Mexico's auto unions agree to cut wages
MEXICO CITY (AP) - June 4, 2008
As more automakers turn to Mexico, a big argument for the North
American Free Trade Agreement in 1993 - that Mexico's low wage
rates would slowly rise to close the gap with U.S. wages - seems to
have been thrown in reverse.
"The pressure has not been to raise the Mexican wages up, it's
been to push the U.S. wages down," said Ben Davis, the director of
the AFL-CIO Solidarity office in Mexico City..
And now Mexican wages are being pushed down even more..
Wage concessions were apparently key to persuading Ford Motor
Co. to direct many of the 4,500 new jobs involved in building
Fiestas to the Ford plant in Cuautitlan, on the outskirts of Mexico
City. Union leaders at the plant told The Associated Press they had
agreed to cut wages for new hires to about half of the current wage
of $4.50 per hour..
"We agreed to it," said Ford union leader Juan Jose Sosa
Arreola. "We need to be more competitive. That's the truth. That's
a reality.".
The United Auto Workers union had hoped to preserve American
jobs by offering a two-tier wage system last fall, cutting starting
wages for new U.S. workers by half to about $14.20 an hour. But it
hasn't worked - the jobs are flowing to Mexico, where starting
wages at some plants also have been two-tiered, to as little as
$1.50 per hour with a lot less of the related pension and health
care costs of U.S. workers..
With labor costs like these, Mexico is staying competitive with
China, where an average worker at a foreign-owned factory or joint
venture can make $2 to $6 per hour. While Mexican benefit costs run
higher, Mexico may have already won the low-wage race..
Mexico also now has the advantage of a massive auto production
platform based on experience with export plants and proximity to
major markets that can't yet be beat in China, whose factories
still produce mainly for its own domestic market..
Ford spokeswoman Alejandra Acevedo said she did not know what
starting wages for new hires at Cuautitlan would be, but she
acknowledged that to win the jobs, the plant had to compete against
other Ford facilities worldwide..
"It makes business sense that labor costs are much lower here,
and also it's much cheaper here to grow the local supplier
network," said Acevedo, noting Mexico's free trade deals help
slash the cost of importing parts and exporting cars, Acevedo said..
Other U.S. automakers also are squeezing wages. General Motors
Corp. said Tuesday it will stop using relatively high-wage workers
to assemble slow-selling pickups at its plant in central city of
Toluca. A labor leader there said the union had gotten the message
and would offer to work for less to keep the plant alive..
"I think we are going to have to sacrifice something in order
to continue to be competitive," said Edgar Arroyo, a union leader
at the Toluca GM plant, where he estimated some workers earn about
$6 per hour, an extremely high rate by Mexican auto industry
standards..
Nothing in NAFTA stops this drive to the wage floor. The treaty
only requires countries to enforce their own minimum wage laws,
which in Mexico means about $5 per day..
Foreign investment in Mexico's auto industry is soaring,
averaging about $2 billion per year since the 1990s. Ford's $3
billion investment in the Fiesta project may accelerate that trend.
Auto exports grew by almost 68 percent between 2004 and 2007 to
1.6 million units. Most went to the U.S., but also to European and
other Latin American markets..
But since NAFTA's approval in 1993, the gap in overall
manufacturing wages between Mexico and the United States has
widened slightly, according to government figures..
At Volkswagen's plant in the central city of Puebla, union
spokesman Arturo Monter blames low wages on Mexico's antiquated
system of labor laws that favor employers and discourage strikes
and union organizing..
Unlike in the United States, where a single national union, the
UAW, organizes most auto plants, in Mexico unions are deeply split
and may only represent workers at one manufacturer, or even at a
single plant..
Union leadership at Monter's plant agreed to cut starting wages
to $1.50 an hour from $1.95 a few years ago. It can now take as
long as seven years to work up to earning what was once the
entry-level wage, Monter said..
Still, those lower labor costs helped win a contract for an
as-yet unnamed Volkswagen model, known at the plant only as
"Project Zero," that the automaker had been considering building
in the United States, Monter said..
A VW spokesman declined to comment on production plans, saying
only that nothing had yet been confirmed..
Mexico's abundant, youthful work force is still drawn to auto
plants despite the low wages, union leaders say, because the
companies offer stable employment, a rarity in Mexico's working
world..
"Despite the fact that we're negotiating what you could call a
cheaper contract, I guarantee you that if we advertise for 2,000
workers, 10,000 people are going to show up," said Sosa Arreola,
whose plant sits on the outskirts of Mexico City..