Auto Suppliers Moving to Central Mexico to Leverage Efficient, Low-Cost Labor

Commentary by Doug Donahue

According to this short piece from, auto supplier UGN has broken ground on a 60,000sqf facility in Guanajuato, Mexico, where they will be manufacturing products for vehicles made in Mexico. The company’s CEO explains they are expanding in order to better serve automakers who have a presence in the wider Baijo region of central Mexico, to leverage Baijo’s efficiencies and cost savings.

The company expects a 20% production increase in Mexico and, importantly, no jobs at US plans will be lost nor will production shift to Mexico.

Expansion into Baijo in order to leverage highly efficient production helps bust the myth that Mexican workers are not as productive as US workers. In fact, in Entrada Group’s experience, Mexican production workers are even more efficient than their US and Canadian counterparts. There are several reasons for this.

The Efficiencies of Mexican Manufacturing

First, Mexico now has over 40 years of experience manufacturing for numerous industries. This tradition spreads over several generations and it is now well ingrained. Next, the work week for production workers in Mexico is 48 hours instead of 40 hours in the US.

Third, Mexican workers have adapted more-efficient production processes by necessity. The rise of affordable manufacturing in China within the past generation made it nearly impossible for Mexico to compete. Mexico had to adapt by implementing processes such as Six Sigma and Kaizen to level the playing field with the Chinese. Since then, the Mexicans have improved efficiencies and wages in China have skyrocketed, while they have stayed level in Mexico.

This gives Mexico a double impact of high efficiency and low-cost production that manufacturers and suppliers are eager to leverage.

Finally, it’s important to realize that suppliers do not really have a choice but to have a Mexican presence. Automotive OEMs are informing suppliers that they cannot quote on new projects without a facility in Mexico – that’s how keen they are to keep costs down and enhance margins.



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