In a country notorious for its cheap labor, USMCA might actually be hurting workers than helping. Case in point? Honda considering moving their Fit production back to Japan.

Honda has a rich history in Mexico that dates back all the way to 1985 when Honda first started selling motorcyles two years later. A year after that in 1988, motorcycle parts began production for Honda in Mexico. Honda has been in Mexico for a long time. But as per Reuters on their report earlier this week (Oct. 26,2018) on Honda’s latest move out of North America, Honda is thinking about moving Honda Fit production out of Mexico and back to its home country of Japan.

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Honda of Mexico currently has two assembly plants operational in Mexico where the Honda CR-V, HR-V and Fit are assembled, all three best sellers in North America.

Before, Honda of North America benefited from duty-free export into the United States with a large majority of their Mexican built vehicles having just enough of it with materials from North America. With a higher percentage of N. American content required for every vehicle coming from Mexico, tariffs might be imposed if nothing with suppliers not from N. America changes.

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For the first time since NAFTA, USMCA allows Mexican workers to unionize, only increasing the cost per vehicle.

In addition, there’s a stipulation where 30 percent of cars must be made by high-wage workers making at least $16/hour, a significant increase compared to what they’re paid today.

The Denver Post reports that, at one point, Audi was paying its assembly line workers as little as $2 an hour.

With wages going up causing costs to increase there is little incentive for Honda to stay in Mexico and there’s a strong possibility that, if costs rise too much, Honda will move out of Mexico altogether.

Honda, Audi, Volkswagen, and all these other car manufacturers building cars for the North American market are in Mexico for a good reason, it’s cheap to make cars there.

The last thing Honda wants to do is pass on this extra cost to the consumer and they certainly won’t cheapen their cars to compensate. Honda has been criticized in the past for attempting to do that where they paid in sales.

If USMCA plays out like Reteurs predicts based on these unfounded rumors, we’ll continue to have our Fits at regular prices but Mexicans will lose their jobs.

Source: Reuters




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