"Mexico’s location next door to the U.S. market and close to South America is also a major lure for Asian and European auto makers that want to keep their capital investment as low as possible by supplying both markets from a single location."
3/24/2017, “Made in Mexico: An emerging auto giant powers past Canada,” theglobeandmail.com, Greg Keenan, Puebla, Mexico
“A free-trade advantage” (scroll down)
“The automatic assumption is that auto investment is flooding into Mexico because of rock-bottom wages – and they are low. Assembly plant workers earn the equivalent of about $2.90 (U.S.) an hour, estimates Alex Covarrubias, a professor at Sonora College in Hermosillo, Mexico.
That’s about 10 per cent of what workers with full seniority are paid hourly at Canadian and U.S. assembly plants….
The wages for assembly-line workers at Volkswagen’s Puebla plant are the equivalent of $3.77 an hour, data compiled by Prof. Covarrubias show. That’s higher than the average across all assembly plants in Mexico and trails only Nissan’s Cuernavaca plant….
But that experience is far from universal, Prof. Covarrubias says, particularly for those workers at plants that are not as old as Volkswagen’s Puebla facility.
Assembly line worker wages have fallen across the industry since 2007, he notes, even though productivity has improved.
A job with full seniority in the auto sector paying wages of more than $30 an hour with a defined benefit pension plan and other benefits has been a ticket to the middle class in Canada and the United States….
Mexico’s location next door to the U.S. market and close to South America is also a major lure for Asian and European auto makers that want to keep their capital investment as low as possible by supplying both markets from a single location.
What’s more, Mexico has free-trade agreements with many of these
countries – 45 in total – that allow auto makers to ship duty-free.
“You can export duty-free from Mexico to big automotive markets in the world – except China of course –
North America, South America, European Union, Japan,” notes Thomas
Karig, vice-president of corporate relations for Volkswagen de Mexico. “There’s no other country in the world that has these kinds of advantages.”
By contrast, Canada, as a competitor with Mexico for investments by
global auto makers, does not have similar links. It is a member of the
North American free-trade agreement, and has recently signed free-trade
deals with Europe and South Korea.
But the assembly industry in Canada is designed to feed the massive U.S. market, not markets around the world.”…