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

Scott Tong May 18, 2020
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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
Heard on:
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

So what’s up with “Zoom fatigue”?

It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.

How are Americans spending their money these days?

Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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