Mexico taking a cue from U.S. labor

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Mexican auto unions for 2-tier wage schemes Wage concessions are bringing already low salaries lower at Mexican auto factories but helping to keep the industry competitive with China.

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By MARK STEVENSON
Associated Press
MEXICO CITY -- Mexican auto unions are taking a cue from U.S. labor leaders by offering two-tier hiring schemes and salary cuts that bring already low wages down to near-Chinese levels.
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 more.

Wage concessions were apparently key to convincing Ford 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 are two-tiered, to as little as $1.50 per hour with a lot less of the related pension and healthcare 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 earn $2 to $6 an hour. While benefit costs run higher in Mexico, it 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 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 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 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, who estimated some workers earn $6 per hour, a very high rate by Mexican auto industry standards.



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