Delphi Corporation, the world’s largest car parts maker, could move part of its production operations out of Mexico due to high costs, according to a Reuters report.
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Sean Kelly, executive director of Delphi Mexico, told the news agency that production volumes in Mexico have fallen by 3 to 5% this year from last year, and the company is evaluating the possibility of moving production contracts to countries including Brazil, China and eastern Europe.
Reuters noted that Delphi, which posted falling earnings for the second quarter, has 55 plants in Mexico and employs 70,000 workers – a third of its worldwide operations are there.
The news agency also noted that Mexico is the world’s 10th largest car producer, but companies including General Motors and Volkswagen have seen production drop due to lower demand for exports amid an economic slowdown in the United States, Mexico’s main trading partner.
Among high costs are shipping expenses – Kelly told Reuters it costs as much to ship a container of components to the United States from China as it costs to ship from Mexico’s northern Sinaloa state to El Paso, Texas.
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By GlobalData“That’s where I think we need to be working with the government to say why does this cost this much. To be here this close to the market yet it still costs me as much to move the freight as perhaps being way around the globe, that’s kind of crazy,” Kelly told Reuters.
