Call it the Trump effect. A Japanese automotive parts maker is saying adios to Mexico thanks to the American president.
Nisshinbo Holdings Inc. has ditched its plans for a factory in Mexico for automotive brakes. A company spokesman confirmed to news agency AFP that the decision was made due to U.S. President Donald Trump’s desire to scrap or renegotiate the North American Free Trade Agreement.
“With regard to Mexico, we are back on the drawing board,” the Nikkei Asian Review reported executive managing officer Takayoshi Okugawa saying at a recent earnings release. “Now we believe we have to choose somewhere else.”
The plant had was expected to cost US$90 million. It is believed that the U.S. is the most likely alternative, despite labor costs being 10 times higher.
The report said Nisshinbo is the global leader in brake friction materials, holding a market share of around 15 per cent. The company is the first supplier to leave or back out of plans to enter Mexico. A Japanese economist told the AFP that other companies could follow suit.
Ford scrapped its plans in early January to build a $1.6 billion plant in Mexico. However, it did say it was moving production of the Ford Focus from the U.S. to an existing facility in the country. Nissan recently reaffirmed its commitment to Mexico. Along with Daimler AB, the two are building a billion-dollar joint manufacturing facility. The pair will will build next-gen premium compact cars for the Infinity and Mercedes-Benz brands. Toyota has stuck to its plans to build a new factory in Mexico despite blowback from Trump. The Japanese automaker, though, did announce its intention to create 400 jobs and invest $600 million at one of its U.S. plants.
Trump threatened to kill NAFTA and implement a 35 per cent tariff on vehicles built in Mexico before he took office. A study from the Center for Automotive Research said the move could cost 40,000 jobs. Trump has blasted the likes of Toyota, BMW and General Motors for operating plants in Mexico.
The head of the U.S. Chamber of Commerce recently spoke in Ottawa against tearing up NAFTA. Tim Donohue said improvements could be made to strengthen the agreement and strengthen the competitiveness of Canada, the U.S. and Mexico.