By Anthony Esposito and Sharay Angulo
AGUASCALIENTES, Mexico (Reuters) – A global semiconductor shortage is hitting Mexican auto workers hard as employers cut production, cut shiftwork and cut jobs due to supply chain failures.
The pain is acute in the central Mexican state of Aguascalientes and its namesake capital, one of the country’s main automotive hubs, where the chip tightening has forced phased shutdowns among employers large and small.
The temporary closures have resulted in lost wages for tens of thousands of workers here and across Mexico due to time off and layoffs, according to interviews with workers, union leaders and industry leaders.
Cuitlahuac Perez is managing director of Aguascalientes-based auto parts company Maindsteel and head of one of the state’s auto clusters, which promotes the industry. He said his company and other Aguascalientes suppliers were suspending operations on average seven to eight days a month, with automakers and other parts makers further up the supply chain halting production.
Perez estimates that about one in five local auto workers have lost their jobs, with the rest having suffered significant pay cuts since the chip shortage began about seven or eight months ago. By contract, many unemployed workers receive half their salary here.
“We are talking about a direct impact on their families,” Perez said.
Semiconductors are an indispensable component for automotive manufacturers around the world, which require them for a wide variety of systems such as security, navigation and entertainment. COVID-19 outbreaks in Asian semiconductor manufacturing centers have slowed chip production. The fallout has spread around the world, with automakers unable to keep production up to pace with demand for vehicles.
In Mexico, multinationals affected include Nissan Motor Co. Ltd., the country’s second largest automaker. The Japanese company operates a powertrain plant and assembly plant in Aguascalientes producing its March, Versa, Kicks and Sentra vehicles. The company has experienced at least five shutdowns at its Mexican facilities this year due to chip issues, Reuters reported.
The latest arrived earlier this month, the company said, with shutdowns ranging from five to seven days at its Aguascalientes factories and an eight-day shutdown at its CIVAC factory in Morelos state, which manufactures the Versa V-Drive sedan and two pickup trucks: the NP300 and Frontier.
The chip shortage also affected an assembly plant in Aguascalientes jointly operated by Daimler AG and Renault-Nissan. The so-called COMPAS plant, which produces the Mercedes-Benz GLB SUV, has experienced “job cuts or production interruptions,” a Mercedes-Benz spokesperson said in comments sent by email.
The turmoil weighs on the Mexican economy. Auto production fell 20% to 3.04 million vehicles last year, and is expected to drop an additional 5% https://www.reuters.com/world/americas/auto-output-dives-brazil -mexico-chip -shortages-bite-2021-10-06 in 2021, according to the Mexican Automobile Industry Association (AMIA). The auto industry, which currently employs 946,000 workers, has lost 16,000 auto jobs since the end of 2019, according to AMIA figures.
In August, the Bank of Mexico https://www.banxico.org.mx/publicaciones-y-prensa/informes-trimestrales/recuadros/%7B11972B0F-38F8-F301-76C5-1AC6C404C0C0%7D.pdf planned that the stops Auto work resulting from chip shortages could cost Mexico up to 1 percentage point of GDP growth in 2021. Preliminary third quarter GDP data https://www.reuters.com/world/americas/ mexican-economy-shrinks-first-time-since- pandémie-rebond-2021-10-29 showed that the economy contracted between July and September, the first quarterly decline since the start of the recovery from the pandemic, in part due to problems in the automotive sector.
The Mexican unit of the China-based Minth Group, whose Aguascalientes plant supplies parts to automakers across North America, is among the companies cutting hours and jobs. The company laid off around 20% of its workforce this year, according to Manuel Ando, director of administration and infrastructure at Minth Mexico. This is in addition to previous cuts, with a workforce of 1,300, up from around 2,700 before the pandemic, he said.
Ando said the situation was caused by a myriad of factors, including a limited supply of chips, problems in the global supply chain and a slowdown in production for its US customers, many of whom are struggling with labor shortages. of work.
“Since they are stopped, well, we have to stop too,” said Ando.
Dalila Gomez, who inspects parts for Minth in Aguascalientes, feels lucky to still have a job. But the reduced hours make him tighten his belt. Gomez said when production is halted, she receives only 50% of her average weekly salary of around $ 60. The mother-of-three said she had cut back on many household expenses, including non-alcoholic drinks at lunch and home internet service.
“It’s sad because there are a lot of people, including myself, with families – some of whom are single mothers – who have to support their families, pay rent,” Gomez said. “It affected everyone, everyone.”
‘THE WORST IS STILL TO COME’
The Mexican automotive sector does not suffer in isolation.
German automotive powerhouse https://www.reuters.com/world/europe/germanys-next-government-faces-three-big-economic-challenges-2021-10-05 is struggling to increase production and the situation is hampering its economic recovery. Japanese automakers https://www.reuters.com/business/autos-transportation/honda-posts-fall-q2-operating-profit-2021-11-05 have been forced to cut production.
A bipartisan group of US governors recently warned that https://www.reuters.com/world/us/nine-governors-press-us-lawmakers-pass-semiconductor-funding-bill-2021-11-10, due From the shortage of chips, automakers in North America lost about 2.2 million vehicles in 2021 and 575,000 jobs in the industry were affected.
Semiconductor compression is expected to continue at least until the first half of 2022, according to a recent forecast by rating agency Fitch https://www.reuters.com/article/mexico-fitch-idUSL1N2S821Z.
Some industry players are seeing tentative signs that the situation is stabilizing.
Detroit-based General Motors Co, Mexico’s largest automaker, told Reuters this month it is seeing better semiconductor flow https://www.reuters.com/business/autos-transportation / gm-says-seeing-better-flow- semiconductors-2021-11-10. He said the first week of November was the first time since February that none of its North American assembly plants had been idle for lack of chips.
Taiwan Semiconductor Manufacturing Co https://www.reuters.com/technology/sony-invest-500-mln-tsmcs-new-chip-unit-japan-2021-11-09, the world’s largest contract chip maker , said this month that it would build a $ 7 billion semiconductor plant in Japan with the Sony Group to help alleviate the shortage, which has also hit manufacturers of smartphones, laptops and d consumer devices.
In September, the United States and Mexico agreed in economic negotiations in Washington to make their joint supply chains more competitive, especially for semiconductors. US lawmakers, meanwhile, are considering subsidies https://www.reuters.com/world/us/dispute-over-china-tech-measure-delays-vote-massive-us-defense-bill-2021-11 -17 to strengthen the production of chips in the United States.
But that hasn’t done much to allay concerns in Aguascalientes, where the automobile is a mainstay of the economy, employing around 46,000 workers directly and 120,000 indirectly. Almost a third of the state’s GDP comes from the automotive sector, according to Manuel Alejandro Gonzalez, secretary of economic development in Aguascalientes.
Anibal Llamas, quality manager at parts supplier Minth, fears that “the worst is yet to come”.
Some auto workers are stunned by their makeshift turn. A Nissan employee who spoke to Reuters but declined to give her name said she and her husband both worked in the industry. She said the short hours ravaged their monthly income.
She said the couple were behind on mortgage payments and other bills. Worry and desire have replaced the security they once felt.
“Financially you feel like you get out of there and then they send me home, or they send it home,” she said. “The end of the week is coming and we don’t even have two pesos.”
(Reporting by Anthony Esposito in Aguascalientes and Sharay Angulo in Mexico; editing by Marla Dickerson)