COVID-19

U.S. automakers press Mexican partners to restart, rejoin supply chain

Scott Tong May 18, 2020
Heard on: Marketplace
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A worker wearing a face mask at a Mercedes-Benz factory. A Mercedes plant in Alabama suspended production because it can't get the necessary parts from Mexico. Matthias Hangst/Getty Images
COVID-19

U.S. automakers press Mexican partners to restart, rejoin supply chain

Scott Tong May 18, 2020
A worker wearing a face mask at a Mercedes-Benz factory. A Mercedes plant in Alabama suspended production because it can't get the necessary parts from Mexico. Matthias Hangst/Getty Images
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The auto industry returns to work this week. Automakers in the U.S. are opening at partial capacity, which means about half the workforce will be back at work. That comes out to around 130,000 people back on the job.

Thing is, to make an American car, you need loads of components from Mexico, which got hit by the pandemic well after the U.S. did.

Still, the pressure is on for Mexico to join the North American supply chain ASAP.

A typical part in a U.S.-made car has crossed the border into Canada or Mexico eight times before final assembly.

U.S. automakers depend so much on Mexican partners that they’ve waged a pressure campaign for them to restart, according to Duncan Wood, director of the Mexico Institute at the Wilson Center think tank.

“They have spoken to the Mexican government. They have spoken to business associations in Mexico,” Wood said. “We’ve also seen through the State Department stronger and stronger messages, saying that Mexico needs to think about the ways it thinks about cooperating with North American partners.”

It seemed to work. Last week, Mexico’s government declared auto plants essential, letting them restart this week. But the pandemic risk there may be high, said supply-chain consultant Jeoff Burris at Advanced Purchasing Dynamics.

“People are literally sitting within 2 to 3 feet of one another because you’re passing an assembly product down the line,” Burris said.

And in Mexico, the virus hit later than in the U.S. So cases are still going up.

“We are behind in terms of getting our highest number of cases. At least a month behind, compared to New York City,” said Fernando Alarid-Escudero, assistant professor at Mexico’s Center for Research and Teaching in Economics.

So for all the risk, can the North American auto supply chain put itself back together safely and quickly?

There’s not much margin for error, as U.S. factories keep limited inventory. Economist Tom Fullerton watches cross-border supply chains at the University of Texas, El Paso.

“They probably have enough inventory of spare parts to get them through the next 12 days. Any type of disruption to the supply chain is going to be short-lived at best,” Fullerton said.

He’s an optimist. Others aren’t so sure. In Alabama, Mercedes has halted operations because it can’t get the parts it needs from Mexico.

COVID-19 Economy FAQs

How many people are flying? Has traveled picked up?

Flying is starting to recover to levels the airline industry hasn’t seen in months. The Transportation Security Administration announced on Oct. 19 that it’s screened more than 1 million passengers on a single day — its highest number since March 17. The TSA also screened more than 6 million passengers last week, its highest weekly volume since the start of the COVID-19 pandemic. While travel is improving, the TSA announcement comes amid warnings that the U.S. is in the third wave of the coronavirus. There are now more than 8 million cases in the country, with more than 219,000 deaths.

How are Americans feeling about their finances?

Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.

Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.

What’s going to happen to retailers, especially with the holiday shopping season approaching?

A report out recently from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.

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