Cheap U.S. dollar giving Mexico production a lift
The Federal Reserve is keeping interest rates low -- and the dollar cheap -- which helps U.S. manufacturing. But the big winner could be Mexico.
With the yen stuck at 78 to the dollar, Japanese automakers are rushing to transfer production to North America. Consider these developments:
• Mazda Motor Corp. plans to build a 140,000-unit assembly plant in Salamanca, Mexico. It will start producing small cars in 2013. Company CEO Takashi Yamanouchi says Mazda is racing to enable the plant to build the Mazda2 and Mazda3 for the U.S. market.
• Honda Motor Co. expects to open an $800 million assembly plant in Guanajuato in 2014 to produce vehicles on the Fit subcompact platform. The plant will produce 200,000 cars a year.
• Nissan Motor Co. is expected to announce plans this month to build a $2 billion assembly plant in Mexico. Aguascalientes, the site of Nissan's first Mexican plant, is said to be in the running.
If Japanese automakers are migrating to Mexico, their suppliers can't be far behind. With such a strong yen, suppliers simply can't afford to export parts from Japan to North America.
At a recent press conference, Nissan CEO Carlos Ghosn said Japan "has lost all its competitiveness," and added that the yen's surge poses a bigger crisis than the March 11 earthquake.
Those are harsh words from an unsentimental CEO.
To be sure, Japan recently intervened in international currency markets to push down the value of the yen. But that's a temporary fix. The Bank of Japan can't fight global currency trends any more than King Canute could command the ocean tide to recede.
You can reach David Sedgwick at email@example.com.