Detroit's ills send chills through Mexico's auto industry

Chicago Tribune (MCT) - As he did for 20 years, Juan Carlos Figueroa made the drive down Henry Ford Avenue and into the plant here.

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Instead of punching in, however, the former welder came to fill out paperwork for unemployment insurance.

After years of benefiting from its cheap, skilled labor and proximity to the U.S., Mexico is feeling the effects of the decline of Detroit's automakers. Nearly every auto plant in Mexico, including General Motors Corp.'s and Chrysler LLC's, has instituted temporary shutdowns.

In December, this Ford plant on the industrial outskirts of Mexico City ended production, costing about 650 workers their jobs.

For Figueroa, 45, the pain is personal. He drives only Fords _ "If I had a Chrysler, they'd throw rotten eggs at me," he said.

In the dashboard of his Ford Ikon, he displays a pin with the Mexican flag and the company's logo. "See that? It says, 'Ford pride.' That's how I felt. To me, the Ford logo was the ultimate," Figueroa said.

"I gave my youth in that plant. How can you buy that? Now, it's over," he said.

The auto industry is key for Mexico's economy, as one of the few manufacturing sectors that has held its own against competition from China and other nations with low labor costs.

Mexico has grown to become the 11th-largest automaker, home to not only the Big 3 U.S. companies, but also Volkswagen, Nissan and even a Chinese firm. The auto industry is Mexico's largest manufacturing sector and makes up about a fifth of total exports.

Those who study and work in the auto industry are divided over whether Mexico has become part of the problem or the solution for U.S. automakers.

Pascual Francisco, senior market analyst of the Latin American auto industry for IHS Global Insight, said Mexico might come out ahead if a proposed U.S. federal bailout pushes automakers to become more efficient and increase overseas production.

On the other hand, he said, the U.S. government could make job retention the greater priority and pressure automakers not to export more work.

"The U.S. automakers must show they are profitable. In order to do that, they must move more production to Mexico," Francisco said. "However, I don't think even the manufacturers know how much flexibility the government will give them."

Lucia Martin, an auto industry analyst with Ixe Financial Group in Mexico City, said another threat comes from developing nations that offer similarly low labor costs and trade deals with the U.S. Martin said the Mexican government must push fiscal and tax reforms that will keep Mexico a step ahead of its newer competitors.

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"Mexico needs to keep working to maintain high-quality production, develop its own technology. The advantages that Mexico has _ cheap labor, transport costs _ are not necessarily permanent in the face of these super-aggressive emerging markets," she said.

The Mexican auto industry is pushing for its own bailout in the form of loans and tax credits, said Eduardo Solis, president of the Mexican Automotive Industry Association.

Solis doesn't expect the industry to rebound until 2010. Even though Mexico dramatically increased exports to Asia, Europe and South America, at least two-thirds of its auto exports go to the U.S., which is suffering from a pronounced credit crunch and lower consumer demand.

If Detroit shifts its focus from SUVs to smaller, more fuel-efficient vehicles, Mexico also could rebound, Francisco said. Those vehicles have lower profit margins, making Mexico a more attractive place to build them because of the lower production costs, he said.

That is certainly the hope in Cuautitlan, where Ford made a splash in May by saying it would start producing the small, fuel-efficient Fiesta here. Even Mexican President Felipe Calderon attended the announcement of a project that stands to add about 4,500 jobs.

But union president Juan Jose Sosa worries that Ford's financial woes might delay the project. In his office, he read an article online about the latest bad news from Ford: its biggest quarterly loss ever.

"Yes, the environment is very, very rough," he said.

The fate of Ford in Cuautitlan is being watched even by those who were let go in December.

Jose Moises Ortiz, who worked here for 34 years, still comes around to catch up with former colleagues.

Even with Detroit reeling, Ortiz sees a place where Ford inspires optimism for a good life. Ortiz sent three children to college on his Ford paycheck.

"I still have that hope," he said, "that this place will bloom as in the best years."

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© 2009, Chicago Tribune.