HR, USMCA are among the issues facing Mexico’s auto industry.
It’s the downside, if you want to look at it that way, of having such a robust automobile manufacturing sector in Mexico. There are 20 car assembly plants in Mexico competing for workers, so it’s an employee’s market. As a result, companies are experiencing high staff turnover and absenteeism rates.
“To say that talent management is a challenge right now is something of an understatement,” said Roberto Zavala, vice president of Mexico operations at WW Solutions. “All companies in the automotive sector in Mexico have to think outside the box when it comes to addressing growing turnover rates and absenteeism.”
Wallenius Wilhelmsen Logistics, of which WW Solutions is a unit, participates in Mexico’s automotive industry not only as a carrier and logistics provider, but as a vehicle processor, so it encounters the human resource issues on the same playing field as do the OEMs. WW Solutions specializes in processing solutions at ports and at OEM plants, providing services that include pre-delivery inspections, accessory fittings, repairs, storage, washing, vehicle preparation, quality control, inventory management, and the procurement of technical services.
“In Mexico, labor market issues can mean longer hours for those working, as well as lost efficiencies when trained employees leave the business,” Zavala said. “The extra time and training needed to get new employees up to speed creates costs for OEMs and logistics providers alike.”
WW Solutions in Mexico is exploring ways of attracting and retaining employees by paying workers extra for recommending new successful applicants, as well awarding them as enhanced benefits. “We also incentivize perfect attendance and performance,” Zavala added.
There’s no doubt it’s an uncertain time for the Mexican car industry, and talent is just one issue. The replacement, if it actually comes about, of the North American Free Trade Agreement (NAFTA) with the United States-Mexico-Canada Agreement (USMCA), will mean a different set of tariffs and trading rules for Mexico.
Among other things, the USMCA changes the rules of origin for automobiles, requiring more North American content than before to qualify for duty-free treatment. The agreement, which has yet to be approved by the United States Congress, also requires that a percentage of auto production be done by workers earning more than $16 per hour. The USMCA could thereby impact Mexico’s competitive advantage as compared to other car-producing nations.
“Automotive is big business for Mexico,” said Zavala. “Any hit to the sector would have a huge economic impact.”
There might still be worker recruitment and retention problems, but the underlying market fundamentals are strong, according to Zavala. “Mexico will continue to produce millions of vehicles each year,” he said.