When the U.S. government invested the better part of $80 billion last year to bail out GM and Chrysler, a large part of the rationale was that it would save U.S. jobs. And it likely did in the short term.
But some auto industry experts are saying that in order to repay loans and other help as quickly as possible, and to compete effectively with other automakers on more fuel-efficient vehicles, it's likely the two U.S. automakers will have to expand the number of employees they have in Mexico at the expense of U.S. workers.
That's because Mexican workers make so much less than their U.S. counterparts, in some instances about $26 a day compared with the about $30-an-hour wage paid to GM assembly line workers.
An excerpt from a Bloomberg News story explains:
June 9 (Bloomberg) — Mexico's share of North American auto production may rise at a quicker pace as General Motors Co., Ford Motor Co. and Chrysler Group LLC seek out workers making less than 10 percent of what their U.S. counterparts earn.
The lower labor costs may help the U.S. companies build smaller cars profitably amid demand for fuel-efficient vehicles in the wake of last year's recession. Mexico's gains will come at the expense of workers in the U.S. and Canada, said Dennis DesRosiers, president of DesRosiers Automotive Consulting Inc.
"There is going to be more capacity put into North America and Mexico is going to get more than its fair share," DesRosiers said from Richmond Hill, Ontario.
Moves to Mexico may speed up when Chrysler and GM reduce some of the political pressure they face by paying back government bailout money, said Michael Robinet, vice president of global forecasting for CSM Worldwide in Northville, Michigan. The U.S. government has distributed about $80 billion in the Auto Industry Financing Program to support the industry.
DesRosiers says Mexico's share of North American auto production will rise to 19 percent over the next decade from an average 12 percent in 2000 to 2009. Over the same period, the U.S. will lose 7 percentage points to 65 percent of the market and Canada's share will hold at 16 percent, he said.