Low wages, trade deals luring auto plants and jobs to Mexico

DETROIT (AP) — Mexico has become the most-attractive place in North America to build new automobile factories, a shift that has siphoned jobs from the U.S. and Canada, yet helped keep car and truck prices in check for consumers.

In the past two years, eight automakers have opened or announced new plants or expansions in Mexico. Just last week, Toyota announced a new plant in Guanajuato to build the popular Corolla, work now done in Canada, while Ford unveiled plans for Mexican engine and transmission factories.

Low labor costs and fewer tariffs are the swing factors. A worker in Mexico costs car companies an average of $8 an hour, including wages and benefits. That compares with $58 in the U.S. for General Motors and $38 at Volkswagen's factory in Tennessee, the lowest hourly cost in the U.S., according to the Center for Automotive Research, an industry think tank in Ann Arbor, Mich. German auto workers cost about $52 an hour.

Mexico also trumps the U.S. on free trade. It has agreements with 45 countries, meaning low tariffs for exporting globally. That, along with low labor costs, convinced Audi to build an SUV factory in the state of Puebla. The German automaker will save $6,000 per vehicle in tariffs when it ships a Q5 to Europe, compared with building the same vehicle in the U.S., says Sean McAlinden, chief economist at CAR.

Audi also sells the Q5 in the U.S., where tariffs on cars built in Mexico were dropped under the North American Free Trade Agreement.

The cost savings also should allow automakers to add expensive fuel-saving features to meet stricter U.S. government gas mileage requirements without raising car prices. Two-thirds of cars made in Mexico are shipped to the U.S.