of the
Koreans. It’s a clear shift in the quality landscape. It’s
changing the pace that you need to be at in order to be
ahead.”
What so impressed Renee Stephens, vice president for
United States automotive quality at the market research
firm J D Power, was the performance of South Korean
automakers in the initial quality study released in mid-June.
While the industry overall improved by three per cent in a
year, the South Korean companies improved 11 per cent.
Japanese brands as a whole improved at a rate of one
per cent, while the domestic automakers and European
automakers improved by three per cent, Ms Stephens told
the New York Times. The initial quality study measures
problems experienced by buyers and lessees of new
vehicles in the first 90 days of possession. J D Power then
ranks brands by the number of problems reported per
100 vehicles. The lower the number of problems, the higher
the ranking.
BigStockPhoto.com Photographer: Aispl