Why Ford and Its Rivals Are Investing Big in Mexico

Ford's hot Fusion sedan is produced in a big factory in Hermosillo, Mexico -- and that factory has recently been working around the clock to keep up with demand. Photo credit: Ford Motor Co.

Investors have watched with great interest as Ford  (NYSE: F  ) , General Motors  (NYSE: GM  ) , Volkswagen  (NASDAQOTH: VLKAY  ) and other big names have poured billions into new factories in China. But there's another auto boom happening a lot closer to home: All three of those giants, and several others, are pouring funds into new factories in Mexico as well.

Nearly 3 million new vehicles were built in Mexico last year, a number that could rise substantially in years to come. What's driving this auto boom? As Fool.com contributor John Rosevear explains in this video, Mexico's skilled, low-cost workforce -- and the North American Free Trade Agreement -- make the nation a great base for automakers looking to expand in the huge U.S. market.

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  • Report this Comment On October 19, 2013, at 6:02 AM, meanoldwoman wrote:

    I stopped buying GM products when it went from General Motors to Government Motors, now it looks like Ford will be off the list of possibilities.

    Improve the American economy before someone else., especially since it was the hard work and dedication of the American worker who made you.

  • Report this Comment On October 19, 2013, at 10:34 AM, TMFMarlowe wrote:

    @meanoldwoman: You've missed the point. At least in the case of Ford and GM, these aren't jobs that are being shipped out of the U.S. or denied to the U.S. Both Ford and GM have added thousands of U.S. jobs over the last few years and both are likely to add thousands more over the next few years. But managing costs sensibly means that some things are best built in non-U.S. markets. Would you rather see them come from Mexico or from China?

    The reality is that cars, and parts for cars, are made all over the world. That's a good thing, and the success of U.S.-based companies like Ford and (yes, really) GM in overseas markets is an unambiguously good thing for America.

    Ford and GM aren't just expanding in the U.S., or in Mexico, they're also expanding in places like India and China and Thailand. Again, those foreign factories mean that American brands have more presence and influence overseas, and more profits get sent home to Ford and GM in Michigan. Is that somehow un-American?

    I occasionally hear the argument that it's somehow more "patriotic" for an American to buy a Hyundai that was made in a right-to-work state than it is to buy a Ford or GM product made in a UAW factory. That line of thinking is absurd, and I hope that's not the argument you're making here.

    John Rosevear

  • Report this Comment On October 19, 2013, at 10:46 AM, sosideirish wrote:

    "Mexico's skilled, low-cost workforce -- and the North American Free Trade Agreement -- make the nation a great base for automakers looking to expand in the huge U.S. market."

    Let's see, millions of AMERICANS are out of work, but these companies are opening plants in Mexico while looking for their profits in the US market?

    I, and several family members, are planning new car purchases in the next six months. Looks like I'll be doing a lot of research before I decide where to spend my money.

    NAFTA sucks!!

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