Nissan to Cut 1,000 Workers in Mexico : Peso crisis: The company is the first major foreign firm to plan layoffs in response to the country’s financial upheaval.
In the most dramatic sign yet of the threat Mexico’s financial crisis poses to employment, Nissan Motor confirmed plans to lay off 1,000 workers--nearly 10% of its work force--because the country’s economic problems are likely to crimp demand for cars.
Nissan has proposed the job cuts to the labor union at its factory in Cuernavaca, south of here, which makes cars primarily for the Mexican market, a company spokesman in Tokyo said early this morning. Nissan plans to eliminate the night shift and operate just one shift daily.
The measure will not affect Nissan’s other factory in the central Mexican city of Aguascalientes, which makes cars mostly for export, the spokesman said.
The financial upheaval in Mexico since the peso was devalued on Dec. 20 has already slowed domestic car sales, according to Nissan. And other auto makers--including Volkswagen, Mercedes-Benz and Ford--have closed factories for periods of one to three weeks because of the financial crisis.
But Nissan, which produced 190,990 cars and trucks in Mexico last year--making it the nation’s No. 2 car maker--is the first major foreign corporation to lay off workers in response to the currency crisis.
The car maker’s decision is certain to fuel speculation that other big job cuts are ahead.
The Mexico City-based Televisa media company is reported to have cut back 1,500 employees, mainly contract workers. Officials of the corporation, which blamed the financial crisis in closing its newspaper Summa last week, could not be reached for comment.
Rumors are also circulating that banks, which have been hard-hit by the devaluation, also plan to lay off workers.
Still, Nissan’s layoffs contrast sharply with efforts by other foreign corporations operating in Mexico to forge an image of confidence in the nation’s future.
Confidence was the byword at both a news conference held by a select group of foreign executives after a closed-door meeting Thursday with President Ernesto Zedillo and at a media gathering called by the American Chamber of Commerce of Mexico the same day.
Longtime Mexico supporters such as Citicorp have announced major investments in the past month as proof of their commitment.
Still, Nissan’s reluctance to follow that line was not entirely unexpected. Company executives have repeatedly complained about Mexican regulations that set minimums for domestic content in automobiles. They have blamed the poor quality of Mexican materials, particularly sheet metal, for their inability to export more Mexican-made automobiles.
Provisions of the North American Free Trade Agreement that ease domestic-content requirements for America’s Big Three car makers are expected to place Nissan at a significant competitive disadvantage.
More recently, Nissan announced plans to suspend production this week at both its Aguascalientes and Cuernavaca plants, citing a lack of parts.
In keeping with government efforts to restrain the inflation that generally follows a devaluation, Nissan had agreed to impose only a 10% price increase, the standard for the auto industry. Following the same policy, the company also offered only modest price increases to suppliers.
In response, some suppliers decided they would stop providing the Japanese auto maker with components, Nissan said.
Nissan’s 11,150 Mexican employees were to have received half-pay during the shutdown, which will curtail production by about 4,000 vehicles. Nissan expects to produce 180,000 vehicles in Mexico this year, about 30,000 fewer than it originally forecast.
Bloomberg Business News in Tokyo contributed to this report.