General Motors will begin building 50,000 trucks a year in Mexico, many of them for export, in a joint project that is expected to take jobs away from U.S. auto workers.
GM signed the accord with the Mexican government-owned National Diesel company, known as DINA, on Nov. 29, 1984.
The American company will control 40% of the project, while DINA has the remaining 60%.
GM will invest $100 million over the first two years in the joint venture to produce 50,000 trucks a year. The trucks--exactly the same as GM trucks built in the United States--will be mostly for export to the United States and other "developed countries," said Guillermo Becker Arreola, DINA general director.
"We will introduce the vehicles into international markets in 1986, and, by 1987, exports will amount to $500 million annually," Becker said.
Francisco Labastida Ochoa, secretary of Mexico's semi-state energy, mining and industry, said the venture will add 10,000 jobs to direct DINA operations, plus another 15,000 to Mexican auto-parts production.
"The project signifies a plus for Mexican workers by generating 25,000 jobs, and for the country by bringing in foreign currency," Labastida said. "And it gives us access to GM's superb technology."
A foreign-industrial analyst in Mexico City said he expected U.S. auto workers to suffer, adding he is surprised American labor unions have so far kept quiet about the damage the GM-Mexico deal could do to the U.S. job market.
"The argument is that it would actually create jobs, just not the same type, for instance, distributors and specialists. And someone has to make the equipment shipped in for the plant here," said the analyst, who asked not to be named.
"But I find that argument hard to believe. I haven't seen where they get into any specifics."
The average hourly wage for Mexican auto workers is $1.71, making labor costs here look very attractive compared to Detroit's $24-per-hour total compensation, including wages and all benefits, the analyst said.
Lower Labor Costs
He said the GM-DINA venture is just one part of an overall plan among American auto makers to reorganize the transportation industry, moving the production end from the United States and Canada to the Third World where labor costs are lower.
"Mexico is playing a big part in this grand design. A lot of U.S. manufacturers and parts suppliers are going to be moved to Mexico," he said.
General Motors estimates it produced 1.3 million trucks, including all models, in the United States last year and 270,000 in Canadian factories, a GM official said.
The industrial analyst said the Mexican government wants its auto industry to become internationally competitive. Past protectionist laws have allowed technology to slip behind that in the industrial nations.
"The goal of Miguel de la Madrid's administration is to increase exports," he said. Mexican vehicular production, suffering from high prices and a reputation for poor quality, have not had much luck in exportation in the past.
The Chrysler Corp. last year began trying to see Mexican-made Chryslers in the southwest of the United States, and the program will be expanded if successful.
Joaquin Vazquez Manzanedo, deputy director of DINA public relations, said the exported trucks will display the GM logo. Those sold in Mexico will say DINA, although they will be exactly the same as U.S.-made GM trucks. Models will run the gambit from GM's smallest trucks to its semitrailers.
GM Barely Won
"1986 will be dedicated to adapting the GM technology to existing DINA factories in the states of Hidalgo, Mexico, Nuevo Leon, San Luis Potosi and Aguascalientes," Vazquez said.
The industrial analyst said GM barely won the joint project over West Germany's Mercedes Benz, adding that the Ford Motor Co. was third in line for the bid.
One reason GM won the project could have been an unannounced agreement for a future venture between GM and DINA, he said.
"There is also the possibility of another operation. The decision was made on the whole package, and who knows what the terms of the package were," he said.
Part of Mexico's interest in Mercedes stemmed from the country's fear of dependence on U.S. investment. It was looking to bring in more non-U.S. foreign capital, he said.
Donald Atwood, GM vice president, said his company has conducted joint projects with Mexico for more than 50 years.
"We currently have more than 26,000 employees in all our activities in Mexico," Atwood said.