Artist's rendering of BMW's new plant. Artist's rendering of BMW's new plant.

BMW set for 2019, with NAFTA or no

Construction of San Luis Potosí factory between 40% and 60% complete

Construction of German auto maker BMW Group’s San Luis Potosí assembly plant is on schedule and is expected to begin production in April 2019, with or without NAFTA — the North American Free Trade Agreement.

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Plant manager Hermann Bohrer told CNN Expansión that “while there’s uncertainty around the renegotiation and the possibility of a tax [on Mexican imports to the United States], we expect it won’t affect our business model.”

Part of Bohrer’s confidence in the future stems from the fact that while other automotive manufacturers set up shop in Mexico to cater to the United States market, BMW planned since the beginning for its San Luis Potosí plant to produce for the global market.

Project vice-president Raymond Wittmann reported that construction fn the different buildings that make up the plant is currently between 40% and 60% complete.

Bohrer said US $22 million is being invested this year in training 700 employees, a figure that will double by next year.

Once it’s operational the plant is expected to employ 1,500 people directly and 10,000 indirectly.

The manufacturer has signed agreements with 180 Mexican suppliers, 45 of which operate in the state, and with 20 international firms that are also investing in Mexican plants, including the Chinese firm Minghua, a bumper manufacturer.

Wittmann also explained that a 71,000-square-meter solar farm will satisfy 100% of the plant’s electricity needs.

The solar array is part of an innovation plan that will make the San Luis Potosí plant its most technologically advanced in the world, the company said.

With an estimated production of 150,000 units per year, the new plant will be the firm’s third largest in the world.

Source: CNN Expansión (sp), El Financiero (sp)

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  • Güerito

    How Mexico’s Unions Sell Out Autoworkers – Wage contracts are inked years before plants open and workers never get a say.

    “At a ceremony at Mexico’s Los Pinos presidential residence in July 2014, BMW Chief Executive Officer Harald Krüger pledged to spend $1 billion to build a factory in the northern state of San Luis Potosí that will employ 1,500 workers. To mark the occasion, he presented President Enrique Peña Nieto with a model of a silver BMW race car.

    The German automaker had unwrapped its own gift two days earlier, a labor contract signed by a representative from the state chapter of the Confederación de Trabajadores de México (CTM), the country’s largest union confederation, and notarized by a Labor Ministry official. The document, which Bloomberg reviewed, sets a starting wage of about $1.10 per hour and a top wage of $2.53 for assembly-line workers. The starting rate is only a bit more than half the $2.04 an hour that is the average at Mexican auto plants, says Alex Covarrubias, a lecturer at the University of Sonora in Hermosillo.

    The paperwork was filed two years before BMW broke ground on the new plant, which will turn out $45,000 3 Series sedans. When workers begin to stream into the factory sometime next year, there’s a good chance most won’t know they belong to a union.

    So-called protection contracts— agreements negotiated between a company and a union that doesn’t legitimately represent workers—are illegal in the U.S. and Germany. But Lance Compa, a senior lecturer at Cornell’s School of Industrial and Labor Relations, says they’re standard operating procedure in Mexico, where deals are cut factory by factory rather than collectively across a company or industry. Experts say this is a primary reason that wages in the auto sector have stagnated in recent years, despite a fresh wave of investments by foreign carmakers, most recently by German and Japanese manufacturers. Mexico’s union bosses and politicians are more interested in keeping corporations happy than in raising the living standards of workers, Covarrubias argues. “Protection contracts are a way to keep wages artificially low,” he says.”

    https://www.bloomberg.com/news/articles/2017-05-05/how-mexico-s-unions-sell-out-autoworkers

    • raoul contreras

      Funny, 35 years or so ago, Sol Price opened the Price Club in San Diego which became COSTCO. He signed a labor agreement with the Teamsters before he hired a single floor employee.

  • K. Chris C.

    Being that the US tyranny is just about plundered to the bone, in a few
    years time most of the cars produced here will go to Europe. Time for
    the Khazarian grift-machine to shift operations over to the European
    plantation, as they still have wealth to loot.

    An American citizen, not US subject.

