October 11, 2019 / 9:20 PM / 2 months ago

Mexican motor city 'getting desperate' as GM's U.S. strike takes heavy toll

SILAO, Mexico (Reuters) - Half a continent away from the auto plants of Detroit, U.S. strikes at General Motors (GM) have sent shivers through the central Mexican city of Silao, where the local GM factory furloughed 6,000 workers last week when parts from the United States ran out.

FILE PHOTO: General Motors workers are seen while leaving their shift at the GM pickup and transmission plant in Silao, Mexico, October 1, 2019. REUTERS/Sergio Maldonado

Rich or poor, residents are anxiously hoping the labor dispute will end so the company reopens the plant, which has been an anchor of the local economy since GM arrived a generation ago, transforming the landscape forever.

“General Motors is the biggest source of income here. When General Motors stops, everything stops,” said Silao resident Francisco Vazquez. “Before General Motors, there was nothing.”

Once a provincial backwater with a handful of colorful old churches, Silao is now enveloped in a thick cordon of factories and warehouses serving automotive companies from all over the world.

In the years after GM opened the Silao plant in 1995, dozens of other firms followed, such as Volkswagen, Continental and Pirelli. Meanwhile the city’s home state, Guanajuato, drew in plants from carmakers including Mazda, Honda and Toyota.

Tensions over the future of manufacturing in North America are at the heart of the mass GM walkout. The debate has pitted U.S. labor advocates eager to reduce Mexico’s cost advantage against Mexican trade unions fighting to protect local jobs.

In the United States, the average GM assembly employee earns about $30 per hour before tax. By contrast, an assembly worker in Silao with 10 years experience was, until the shutdown, getting about $4.50 per hour before tax, including benefits like shopping vouchers, according to a pay-slip he showed Reuters.

When Donald Trump won the 2016 U.S. presidential election, he pledged to bring back manufacturing jobs lost since the North American Free Trade Agreement (NAFTA) took effect in 1994. He also vowed to slash illegal immigration from Mexico.

Yet Silao’s labor leaders say moving jobs from Mexico to the United States will only increase pressure on Mexican workers to migrate.

“It’s important to keep jobs in Mexico for the sake of the United States,” said Hugo Varela, the Guanajuato boss of Mexico’s CTM trade union confederation, which represents GM workers. “It’s what stops migration to the United States,” he added. “If there aren’t jobs here, people will try to cross.”

In addition, the GM strike has Mexican business leaders worried that industrial unrest could spread here, where the leftist government of President Andres Manuel Lopez Obrador has promised to help strengthen trade unions.

More than a dozen local workers, union officials and contractors of GM told Reuters their priority was defending local jobs. There has been little indication that Mexican autoworkers will show solidarity with the UAW.

EMPTY PARKING LOTS, ODD JOBS

Operations at the GM Silao plant ground to a halt on Oct. 1. Vast parking lots in front of the cream-yellow building were mostly empty this week. Fast food sellers set up on the perimeter of the sprawling plant complained business was bad, and local GM workers said they were trying to make ends meet with odd jobs.

The GM worker with the pay-slip said that during his furlough he was only receiving 55% of his regular wage. He shook his head when asked if he might strike to pressure GM for full pay. His chief concern, he said, was to keep his job - or ensure a proper severance.

“Maybe we’d go on strike if they tried to take the plant away,” said the GM worker, speaking on condition of anonymity because he worried he could be fired for talking to the media.

The Silao shutdown has sparked temporary layoffs at another GM site in Mexico and some major suppliers locally, including American Axle & Manufacturing (AXL.N), employees said.

In Washington, the GM strike has complicated Trump’s push to get Congress to ratify the United States-Mexico-Canada Agreement (USMCA), the trade deal he brokered to replace NAFTA.

Democratic lawmakers allied with unions are resisting, saying Mexico must do more to implement tougher labor rules.

U.S. and Canadian unions accuse their Mexican peers of flouting international standards to undercut them, and hope tougher laws will make Mexico less attractive to offshoring.

Over the past two decades, Mexican annual automobile output has jumped 165% to more than 4.1 million according to the International Organization of Motor Vehicle Manufacturers, lifting Mexico from 11th to 6th place in the global rankings.

“GETTING DESPERATE”

By July 2019, the automotive industry made up more than 30% of the value of Mexico’s total exports. Some 80% of those are sent to the United States, making Mexico highly sensitive to U.S. industrial disputes.

The U.S. strike at the No. 1 U.S. carmaker began on Sept. 16, with its 48,000 members of the United Auto Workers (UAW) union seeking more pay and job security, a bigger share of company profits and protection of healthcare benefits.

In Silao, fears about the local economy are growing.

Jose Juan Campos, a contractor who said he had worked regularly at the GM plant from its opening until the strike, said he had never known a stoppage like it and that the firm was unlikely to take back many workers before Christmas.

“People are getting desperate,” he said.

Reporting by Dave Graham; Additional reporting by Anthony Esposito; Editing by David Gregorio

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