News/Events

Event Recap: A Vision For A Stronger U.S.-Mexico Partnership: Emerging Opportunities In The Automotive Industry Virtual Roundtable

On Nov. 5, 2021, the William Davidson Institute at the University of Michigan and the Ross School of Business at the University of Michigan, in collaboration with the U.S.-Mexico Foundation (USMF), hosted a virtual roundtable to discuss further integration within the auto industry in the U.S. and Mexico. The event brought together accomplished diplomats, industry leaders and analysts to share their perspectives on trends and opportunities for players in both countries.

For decades, the U.S.-Mexico automotive supply chain has been deeply unified, collectively manufacturing around 20 percent of the world’s passenger cars and commercial vehicles. At the same time, the automotive sector is undergoing a profound transformation, fueled by technological innovations, sustainability efforts and supply chain concerns.

During the virtual roundtable, two interrelated, consecutive panel discussions focused on these shifts and how both sides of the border can leverage them in the context of an enhanced U.S.–Mexico partnership.

Panel 1, “U.S.-Mexico Automotive Supply Chain Resilience: Trends and Opportunities,” put a spotlight on emerging opportunities for co-production and manufacturing of products, services and technologies, which have the potential to catalyze further economic growth in the U.S. and Mexico. It was moderated by Francine LaFontaine, Interim Dean of the Ross School of Business at the University of Michigan, and the panel consisted of:

• Gerónimo Gutiérrez, former Mexican Ambassador to the U.S.
• Earl Anthony Wayne, former U.S. Ambassador to Mexico
• Sarah Cartmell, Manager of Global Government Relations, Ford Motor Company
• Oscar Dominguez, President of Lear Mexico Operations

Key Discussion Points:

The Role of Government and Industry

The panel began by discussing the transition from the North American Free Trade Agreement (NAFTA) to the United States-Mexico-Canada Agreement (USMCA), which was ratified in July, 2020. While panelists agreed the USMCA trade agreement was an important and necessary treaty, there remains a good deal of negotiation around several points.

Earl Anthony Wayne, former U.S. Ambassador to Mexico, noted there are key areas of USMCA where the countries are not in full agreement, including regarding the “Rules of Origin” and how they are applied to the auto industry as well as other sectors.

Gerónimo Gutiérrez, former Mexican Ambassador to the U.S., agreed that while the USMCA is far from perfect, it has proven effective in addressing multiple issues important to the automotive industry and its workforce. He added that, from a policy standpoint, governments are now focused on supply chains and the need to improve infrastructure in ways they were not prior to the pandemic.

Both former diplomats anticipated trade across the border rebounding, and possibly surpassing pre-pandemic levels.

Supply Chain Challenges

The panelists also agreed on the need for increased cooperation between the U.S., Canadian and Mexican governments, and within the industry, to improve the flow of components and materials required in the final assembly of a vehicle.

Oscar Dominguez, President of Lear Mexico Operations, indicated the industry needs the U.S. and Mexico border crossings to apply a 24×7 approach to eliminate congestion while increasing the capacity, with a goal of improving efficiency. As a Tier One Supplier, Lear is looking at ways to produce more parts locally, Dominguez said.

Playing into supply chain woes has of course been the semiconductor shortage, which many automakers anticipated, but few observers suspected would last as long as it has. The shortage of semiconductors has taken a toll on available car inventories and has severely curtailed sales.

Sarah Cartmell, Manager of Global Government Relations at Ford, said the automaker is updating how it scans for risk. The company is looking more comprehensively into how disruptions in related industries, such as consumer tech, can have downstream impacts within the auto industry, said Cartmell. She also noted that a silver lining of the current situation is that it has forced Ford to rethink its supply chain management and consider disruptions well beyond its network of Tier One suppliers.

Panel 2, “Powering Mobility: Implications of the Energy Transition,” discussed how renewable energy sources are key to achieving climate and sustainability goals and how energy transition toward electrification could redefine cross-border business models and opportunities. Moderator Diana E. Páez,  Senior Director of Grants & Partnerships at WDI, was joined by:

• Scott Adams, President eMobility, Eaton
• Mike Ramsey, Vice President, Analyst at Gartner
• Mónica Doger, Director of Mexico’s Central Region Automotive Cluster (CLAUZ)
• Gerónimo Gutiérrez, former Mexican Ambassador to the U.S.
• Earl Anthony Wayne, former U.S. Ambassador to Mexico

Key Discussion Points:

The State of Electric Vehicle Production in North America

The panel began by discussing the current state of electric vehicle production across North America. Mike Ramsey, an analyst at the technology research and advisory firm Gartner, shared the radical increase in interest he’s seen from companies seeking to meet environmental sustainability goals. He is urging clients to move quickly and aggressively in their efforts, though he notes that consumer adoption of these vehicles is currently lower in North America than other markets.

Future Preparation and Opportunities

There is power in shifting consumer preferences, noted Mónica Doger of Mexico’s Central Region Automotive Cluster (CLAUZ), who highlighted the close connection between public adoption and industry production changes. Gutiérrez spotlighted the North American Development Bank as a likely resource for green infrastructure projects that could focus on mobility, while Wayne shared that North America’s currently integrated automotive industry could easily split if government interests become misaligned.

Major shifts must be made to alter the manufacturing processes — including an increase in automation, which will have major workforce implications, said Ramsey. There are no workforce-related national policies in Mexico and the U.S., but there is mention of collaboration on labor within the USMCA and conversation about investing in people in the new high-level economic dialogue that the U.S. and Mexico set up. Even without clear direction, there are examples of good collaboration between the private and public sectors, said Wayne, noting recent studies from the Wilson Center. Still, Gutiérrez added that improved labor mobility is critical to the industry’s success, while the entire panel emphasized support for updated training across related fields at universities.

Renewable energy and electricity production is also a key piece to electric vehicle production, and Ramsey and Adams highlighted the need for updated, safe, and reliable systems. The panel shared their thoughts on Mexico’s recent debates around the proposed power industry reform, with Gutiérrez claiming these policies and uncertainties would make it difficult to attract manufacturing investments.

Global Competitiveness

The conversation closed with a consideration of North America’s place in the global electric vehicle economy and steps that could be taken to improve that state. Ramsey noted that regions with higher adoption rates use both incentives and disincentives to push the market, while Wayne highlighted the need for massive marketplace investments. Gutiérrez shared the need for a fact-based debate about whether parties are willing to do what it takes to achieve these goals — and urged governments to listen to the private sector. Dogen said these preparations cannot wait, and Adams agreed that the push and pull of incentives and penalties can be effective. Ultimately, if the industry can drive vehicle costs down and ensure charging availability, public adoption will follow.