Auto maker, criticized during the presidential campaign, is well on its way to spending $1.6 billion to build a new factory in Mexico
.. Ford’s Mexico plan has been long in the making and is the only way that executives expect they can stanch the losses associated with small-car production.
.. Still, many industry participants see them as necessary to meet fuel-economy standards because they help bring down the fleet average. That is why cars like the Focus are referred to as “compliance cars” in the industry.
.. Mexican production not only cuts the labor costs going into a Ford Focus, it also opens up more markets for export seeing that Mexico has dozens of free-trade agreements. More export destinations lessens the potential for unused factory capacity, which is the most common reason that auto makers burn cash.
.. In 2009, as part of terms of its government bailout, the auto maker agreed to keep a small car plant open in Michigan. That factory operates well below its capacity, but it appears to be under no threat of closing.
.. Fiat Chrysler Automobiles NV doesn’t see small-car sales as a key method for meeting fuel-economy requirements. As a result, it is converting all of its U.S. car-assembly capacity into light-truck capacity. This means that Dodge Darts and Chrysler 200s are no longer made in the U.S. as of Friday.
.. About 17% of the Detroit 3’s North American output is currently sourced from Mexico
.. U.S. auto factory workers are relatively expensive and executives want them building their highest-margin vehicles.
Donald Trump Warns of Penalties If U.S. Firms Take Jobs Abroad
He offered a carrot-and-stick approach to enticing companies to remain—a plan to lower the corporate tax rate to 15% from the current 35%; a drastic cutback in regulations; and steep penalties such as import tariffs for companies that move jobs out of the U.S.
.. What Mr. Trump described as his ability to bring outsourcing corporations to heel has emerged as a compromise that will see a break on corporate taxes in exchange for a commitment to keep some, but not all, manufacturing jobs from leaving.
.. Carrier has previously said it expected to save about $65 million a year by shifting the Indianapolis plant’s operations to Monterrey, in the state of Nuevo Leon, where wages average about $11 a day. The average wage of the Indiana jobs that will be retained is more than $30 an hour
.. The union said the hourly wages at the plant, which currently range from $18.82 to $30.81, would have to drop below the U.S. minimum to match the company’s estimated costs savings in Mexico.
.. The economy currently loses nearly 7 million jobs a quarter through the churn of companies failing, closing or leaving the U.S., Mr. Wolfers said, citing data from the Bureau of Labor Statistics. “Firms contracting or leaving a market is the natural state of business.”
.. The more pressing issue for the incoming administration would be to find ways to encourage more private job creation, rather than trying to intervene to prevent individual firms from leaving or shutting down. “Deal-making is not macroeconomic policy,” Mr. Wolfers said. “We should understand it’s politics, not economics.”
.. A study published by the Peterson Institute for International Economics estimated that imports from Mexico have displaced 203,000 jobs a year, but the two-way trade has also supported 188,000 jobs due to U.S. exports headed to Mexico. That’s a net 15,000 jobs lost annually—a tiny fraction of U.S. employment, according to the 2014 study.
Donald Trump Poised to Put Pressure on Nafta
While an abrupt withdrawal from the trade deal is unlikely, the president-elect and his advisers are gunning for big changes
His team may also seek to remove a Nafta provision that allows Mexican and Canadian companies to challenge U.S. regulations outside the court system... Breaking up Nafta would upend numerous industries, and the biggest victim would be Mexico, which promotes itself as a platform offering global manufacturers duty-free access to the U.S... Reopening the treaty would create “a long line” of special interests in all three countries trying to get protection, he added... If the U.S. leaves Nafta, then the two-decade-old agreement could be replaced with bilateral trade agreements, which Trump advisers say they prefer to multilateral tie-ups.
Does David Brooks Think Barack Obama Is the Answer?
David Brooks returned yesterday to his prediction of a coming political divide between the forces of “open” versus “closed.”
.. Rather than “open” and “closed,” I suggested, perhaps the real divide is between those who want to push ahead with what Brooks calls opening and those who want to slow down and correct course. We might even call the Openers “progressive.”
.. Are such communities best created through individual initiative and enterprise or large government interventions? Here, Brooks has apparently decided that large government interventions are the way to go.
.. To distinguish it, we should replace his “individual” and “social” labels on this community-building axis with “bottom-up” and “top-down.”
.. But government has no track record of accomplishing any of the tasks he would demand of it here. All the risk in this approach gets placed on those falling furthest behind and least equipped to manage it.
.. What Brooks wants to sell as “open/social” he should properly label “progressive/top-down.” Unsurprisingly, then, it happens to align almost precisely with the agenda of Barack Obama over the past eight years.