  • csb4546

    Mexican wages have been sold out to attract foreign automobile manufacturing investment to Mexico.
    The business model of these factories is predicated on long-term contracts paying slave wages to Mexican workers.
    Why is this good for Mexico?

    • You are correct in complaining that wages in Mexico are too low, but they are not as low as you might think because of the job security, medical care, Aguinaldo, paid vacations, overtime, 12 weeks maternity leave for mothers, free child care and in the case of BMW, transport to and from work and hot meals.

      • Güerito

        Glenn, the job security, aguinaldo, maternity leave, paid vacations and overtime are all being paid based on the $1.10 USD an hour salary cited in the Bloomberg article I posted below.

        And at least some employee benefits, such as Infonavit and other social security-type benefits, are deducted from this hourly salary or paid jointly by employer and employee, right? Any other taxes?

        Since you seem to work in the area, what’s the average deduction, % wise, from an employee’s twice monthly (quincena) paycheck? I’ve seen a figure of 25%, but also heard as high as 40%. What’s your experience?

        • I am a licensed Mexican attorney with 30 years experience in the maquiladora industry. A Mexican worker is paid a daily wage. No matter how many hours he works he is paid for 6 days plus 25% (prima dominical). Overtime is paid over 8 hours a day at double the wage for up to 9 hours, over 9 hours of overtime is triple paid. The Aguinaldo is 15 days wage minimum. Many people depending on their union contract are paid 20 days or more of Aguinaldo. A university degree means you will make up to 100 times what an unskilled worker makes. Unemployment is so low in many places that the employers offer extra benefits to attract and retain workers. Transport and meals has become one of those perks – here in Tijuana, if you want to compete for labor, you have to offer transport and meals. Infonavit – the government mortgage plan is 100% paid for by the employer and is roughly equal to one weeks pay every two months. Workers accumulate points or amounts of money in their fund and can apply for a mortgage. Their mortgage payments are deducted by the employer and paid directly to INFONAVIT. There payments by law cannot exceed 25% of their monthly income. If they change jobs and make less money, their payments are lowered. If they become unemployed, payments are suspended for the duration of their unemployment. Social Security (IMSS) (medical, retirement, maternity leave, child care, retirement, disability, etc.) is paid for by the employer completely and is roughly 30% of a workers salary depending on the risk rate for that industry. Some companies are paying up to 35% on top of wages for Social Security. Workers who make less than 3 times the minimum wage for their profession (there are 70 minimum wages) do not pay income tax, their employer pays their income tax referred to as the “subsidio patronal.” A worker who makes more than this pays between 1% to a maximum of 30% of their wages based on their income level. Mortgage payments and income tax for higher paid workers are the only possible deductions. A university degree means that you may enter the work force making 50 to 100 times the minimum wage, although it is very difficult to find anyone who actually is paid the minimum wage. Until January of 2017, all government fees and fines were based on the daily minimum wage current in Mexico city. For example a traffic violation was fined at to to 50 times the daily minimum wage. It took a Constitutional reform to change this link between government fees and fines and it had the effect of keeping that minimum low, because a change meant all government fess increased by that amount. That link no longer is in effect, which should mean that the minimum wage should rise more rapidly. Their are initiatives in Congress today that would set a time table to raise wages over a period of time dramatically.

          • Güerito

            Are you involved in drafting some of those fake “protection contracts,” which, according to experts cited by Bloomerg, are “a primary reason that wages in the auto sector have stagnated in recent years, despite a fresh wave of investments by foreign carmakers, most recently by German and Japanese manufacturers”?

            Not sure where to begin on your post which is all over the place, but the bottom line is that wages in Mexican factories are extremely, embarrassingly, low, and this is the only reason why any foreign company invests in Mexico.

            The state of Sonora is currently proudly offering 150 pesos a day for entry level work in malquiladoras for returning departees. But, as you say, that do get free grub and are picked up in aged school buses on the side of poorly lit highways at 5 a.m.

            http://www.excelsior.com.mx/nacional/2017/03/07/1150707

            With more than 50% of Mexicans working in the informal economy, is unemployment in Mexico really so low? Mexicans take jobs in the informal economy to make more money than they can in the formal economy.

