Cars and Trucks Made in Mexico, Canada, and China

Just some thoughts on manufacturing and international trade I have seen and experienced over the decades.

I worked in automotive (care and trucks) for the Tier1s supplying wire harnesses and other components to Chrysler, Ford, and GM. The company also did business with foreign car manufacturers. This particular company was Japanese. US components were shipped globally supplying each of our sites with the necessary components and wire.

Why did we have so many manufacturing sites? Because it made sense to manufacture where the harnesses would be used. Furthermore, the time in transit by ship was weeks and air freight is expensive. Again, it makes sense to manufacture in the place where the parts are used. It also makes sense to minimize the amount of lead time and transportation to get materials to manufacturing and a finished product to where it is sold.

So what is the big attraction to assemble in Mexico and Canada to be delivered in the US? Lower overhead. Healthcare costs for one which eat up a significant amount of funds per employee in the United States. Hourly wages are less in Mexico and can be lower in Canada also. So are other costs such as real estate.

The big equalizer in all of this is throughput. Can US Labor be more efficient than Mexico and Canada to overcome the cost differences? In some cases, this can be the case. For lower cost items, it may not be so prevalent.

The same holds true for other products.