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Small car production heads to Mexico, and suppliers follow

Sep 15, 2016

Ford Motor Company is by no means the only automaker moving production of small cars to Mexico.

Ford confirmed this week it will move the last of its small car production to Mexico, where labor costs are significantly lower than in the U.S.  But many other companies have been doing the same.

And suppliers have wasted no time in expanding in Mexico to serve the new factories.

"The announcement by Ford is really no surprise for the supply base," says Charles Chesbrough, an economist with OESA, a supplier trade group. "They've been well aware that this was going to be the plan. And in some ways, I think it could be an opportunity, in that it will be making available many of the manufacturing capabilities in the U.S. and in Michigan -- for Ford and other manufacturers -- to focus on the bigger vehicles, which are really the higher profit vehicles.  And those are the vehicles where we're seeing the sales remain very very high."

Chesbrough says he doesn't think the new operations in Mexico are actually pulling supplier jobs out of Michigan. In fact, he says the supplier industry is having trouble filling jobs in the state, both factory and engineering.

Chesbrough sees signs that talent shortage is easing. He thinks the image of auto manufacturing as a Rustbelt industry is finally starting to catch up to reality. Automation and the need to dramatically improve fuel economy demand highly sophisticated software and engineering solutions -- not all of which can or will be done in Silicon Valley.

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