Chrysler’s New $1.2 Billion Plant in Mexico Raises Questions

Commentary by John Paul McDaris

Last month Chrysler confirmed a massive $1.249 Billion investment in two facilities in Saltillo. The company’s CEO, Sergio Marchionne, was on hand along with Mexican President Enrique Pena announcing the move, which should create over 1,500 jobs in the city located in Coahuila state. The company’s headcount in Saltillo will top 6,500 after the expansion is complete. This investment led me to a lot of questions, and I would love to hear Chrysler’s responses to them.

Such as:

  • Why not San Luis Potosi? That’s where the Cummings diesel engine plant is located. So why not set up shop there and leverage the talent?
  • Because of the Cummings engine, they already know the caliber of skilled labor in San Luis Potosi – so why go into Saltillo? Was San Luis Potosi not up to snuff? Were there supply chain concerns that would have been exacerbated by expanding in San Luis Potosi?
  • What will Chrysler’s move do to the competition for labor in Saltillo? Naturally it will go up, like it always does when a big OEM moves in like this. But by how much and how fast?
  • How will Chrysler’s investment in Saltillo affect the supply chain ecosystem? Suppliers will now have new opportunities. But they will also have a big employer competing with them for talent. Will smaller suppliers be able to pay dramatically higher wages?
  • Will the presence of a big OEM lead to a raft of new suppliers and, if so, will those be largely bigger suppliers who can afford the higher wages that Chrysler will inevitably usher into the region? Will this mean some smaller suppliers will be pushed out?
  • Will Saltillo become a bigger player in the Mexican supply chain?

I, for one, can’t wait to see how it plays out and I’ll be watching this space.

Source: http://www.digitaljournal.com/pr/1519145#ixzz2kksWr6XC

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