By Bob Tita in Chicago and Santiago Pérez in Mexico City
U.S. manufacturers preparing to resume production after a month
of lockdowns are returning to work without a reliable supply of
parts from plants in Mexico, a majority of which remain idled by
restrictions there to slow the spread of the coronavirus.
Mexico exported $358 billion worth of goods to the U.S. last
year, surpassing China as the nation's largest trading partner. But
many subsidiaries and suppliers of parts or finished goods to U.S.
manufacturers remain closed by the order of Mexico's Health
Ministry, limiting the flow of goods back north across the
border.
Mexico's lockdown covers entire industries that remain in
operation in the U.S. or are planning to resume production,
including the auto industry. Auto makers in the U.S. voluntarily
idled assembly plants but are expected to resume production later
this month.
Jeff Clark, chief executive of Waukesha Metal Products, a
Wisconsin-based metal stamper and fabricator, predicted it will be
difficult for auto assembly plants in the U.S. to reopen without
suppliers in Mexico starting production as well. Waukesha was
forced to close a plant in Mexico on April 6 that makes parts for
vehicles assembled in both Mexico and the U.S.
"We're essential in the U.S. and still operating, but in Mexico
we're completely shut down," he said.
Repairing the frayed supply chains will be an early test for the
revised version of a free-trade agreement between the U.S., Mexico
and Canada, which is set to take effect in July. Trade experts say
the pact, like many trade treaties, lacks standard definitions for
essential industries that would remain open during a crisis that
affects all three countries such as the coronavirus pandemic.
U.S. companies and some states have been lobbying for Mexican
plants near the border to reopen, raising tensions between border
towns where manufacturing and trade are tightly linked. Mexican
authorities have cited border factories for contributing to higher
rates of infection in northern Mexico.
A spokesman for Robert Lighthizer, the U.S. trade
representative, had no immediate comment on the agreement or the
impact of the pandemic on trade between the U.S. and Mexico.
Mexico's Economy Ministry said on April 24 that it was working
with U.S. and Canadian counterparts on a plan to gradually reopen
the automotive industry.
Mexican officials have been reluctant to deviate from the Health
Ministry's guidelines on essential businesses. Public health
authorities say the trajectory of the pandemic in Mexico is behind
the U.S., requiring that more businesses there remain closed.
"Mexico is going to follow its own calendar," Marcelo Ebrard,
Mexico's foreign minister, told reporters last week.
Lennox International Inc. said its two plants in Mexico remain
open as providers of heating and refrigeration equipment to
essential businesses. But at least a dozen suppliers of components
for the company's equipment were closed for a month by local
authorities, who didn't make exceptions for them to fill orders
from Lennox, said John Hurst, Lennox's vice president of government
affairs. He said about half of those suppliers were allowed to
reopen this week.
"The Mexican supply chain affects every plant we have," Mr.
Hurst said.
Home-appliance manufacturers, too, rely heavily on plants in
Mexico, the second-largest producer of appliances imported to the
U.S. behind China. Appliance companies including Whirlpool Corp.
have said some of their suppliers in Mexico haven't succeeded in
securing permission to remain open.
"We've had some issues of stop and start with certain players,"
Whirlpool's Chief Executive Marc Bitzer said Friday. "They have not
been completely resolved, but we remain confident they will be
resolved."
More than 300 U.S. chief executives signed a letter last month
from the Washington-based National Association of Manufacturers to
Mexican President Andrés Manuel López Obrador asking that Mexico
recognize the broader set of guidelines for essential manufacturing
issued by the U.S. Department of Homeland Security. That list,
which identifies 16 critical industries, has been widely adopted by
state governments in the U.S.
The supply strains are adding to the uncertainty for
manufacturers navigating one of the steepest drops in demand for
their products in decades. U.S. factory orders posted a record drop
in March, the Commerce Department said on Monday.
Mexican health officials have blamed export-focused
manufacturers and their factories near the border with the U.S. for
spreading the virus by not closing the plants quickly enough early
in the pandemic. Tijuana, just across the border from San Diego,
has been one of Mexico's most infected areas.
In Ciudad Juárez, a manufacturing hub near El Paso, Texas,
authorities said 13 workers at a plant for car-seat manufacturer
Lear Corp. died of the virus. Lear said it suspended operations at
its 42 plants in Mexico last month.
Javier Corral, the state governor of Chihuahua, where Ciudad
Juárez is located, said he has rejected requests from U.S.
governors and business executives for his state to establish a
separate schedule from the rest of the country for reopening
automotive and aerospace plants.
"What we're looking for from the federal government is some
alignment, so that we can reopen at the same time." Mr. Corral
said. "We're going to follow all of the recommended health
measures."
--Robbie Whelan in Mexico City contributed to this article.
Write to Bob Tita at robert.tita@wsj.com and Santiago Pérez at
santiago.perez@wsj.com
(END) Dow Jones Newswires
May 05, 2020 15:46 ET (19:46 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.