The temporary shutdowns of two General Motors plants because of supply chain disruptions sent a ripple of worry throughout the auto industry mid-month, with Mexico singled out for bringing production of the Chevrolet Corvette to a halt at its Bowling Green plant in Kentucky.
But industry officials on the ground in Mexico say that supplier plants are mostly keeping up with their U.S. orders despite a new wave of COVID-19 infections and deaths south of the border that is not unlike what’s happening across most of the U.S.
Supply chain breakdowns occurring in Mexico appear to be isolated cases, they say.
That doesn’t mean there isn’t a danger of Mexico once again falling behind on the robust orders coming from North American factories, as it did in late May and early June. At that time, U.S. cities came out of lockdown weeks before Mexico, causing production disruptions as U.S. plants ran out of Mexican parts.
Last week, Mexico surpassed 100,000 deaths from the pandemic, according to the Health Ministry, and two states recently entered the most restrictive “red” tier under the federal government’s scale of green, yellow, orange and red. One of those states, Chihuahua, is a major producer of auto parts.
But despite the sea of red from coronavirus cases on maps in both the U.S. and Mexico, the North American auto industry continues to chug forward in response to strong consumer demand.
“I have not heard of any supply disruptions, and generally production has been going forward at a good pace,” said Manuel Montoya, director of the Nuevo Leon Automotive Cluster in northern Mexico and president of the National Network of Automotive Clusters. Nuevo Leon state borders Texas.
“The only situation we know about involves the state of Chihuahua, where production has been restricted on weekends,” Montoya told Automotive News. He added that he didn’t know whether restrictions in Chihuahua, which also borders Texas, were responsible for GM’s supply problems in the U.S. this month.
Chihuahua entered the red coronavirus tier in late October, while the neighboring state of Durango entered early this month. The red tier allows for “essential economic activities” to continue, which include the auto industry. Local governments, however, can impose restrictions on essential industries.
In Nuevo Leon, which is in the orange tier, the only government action has been to penalize businesses that don’t comply with health measures to protect workers, Montoya said. The state, home to the industrial city of Monterrey, has a number of automotive factories, including a Kia assembly plant.
But state and local governments, in general, “are aware of the importance of the auto sector,” Montoya said. “They have kept the industry open.”
GM did cite coronavirus restrictions in Mexico as the cause of this month’s two-day Kentucky plant closure. The automaker did not identify the supplier or the part that was in low supply.
Separately, GM did not identify the national origin of a parts shortage at its SUV plant in Arlington, Texas. Normal production at the plant continued but a weekend overtime shift was canceled.
General Motors de México said in an email to Automotive News that it has been working closely with its Mexican suppliers and that GM’s plants in Mexico have not had regular production impacted by supply interruptions. The automaker did not directly address the Kentucky and Texas supply issues.
“Suppliers have been moving mountains to keep their plants safely running,” the automaker said in the email last week. “Our supply chain, manufacturing and engineering teams are working closely with our supply base to mitigate any impacts on production, including with suppliers based in Mexico.”
Oscar Albin, president of the National Auto Parts Industry Association, said in a presentation this month that Mexico’s $100 billion-a-year parts industry was essentially running at the same high levels as a year earlier, with total employment levels down just 5 percent to 825,000 workers.
“Since recovering from the North American automotive shutdown starting in July, we have returned to practically the same [production] levels that we had in the second half of 2019,” Albin said. “Moreover, we are forecasting that December will be an even better month than December 2019.”
Parts production by Mexico-based suppliers will fall about 20 percent to $78 billion this year, compared with 2019 when it reached about $98 billion, Albin said. Earlier this year, the association had projected a 32 percent drop in 2020 output.