GM Expects To Move 600 Supplier Jobs From Mexico to Texas -- Update
June 16 2017 - 2:36PM
Dow Jones News
By Mike Colias and William Mauldin
General Motors Co. said Friday it would open a supplier park
near its Arlington, Texas, sport-utility factory, resulting in the
relocation of about 600 jobs from Mexico to the U.S. and a higher
concentration of American-made parts in Chevrolet Suburbans and
Cadillac Escalades.
Many of those U.S. employees will work for Luxembourg-based
interiors supplier International Automotive Components Group,
founded by billionaire investor and U.S. Commerce Secretary Wilbur
Ross. IAC will anchor the supplier facility.
The decision comes as the Trump administration considers changes
to the North American Free Trade Agreement and as Republican
lawmakers weigh a border-adjusted tax, both of which could make it
more expensive for companies to import parts from abroad. Boosting
the number of U.S.-made parts could alleviate some trade risk for
GM's most-profitable vehicles, the hulking SUVs assembled at its
Arlington factory.
Analysts estimate that profit margins on the SUVs can exceed
$15,000. Any tariff on the trucks' components could pinch
profits.
GM is one of several manufacturers rethinking the wisdom of
shipping intermediate products through far-flung supply chains.
Once thought of as a strategy to lower costs, overreliance on a
global parts network is perceive to be a risky bet due to political
shifts, protectionist measures and even natural disasters.
The auto maker earlier this year announced plans to add about
1,500 factory jobs in the U.S. in the wake of public criticism from
President Donald Trump of GM's Mexican imports.
The company said both the 1,500 jobs and the 600 supplier jobs
were planned before Mr. Trump's election. The new supplier park is
aimed at trimming logistical costs and benefiting from of other
advantages that could result from proximity of parts to the
assembly plant, GM purchasing chief Steve Kiefer said in an
interview Friday.
Mr. Trump has set in motion a renegotiation of the 23-year-old
North American Free Trade Agreement, which has set the ground rules
for Detroit and foreign-based auto makers operating in the U.S.,
Canada and Mexico.
The SUVs assembled at GM's Arlington plant have among the
highest Mexican content of any vehicles produced in North America,
according to the National Highway Traffic Safety Administration.
The SUVs contain 49% U.S.-or Canada-made components, while 38% of
the parts come from Mexico, the agency says.
Among U.S. officials' most frequently mentioned objectives for
Nafta talks is a revamp of the "rules of origin," which regulate
how much of a car -- or auto part -- must be produced in North
America to be eligible for duty-free shipment across the Mexican or
Canadian borders.
Shifting some parts production north to Texas reduces the risk
of costs related to a border tax that U.S. lawmakers have proposed,
potential tariffs Mr. Trump has threatened, or a newly negotiated
Nafta. Mr. Trump has even threatened to pull the U.S. out of Nafta,
a move that would likely result in immediate tariffs at the
border.
GM Chief Executive Mary Barra is a member of Mr. Trump's
business council. The jobs announcement comes as GM trims thousands
of assembly jobs in the U.S. to counter sluggish sedan sales.
GM next year will open a 1.2 million square-foot facility on the
site of a former retail mall less than 2 miles from the factory. A
handful of suppliers are expected to locate in the facility.
IAC supplies some content for the current SUVs, but won more
business on the next-generation trucks, which industry analysts
expect to go on sale in 2019. IAC will supply the bulk of the
truck's interiors, including consoles, instrument panels and door
trim.
About 1,250 hourly and salaried workers from IAC and other
suppliers will work at the facility. Roughly 600 of those employees
will replace work that had previously been done by suppliers in
Mexico, GM spokesman Nick Richards said.
GM has located supplier operations near several other U.S.
assembly plants in recent years to cut logistics costs, Mr. Kiefer
said. The setup reduces inventory, makes it easier to tweak
production schedules and can help spot and fix quality lapses more
quickly, he said.
The strategy is part of a broader effort by GM to squeeze out
$6.5 billion in annual costs by 2018, compared with four years
earlier. Mr. Kiefer said savings from supplier parks and other
logistical moves is contributing about $1 billion to that goal.
Mr. Kiefer acknowledged that some of those savings are offset by
higher labor costs in Texas compared with overseas markets but
called it "a positive trade off." He said the creation of U.S. jobs
is "a great byproduct" of the strategy but said it wasn't the
primary factor.
Write to Mike Colias at Mike.Colias@wsj.com and William Mauldin
at william.mauldin@wsj.com
(END) Dow Jones Newswires
June 16, 2017 14:21 ET (18:21 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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