Mexico appears to delay auto industry restart to June 1 amid confusion

Mexico on Thursday pushed back by two weeks the reopening of automotive plants and the mining sector after the coronavirus lockdown, creating confusion among companies about how soon they can reconnect supply chains tied to U.S. manufacturing.

File photo: The United States and auto companies have been pressing Mexico to reopen auto factories. (Bloomberg)
File photo: The United States and auto companies have been pressing Mexico to reopen auto factories.

The government on Wednesday had indicated the auto sector would resume operations on Monday and published advice to that effect in its official gazette. It later withdrew the page from the gazette and on Thursday published fresh instructions in the gazette indicating the industry would not reopen until June 1.

"This would be a real crisis for suppliers," said Ann Wilson, senior vice president of government affairs at the Motor & Equipment Manufacturers Association, a major U.S. auto parts industry group, referring to the possibility of not being allowed to resume production next week in Mexico.

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Despite the intensifying challenge posed by the pandemic in Mexico, the United States and auto companies have been pressing its government to reopen factories quickly because automakers will struggle to operate without parts from south of the border.

Some lawmakers in President Andres Manuel Lopez Obrador's ruling MORENA party had publicly expressed concern about a Monday restart in regions badly hit by the coronavirus outbreak. Mexico's Mining Undersecretary Francisco Quiroga on Thursday said certain safety protocols have to be carried out with the ministries of health and labour after May 18, which would take time, before the mining sector reopened.

Also Read : GM to reopen cash cow Mexican pickup plant as soon as next week

"In principle, we are planning everything for a start on 1 June," Quiroga told Reuters. "Reopening activities cannot be done from one day to the next."

The uncertainty follows death figures that show Mexico's pandemic is still increasing, despite government predictions that the virus would peak last week. Tuesday and Wednesday were the two most lethal days in Mexico's outbreak, with 353 and 294 additional deaths.

The Mexican government is now indicating that companies should use the period between Monday and June 1 to put in place their safety protocols to mitigate the virus' spread.

However, auto industry sources told Reuters that talks are still ongoing between Mexico and automakers and suppliers about when they can resume production.

Industry executives believe Mexico may still clarify whether they can begin production before June 1, the sources said.

Also Read : Mexico plant claiming to help GM build respirators ordered shut

If auto parts plants cannot resume next week, automakers would have to halt most production soon after they restart in the United States and could see shortages of key vehicles assembled in Mexico, the sources said.

"We are seeking clarity about the situation as soon as possible," one Mexican industry source said.

One major industry body representing Mexican auto part manufacturers said it would not adhere to the new date of June 1 and considered the previous May 18 restart date as having legal force.

"We will start to operate according to page 29 of the decree published in the official gazette yesterday," said Alberto Bustamante of the National Autoparts Industry lobby group.

General Motors' pickup plant in Silao is critical to the Detroit company's North American operations and had been expected to reopen next week.

"But just now I have just been told we will not restart until June 1. For now we will only be able to use the next weeks to get ready to restart the operation," said a source in the Silao labor union, who asked not to be identified.

A GM spokeswoman, Teresa Cid, said the company had no comment about an official date to restart manufacturing operations in Mexico.

First Published Date: 15 May 2020, 11:14 AM IST
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