            “A university degree means that you may enter the work force making 50 to 100 times the minimum wage, although it is very difficult to find anyone who actually is paid the minimum wage.”

            You, like many here, continue to insist that no full-time workers in Mexico work for one or two minimum salaries. The statstics show nearly 4 million full-time workers are making the minimum wage and about 7 million are making only twice that amount:

            http://www.excelsior.com.mx/opinion/viridiana-rios/2016/08/07/1109488

            http://www.sinembargo.mx/27-09-2016/3097338

            50 to 100 times the minimum wage?! Really!? Let’s take 75, for example. At four USD a day (current MX minimum daily wage), please explain where a Mexican with a university degree can find starting work at 300 USD a day. It’s really not worth responding to that whopper. Suffice to say it would place the earner in the top 1-2% of all income earners.

            In fact, about 7,500 pesos a month or $15 USD a day (about 4 times the minimum daily wage) is a **very good** starting salary for a college graduate.

            Infonavit is not what it used to be. The “houses” are getting smaller and smaller, and more likely located very far from any urban center. I know a lot of these Infonavit “houses” are located near malquiladoras. With the poverty wages, coupled with Infonavit houses nearby and the free work transport and food, the whole thing closely resembles the “mill towns” or “company towns” you found in mid-to-late 19th century in the US.

          • I am sure you have your preconceived notions of labor unions, wages and protections for workers in Mexico and don’t want another point of view. I have already stated that wages are too low in Mexico. I advise all my clients to sign an agreement with a union before they start hiring. The reason is that there are a lot of unions that take advantage of the situation to control hiring and benefits. If you do not sign with a union, another union with 5 workers signed up can call a strike. A strike shuts a company down completely and the company cannot even enter the property to access offices. There is no scab labor in Mexico, a company shuts down completely until the strike is settled. Those contracts you mention are not “fake protection contracts”. I don’t have time to explain one to you, but if you want to read an English translation of one, I can provide that to you.

          • Güerito

            It’s been a while, but I thought about your posts here, lauding the benefits of Infonavit houses and my response, after reading this article on the tragedy of Infonavit:

            http://www.jornada.unam.mx/2017/06/11/politica/014n1pol

          • About 10 years ago someone had the idea of building small starter homes for young people entering the work force. It was a disaster, these small houses were never meant for more than one or two people and workers could buy them after having worked a short time. The INFONAVIT has prohibited those small houses now and they are no longer being built and yest there are thousands of them abandoned. What you may not know about INFONAVIT is that you can apply your fund to any home you want to buy or an existing home that you want to remodel. Many people, including my daughter, have bought homes that they are very happy with. INFONAVIT is a huge program and yes there are horror stories but it is not the experience of the majority of people that buy homes.

      • csb4546

        That doesn’t make up for wages that are slave level.
        These should be high-paying Mexican middle class jobs.
        This is the reason there is no middle class in Mexico.

        • To state there is no middle class in Mexico is absurd. There is a healthy middle class in Mexico. Visit any Mexican city and you will find streets full of new cars and luxury homes and apartments. Restaurants full of people spending money. The key to the middle class in Mexico is education. Right or wrong unskilled labor is not highly paid, although there is job security, medical insurance, vacations, day care, and other benefits required by law. If you do not have a university education in Mexico, you are very limited in what kind of wage you can earn and even what kind of job you can acquire. You want to work in management in a Mexican factory, you will not find an open door without a university education. The only way out of low wages in Mexico is to open your own business or have a University Education. My children all have a University education and they are all under 35, have new cars and have already bought homes. My youngest daughter graduated from law school in September and in January she started working as an attorney for the government in SAT. This is her first job, she is well paid, she gets a month vacation every year, 45 days of Aguinaldo, health care in ISSTE plus a private insurance for major expenses. Education opens doors in Mexico.

  • rachelle casillas

    It is sickening to hear people are being treated so badly, getting fired for no apparent reason and being paid peanuts. If more people become aware of the inhumane treatment of the Mexican people nobody is going to buy these cars!

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