In Mexico’s auto heartland, workers struggle as chip shortage bites

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AGUASCALIENTES, Mexico, Nov 24 (Reuters) – A worldwide semiconductor shortage is hitting Mexico’s auto workers arduous as employers slash output, cut back shift work and lower jobs because of supply-chain breakdowns.

The ache is acute within the central Mexican state of Aguascalientes and its namesake capital, one of many nation’s prime automotive facilities, the place the chip crunch has compelled rolling shutdowns at employers giant and small.

The short-term closures have translated into misplaced wages for tens of hundreds of workers right here and throughout Mexico because of furloughs and layoffs, based on interviews with laborers, union leaders and trade executives.

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Cuitlahuac Perez is common director of Aguascalientes-based auto elements agency Maindsteel, and head of one of many state’s automotive clusters, which promotes the trade. He mentioned his agency and different Aguascalientes suppliers have been suspending operations a mean of seven to eight days per 30 days as carmakers and different elements firms additional up the provision chain halt manufacturing.

Perez estimates that about one in 5 native automotive workers have misplaced their jobs, with the remaining seeing large pay cuts for the reason that chip shortages started about seven or eight months in the past. By contract, many idled workers right here obtain half their salaries.

“We are talking about a direct impact on their families,” Perez mentioned.

Semiconductors are an indispensable part for the world’s automakers, who want them for all kinds of methods such as security, navigation and leisure. COVID-19 outbreaks in Asian semiconductor manufacturing hubs have slowed chip manufacturing. The fallout has rippled throughout the globe, with automakers unable to maintain manufacturing on tempo with car demand.

In Mexico, multinationals affected embrace Nissan Motor Co. Ltd (7201.T), the nation’s second-largest car producer. The Japanese agency operates a powertrain facility and an meeting plant in Aguascalientes producing its March, Versa, Kicks and Sentra autos. The firm has seen a minimum of 5 shutdowns at its Mexican services this 12 months because of chip points, Reuters has reported.

The newest got here earlier this month, the corporate mentioned, with stoppages starting from 5 to seven days at its Aguascalientes vegetation, and an eight-day closure at its CIVAC manufacturing unit in Morelos state, which manufactures the Versa V-Drive sedan and two pickups: the NP300 and Frontier.

The dearth of chips has additionally affected an Aguascalientes meeting plant that is collectively operated between Daimler AG (DAIGn.DE) and Renault-Nissan. The so-called COMPAS plant, which produces the Mercedes-Benz GLB SUV, has skilled “shift reductions or production breaks,” a Mercedes-Benz spokesperson mentioned in emailed feedback.

The turmoil is weighing on Mexico’s financial system. Car manufacturing fell by 20% to three.04 million autos final 12 months, and is forecast to drop by as a lot as one other 5% in 2021, based on the Mexican Automotive Industry Association (AMIA). The auto trade, which employs 946,000 workers presently, has misplaced 16,000 auto jobs for the reason that finish of 2019, AMIA figures present.

In August, the Bank of Mexico projected that automotive work stoppages ensuing from chip shortages might value Mexico as much as 1 proportion level of GDP progress in 2021. Preliminary third-quarter GDP knowledge confirmed that the financial system shrank between July and September, the primary quarterly fall since restoration from the pandemic started, partly because of issues within the auto sector.

The Mexican unit of China-based Minth Group, whose Aguascalientes plant provides elements to automakers all through North America, is among the many companies trimming workers’ hours and chopping jobs. The firm has laid off about 20% of its workforce this 12 months, based on Manuel Ando, director of administration and infrastructure for Minth Mexico. That comes on prime of earlier cuts, with staffing now standing at 1,300, down from round 2,700 previous to the pandemic, he mentioned.

Ando mentioned the scenario was attributable to a myriad of things, together with tight chip provides, hiccups within the world logistics chain and a slowdown of manufacturing by its U.S. prospects, lots of whom are grappling with employee shortages.

“Since they are halted, well, we have to stop too,” Ando mentioned.

Dalila Gomez, who inspects elements for Minth in Aguascalientes, counts herself fortunate nonetheless to have a job. But lowered hours have her tightening her belt. Gomez mentioned when manufacturing is halted she receives simply 50% of her common weekly paycheck of round $60. The mom of three mentioned she has trimmed a number of family bills, together with gentle drinks at lunch and residential web service.

“It’s sad because there are many people, including myself, with families – some of them single moms – who have to support their families, pay rent,” Gomez mentioned. “This has affected everyone, everyone.”

‘THE WORST IS YET TO COME’

Mexico’s automotive sector is not struggling in isolation.

Automotive powerhouse Germany is struggling to ramp up output and the scenario is hampering its financial restoration. Carmakers in Japan have been compelled to chop manufacturing.

A bipartisan group of U.S. governors not too long ago warned that, because of the chip shortage, automakers in North America misplaced an estimated 2.2 million autos in 2021 and 575,000 trade jobs have been impacted.

The semiconductor squeeze is more likely to proceed a minimum of by way of the primary half of 2022, based on a current forecast by Ratings company Fitch.

Some trade gamers see tentative indicators that the scenario is stabilizing.

Detroit-based General Motors Co (GM.N), the most important automaker in Mexico, advised Reuters this month it is seeing a greater stream of semiconductors. It mentioned the primary week of November was the primary time since February that none of its North American meeting vegetation had been idled for need of chips.

Taiwan Semiconductor Manufacturing Co(2330.TW), the world’s largest contract chipmaker, mentioned this month it could construct a $7-billion semiconductor plant in Japan with Sony Group (6758.T) to assist ease the shortage, which has additionally hit producers of smartphones, laptops and client home equipment.

In September, the United States and Mexico agreed at financial talks in Washington to make their shared provide chains extra aggressive, particularly for semiconductors. U.S. lawmakers, in the meantime, are mulling subsidies to bolster U.S. chip manufacturing.

But that has performed little to ease considerations in Aguascalientes, the place autos are a pillar of the financial system, using about 46,000 workers instantly and 120,000 not directly. Almost a 3rd of the state’s GDP comes from the auto sector, based on Manuel Alejandro Gonzalez, the financial growth secretary for Aguascalientes.

Anibal Llamas, high quality supervisor at elements provider Minth, fears that “the worst is yet to come.”

Some auto workers are surprised by their flip of fortune. A Nissan worker who spoke to Reuters however did not wish to give her title, mentioned she and her husband each work within the trade. She mentioned the quick hours have ravaged their month-to-month revenue.

She mentioned the couple has fallen behind on mortgage funds and different payments. Worry and need have changed the safety they as soon as felt.

“Financially you feel like you’re coming out of this and then they send me home again, or they send him home,” she mentioned. “The end of the week comes and we don’t even have two pesos.”

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Reporting by Anthony Esposito in Aguascalientes and Sharay Angulo in Mexico City; enhancing by Marla Dickerson

A view of the facade of Minth plant, a manufacturer for the automotive industry, in Aguascalientes, Mexico November 9, 2021. Picture taken November 9, 2021. REUTERS/Hugo Gomez

A worker operates a forklift at Minth plant, a manufacturer for the automotive industry, in Aguascalientes, Mexico November 9, 2021. REUTERS/Hugo Gomez

Workers are seen at the facilities of Maindsteel, a manufacturer for the automotive industry, in Aguascalientes, Mexico November 9, 2021. Picture taken November 9, 2021. REUTERS/Hugo Gomez