Volkswagen Still Plans Expansion for Mexico Facility
After threatening to cut its investment in Mexico after losing a bitter labor dispute last summer, Volkswagen has decided to proceed with expansion plans at its Puebla complex.
The German auto maker is continuing with a $1-billion, five-year plan to bolster its only North American manufacturing facility, despite having said in September that its enthusiasm for Mexico had dimmed after a 19-day strike that shuttered operations and a subsequent 14.7% increase in wages and benefits.
The company said then that it would consider redirecting investment funds to Eastern Europe or Brazil. But VW’s reaffirmation of Mexico highlights its importance to the German giant. By contrast, VW recently said it will reduce investment in its Brazilian operations by $250 million from 2001’s level.
Production at Volkswagen’s Puebla facility fell 10% last year to 380,000 units. VW’s output was hurt by the strike and by its declining market share in the Mexican car market. Since the start of the North American Free Trade Agreement in 1994, General Motors and Nissan have made significant inroads in a market once dominated by Volkswagen.
Cars and trucks made in Mexico last year totaled 1,817,807 units, off 3.8% from 2000. About three-quarters of all Mexican-built vehicles are exported. Mexican domestic sales, meanwhile, rose 7.6% to 918,835 units.
VW hasn’t wavered in its plan to produce a convertible model of the popular New Beetle by mid-2002.
