US automakers, set to reopen factories Monday, wait and watch on word from Mexico

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KEY POINTS
  • Mexico is expected to delay the restart of its “essential” manufacturing operations, including automotive, until June 1.
  • The delay, according to federal documents, is to allow companies to implement health and safety protocols to reduce the spread of Covid-19.
  • It’s unclear at this time how such a delay would impact the reopening plans of automakers in the U.S., which rely on auto parts and production from Mexico.
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Pedro Pardo | AFP | Getty Images
Employees work on the assembly line of the Tiguan model, at the Volkswagen car plant in Puebla, central Mexico in 2018.
PEDRO PARDO | AFP | Getty Images

Automakers and suppliers were set to resume production Monday in Mexico with factories expected to start churning out parts and vehicles in lockstep.

But those plans were thrown into question Thursday after the Mexican government posted guidelines for reopening the country’s economy that say production can’t begin until June 1, potentially throwing off U.S. manufacturing.

The notice from the health ministry, published online in the government’s Official Gazette, comes a day after Mexican President Andres Manuel Lopez Obrador announced that manufacturers could restart production as early as Monday, in line with similar plans for the Detroit automakers.

The June start date, according to the notice, gives companies time to implement health and safety protocols to reduce the spread of Covid-19. Companies can start preparing their facilities Monday so production can resume June 1, the notice said. Many of the factories, like in the U.S., have been shuttered since late-March to reduce the spread of the disease.

An email to the Mexican government as well as a call to a spokesperson with the Embassy of Mexico in Washington, D.C. weren’t returned.

It’s unclear at this time how much a delay in Mexico production would hurt the reopening plans of automakers in the U.S., which heavily rely on the country for auto parts and vehicles. Several U.S. manufacturers also have their own  plants across the border.

General Motors said it is “assessing the situation in Mexico” and continues “to target May 18 to resume production” at the majority of its U.S. plants, according to a statement sent to CNBC. The Detroit automaker became the largest producer of vehicles in Mexico in 2018.

Important vehicles imported to the U.S. from Mexico include pickup trucks by General MotorsFiat Chrysler and Toyota Motor as well as luxury vehicles from Mercedes-Benz and Audi.

Toyota is “seeking clarification with the Mexican government,” according to a spokeswoman in Mexico. Spokespeople with Ford, Audi and Daimler, which produces Mercedes-Benz models in the country, did not immediately respond for comment. Fiat Chrysler declined to comment.

Auto suppliers also are seeking clarification from Mexico, according to messages shared with CNBC.

Ambrose Conroy, CEO of auto consulting firm Seraph, which has been assisting auto companies with reopening plants, previously said a stoppage in Mexico would cause “problems within a week.”

Despite President Donald Trump’s “America First” policies, the U.S. auto industry heavily relies on Mexico for parts and vehicle production.

At $93 billion, vehicles were the top import to the U.S. from Mexico in 2018, according to federal data. The Center for Automotive Research reports $60.8 billion, or 39% of auto parts used in the U.S., were imported from Mexico in 2019.

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