DOW JONES NEWSWIRES | By Amy Guthrie | July 31, 2003
MEXICO CITY (Dow Jones)- -The auto industry is getting swept up in the tide of manufacturers heading to China, which is threatening to shift some of the Mexican jobs provided by U.S. parts maker Delphi Corp., a company official said Thursday.
Delphi, the world's biggest autoparts maker, employs more than 70,000 in Mexico, making it the country's largest private-sector employer. The company said it spent $1.64 billion in Mexico last year, more than half of which went toward wages and benefits.
But that investment could be in danger, as Chinais attracting more manufacturers.
"Our China operations are very competitive now, and quote against our own plants in North America," said Sean Kelly, executive director for Delphi in Mexico.
Delphi employs 5,000 people in Asia, a small fraction of the company's nearly 200,000 workers around the globe. That figure is expected to grow as demand for autos rises in China, and car makers request more Chinese-made parts to satisfy the country's manufacturing requirements.
Car makers of all stripes are setting up production facilities in China. And where they go, the autoparts companies follow.
"When we quote, they (car makers) say we need you to have x amount of product from Chinafor us to grow here. That kind of thing is happening all the time," Kelly said.
Meanwhile, Delphi says Mexico needs to work on its incentives for manufacturers. Apart from low wages, China offers generous corporate tax breaks, cheaper energy and logistics support.
But it isn't too late for Mexico.
"In my view, we can be very competitive in Mexico with the wage levels. It's the structure around them that has to be leaned out," Kelly said.
Not all products heading to North America are best made in China, either. Kelly said that any part that might need an engineering change, for example, shouldn't be stuck on the water for six weeks.
At the moment, Delphi is making few parts in China. The company doesn't want to abandon or damage its 25 year presence in Mexico, but it recognizes that China is a growing force. The company has operations there for 11 years.
"The less urgency there is to improve things (within the Mexican government), the more quotes go the other way," Kelly said.
-By Amy Guthrie, Dow Jones Newswires; Mexico City # (011-52-55) 5080-3453; amy.guthrie@dowjones.comDOW JONES NEWSWIRES:
