General Motors Bulks up in Mexico as Cloud Hangs over NAFTA

Despite President Donald Trump’s threat to scrap the North American Free Trade Agreement (NAFTA), car maker General Motors has shifted its production of GMC Terrain vehicles to its Mexican plants, creating about 400 new jobs.

Amid these ongoing NAFTA negotiations, the auto giant has continued to place its faith in Mexico. Earlier this month, when employees at its plant in Ingersoll, Ontario, went on a strike, the auto giant threatened to close the factory permanently and move production to Mexico.

In Mexico, General Motors runs four manufacturing plants in Toluca (state of Mexico), Coahuila, Guanajuato, and San Luis Potosí, employing nearly 10,000 people. In 2014, it announced that it would invest $3.6 billion in the country to expand and modernize its manufacturing plants.

The GMC Terrain was previously being built at its facility in Ontario, Canada.

Earlier this month, Trump reiterated: “If we can’t make a deal (NAFTA), it’ll be terminated and that will be fine.” If NAFTA is scrapped, Car plants in the United States are likely to lose nearly 17,000 jobs, according to CNN.

Even if NAFTA survives, some of its rules will most likely be changed, impacting the auto industry greatly, as the US is proposing to increase North American content for autos produced in the region.

Under the existing agreement, at least 62.5% of the material in a car or light truck made in the region must be from North America to be able to enter the marketplace tariff-free. President Trump wants this North American share increased to 85%, insisting the auto industry must source 50% of its material from the US.

Moreover, General Motors knows it well that President Trump is not happy with its Mexican operations. In January this year, Trump threatened to impose special tariffs on GM vehicles shipped from Mexico. “General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in USA or pay big border tax,” Trump tweeted.