Auto Industry Reignites in the US; Mexico Will Have to WaitBy Alejandro Enríquez | Mon, 05/18/2020 - 11:01
Scheduled workers started to arrive early this morning to manufacturing plants across the US. FCA, Ford and GM restarted their operations at a minor capacity, some plants with only one shift, as lockdown eases in the US. Mexico, on its part, must wait after the amendments made to the original decree that labeled the industry as essential.
Following strict sanitary checkpoints, social-distancing measures and questionnaires to ensure there was no close contact with any person infected with COVID-19, workers in the US resume operations weary of the health risks but aware that they are helping its employer to survive. "Ultimately, we are in this together. Because if we do not build trucks, Ford Motor Company is gone," told Todd Dunn, President of UAW Local 862 to the New York Times. Some auto suppliers in the US have already started operations since last week so that automakers can resume production smoothly. The challenge for the latter, however, remains in protecting their suppliers, specially bearing in mind that the usual 45-day payment dates could represent a threat for suppliers' cashflows.
In Mexico, the auto industry faces a new delay to resume operations after the federal government amended the original decree published on Thursday, May 14, on the strategy to ease lockdowns and resume operations in essential industries. Even though the automotive, construction and mining industry were labeled as essential early last week by the National Health Council, the guidelines under which they should resume activities remain unclear for industry players.
In the original strategy presented by the Mexican Ministry of Economy, essential industries could have resumed operations on May 18, under the necessary health protocols. However, the amendment published in the Official Journal of the Federation (DOF) on Friday established that between May 18 and June 1, essential industries should prepare the adequate health measures and then submit these for approval either to the Mexican Ministry of Labor, the Ministry of Economy, the Ministry of Health or IMSS. Companies that receive the green light prior to June 1 can then resume operations at that moment. Otherwise, they should wait until June 1 to appeal. "This is a goodwill agreement. however, if the aforementioned conditions are not met, the government will shut down companies or industries that put their workers' health at risk," the amendment says.
Following its publication, industry leaders met with the leader of the majority in the Mexican Senate, Sen. Ricardo Monreal, and members of the Economy and Tax committees. "We will act as goodwill lobbyist before the National Health Council and the executive branch of the government," said Monreal on a statement. "The Senate has supported the automotive industry in other regards, such as the elimination of the transitory regime for used-car imports," said Monreal. The presidents of the Tax and Economy committees also acknowledged the role the sector plays in the country. Guillermo Rosales, AMDA's Director General, highlighted the fact that car sales were not labeled as essential and they are working to proceed in this regard.
US Ambassador to Mexico, Christopher Landau has highlighted the need of a coordinated effort among North American supply chains. We are yet to see the effects these new amendments will have on the region’s automotive chain.