Ford, GM fire up Mexican supply chains as USMCA restructuring deferred

The North American automotive industry has now had six months to deal with new rules of origin introduced by the United States-Mexico-Canada Agreement trade deal. The complexities associated with implementing elements including standards for steel usage and employment levels have led most companies to request an extended "staging period" for applying the rules.

The U.S. Trade Representative had approved 12 requests by the end of January, according to Inside Trade, while the Mexican government had also approved 12 requests covering most of the majors excluding General Motors, Reuters reports. That pushes out the need to restructure to as far as July 2025.

That comes as activity in the automotive industry is continuing to recover, as outlined in Panjiva's research of Jan. 28.

Yet, it also coincides with a widespread shortage of key semiconductor components as well as surging freight costs that underscore the complexity of the auto industry's lengthy supply chains and potential benefits of moving to regionalized production strategies. The most recent example is General Motors having to close four factories, including its San Luis Potosi factory in Mexico, due to the ongoing shortage in semiconductors.

Panjiva's data shows that Mexican exports of completed vehicles to the U.S. surged 31.9% higher year over year in December 2020 after climbing 21.0% in November. That was led by a 210% surge in shipments linked to Ford Motor Co. as it brought new models online, while shipments linked to General Motors Co. and Stellantis NV's Fiat Chrysler increased by 45.2% and 47.6%, respectively, offset by lower shipments linked to Kia Corp. and Volkswagen AG.

Parts imports have broadly kept track outside of the noted exception of specific components including semiconductors, with total Mexican imports of automotive parts up by 34.8% year over year in December 2020. Shipments linked to Ford Motor and General Motors climbed 89.9% and 55.2% higher year over year, respectively, while Fiat Chrysler's declined by 6.0%. The latter compares to the rise in sales and may indicate a shift in sourcing patterns for the company already.

Christopher Rogers is a senior researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.