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| Mexico increased auto production last year as new export markets offset falling sales to the United States. | ||
Mexico's auto production rose in 2008 as new export markets offset falling sales to the United States, but the industry faces a sharp decline this year with the economic crisis taking hold around the globe, industry officials said Monday.
Mexico produced 2,102,801 light vehicles in 2008, up 4 percent from 2,022,241 in 2007, according to the Mexican Auto Industry Association. Exports were up 2.5 percent, to 1,665,133.
Mexico sends 70 percent of its vehicles to the United States, but that reliance has started to ease in recent years. While exports to the U.S. fell 2.4 percent last year, they increased 27 percent to Canada and 10 percent to Europe. Exports to other Latin American countries rose 20 percent.
But association president Eduardo Solis said Mexico's industry will not escape a huge contraction this year, noting that exports to all regions declined toward the end of 2008. In December, production fell 3.5 percent compared to the same month in 2007, while exports plunged 10 percent.
Solis said production could plummet up to 20 percent in 2009.
"We have not yet felt the effect of the auto industry crisis on production and employment," Solis said. "We must warn that we will start to feel it in 2009."
The crisis hits hard what had been an engine of economic growth in Mexico. The industry has grown in the past decade to become Mexico's largest single manufacturing sector and account for a fifth of its exports.
The government expects zero percent economic growth in 2009 as exports and foreign investment decline.
Mexican President Felipe Calderon pledged 2 billion pesos ($147 million) last week to help car makers and other troubled companies avoid massive layoffs this year. Some of the money will go directly to workers facing wage cuts or unpaid vacations during temporary plant shutdowns.
Solis said the government has not yet worked out how much of the money would go to automakers. He praised the measure, but cautioned the industry would need a more comprehensive plan to recover.
Mexico's biggest challenge is reviving its domestic market. Sales fell 6.8 percent in 2008 compared to the previous year, and could plunge 15 percent in 2009 as credit markets tighten, said Jose Gomez, the president of the Mexican Association of Auto Dealers.
The industry has asked for government help in securing $3 billion to loosen credit for dealers and customers, but Solis said talks have not produced good enough guarantees to satisfy lenders. Some 70 percent of Mexican auto purchases are made through credit.
(AP)
