More U.S. Manufacturing Verticals Are Expanding in Mexico

But even a triumphant Trump would have a hard time turning back the growing tide of manufactured goods destined for the U.S. market being made in Mexico. Manufacturing CEOs are moving production of more American-made goods south of the border and are also relocating output to Mexico that they used to have made in China.

In fact, a forthcoming report on this so-called “nearshoring” trend has identified several sectors that have reached sufficient “ecosystem” maturity in Mexico that the country is picking up a greater share of manufacturing and has become the preferred source of U.S. imports over the past few years, according A.T. Kearney, which wrote the report.

“Mexico is picking up a greater share of manufacturing and has become the preferred source of U.S. imports over the past few years.”

In addition to autos and auto parts, these include appliances and electrical products, plastics and rubber, and furniture.

Auto companies including Ford have been investing billions of dollars in manufacturing in Mexico over the last several years that otherwise likely would have ended up in the United States, as carmakers have wanted to take advantage of a level of workforce performance that has improved significantly even as Mexico enjoys free-trade agreements with many more countries than the United States does.

Meanwhile, Trump’s personal campaign promise not to eat any more Oreo cookies was based on the disclosure last fall that Mondelez International plans to install a new production “Line of the Future” in Salinas, Mexico, one of about 40 such streamlined manufacturing operations that the maker of Oreos and other snacks planned to have onstream by the end of 2015. Half of the 1,200 employees at Mondelez’s Chicago Southwest Side branch are to be laid off in the coming year to allow the transfer of funding and jobs to the Salinas plant. The company previously opted out of a $130-million upgrade of the factory, the largest bakery in the world.

The growing advantages of Mexico include a labor force that remains much cheaper than American workers as the quality of their output improves, an increasingly modern and sophisticated technology and infrastructure, inexpensive land and, of course, proximity to the rest of North America.

And so as Kearney noted, U.S. manufacturing CEOs across an array of verticals increasingly are playing the Mexico card.

They include heavy metalworking manufacturers such as Caterpillar, Bombardier Aerospace (of Canada), Cessna Aircraft, Stanley Black & Decker, and Callaway Golf. Meanwhile, in plastics, family-owned Flambeau Plastics, for instance, which is based in Middlefield, Ohio, has pivoted to growing its factory operation in Mexico and taking the work from China to make the company’s Duncan yo-yos, hunting decoys and other items.

“They’re all looking for a new model,” Flambeau CEO Jason Sauey said about the rising number of companies that are following his lead and moving manufacture to Mexico from China as well as the U.S. “It’s not just about cost; it’s about speed of response and quality.”

As long as Trump remains in the presidential race, expect the issue of U.S. job leakage to Mexico to stay intense because it’s been a winning issue for him. But the underlying trend predated him and will most certainly only intensify, regardless of who is in the White House.

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