Mexican Gov't Aiding Ailing U.S. Automakers

In an effort to soften the impacts of the auto industry crisis, Mexican officials are offering financial assistance to foreign-owned companies with plants in Mexico. In the northern border state of Coahuila, for instance, the administration of Governor Humberto Moreira has announced it will give $1.5 million to General Motors in a bid to stave off more lay-offs. The aid package, which is meant to cover worker salaries, was unveiled after General Motors dismissed 600 workers at its Ramon Arizpe industrial complex in Coahuila last week.

Closely tied to the U.S. export market, the Mexican automobile industry has been in serious trouble since last year. Across the nation, Mexican factories are dismissing assembly-line personnel, reducing work hours and instituting temporary shut-downs of production. Adding to the crisis is a sharp drop in domestic auto sales, which some industry spokesmen and financial analysts blame on the large number of used vehicles imported from the United States as well as the credit crunch squeezing Mexican consumers.

In January, sales of new autos in Mexico fell 20 percent in comparison with the same month in 2008.

"Many buyers are postponing their decision to buy," said Jose Gomez Baez, president of the Mexican Automobile Distributors Association.

Gomez said Mexico's federal government is injecting hundreds of millions of dollars into the credit market to help boost new auto sales in the country.

The auto industry could also benefit from a new program announced by Mexico's Economy Ministry that creates a subsidy pool of about $150 million for export-oriented manufacturers unable to maintain previous production levels.

Additionally, industry leaders propose other measures. Tax incentives for the purchase of new cars and trucks as well as a federally-subsidized trade-in program for older, more contaminating vehicles are among popular proposals under consideration. Similar to the SUV deduction implemented in the United States some years ago, a proposal to allow a 100 percent tax deduction for the purchase of certain classes of new vehicles is gaining traction in Mexico.

Border state Governor Moreira, who has been mentioned as a possible aspirant for the presidential nomination of the opposition Institutional Revolutionary Party in 2012, joined the chorus of industry and government voices this week calling for the expansion of auto industry rescue programs.