| | |  Business News | July 2009 
Mexico's June Auto Slump Raises Recovery Doubts
 Jason Lange - Reuters
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July 14, 2009
 |  | Any inkling of renewed activity from its northern neighbor had yet to trickle south to Mexico's auto industry. |  | | |
Mexico City - Mexican automobile output slumped by nearly half in June as a recession in the United States crimped demand for new vehicles, hurting hopes for a near-term recovery in Latin America's second largest economy.
The Mexican Automotive Industry Association, or AMIA, said on Monday production slid 48.1 percent compared to the same month last year, while exports plunged 44.6 percent.
"We see with great worry that we have yet to hit bottom and the industry continues to be in free-fall," Eduardo Solis, the head of AMIA, told a news conference.
Around 70 percent of cars produced in Mexico go to the U.S. market, which is suffering its worst downturn in almost 30 years.
Mexico's economy has been hit hard by the collapse in auto production and is expected to shrink more than 6 percent in 2009 -- its worst downturn in at least 15 years.
Prospects of a rebound in the short term appeared increasingly uncertain given the auto industry's fortunes.
"Today's auto sector data confirm what we have long-feared -- that the auto sector would be in severe decline for a prolonged period given the deep decline in U.S. demand and the restructuring pressures centered around GM and Chrysler," said Nick Chamie, head of emerging markets research at RBC Capital Markets.
NO NEAR-TERM RECOVERY
There have been some signs of improvement in the U.S. economy, including a pick-up in consumer confidence and some growth in durable goods orders.
U.S. auto sales tumbled 28 percent in June, but that was the smallest decline in nine months, prompting the automakers to herald the results as a harbinger of stability.
But any inkling of renewed activity from its northern neighbor had yet to trickle south to Mexico's auto industry.
"There is little chance of a near-term sustainable revival and this of course, given its relative importance within the overall economy, will be a significant drag for the overall economy for the remainder of this year," RBC's Chamie added.
Manufacturing makes up about a fifth of Mexico's economy, and about 80 percent of the country's exports go to the United States. Factory woes have fueled a spike in unemployment, and companies are investing less.
Mexico's gross fixed investment, a measure of spending on machinery, equipment and construction, fell 17.8 percent in April from the year-ago period, data showed on Monday.
That was the worst drop since 1995, when Mexico was reeling from a financial meltdown known as the Tequila Crisis
In a sign of the times, General Motors Mexico said late last week it would slash 300 more jobs as it reels from a sharp decline in U.S. and Mexican demand.
General Motors Corp (GMGMQ.PK), Nissan Motor Co (7201.T), Volkswagen AG (VOWG.DE) and Ford Motor Co (F.N) dominate Mexico's auto industry, which has been cutting jobs and idling plants.
(Additional reporting by Luis Rojas Mena and Pedro Nicolaci da Costa) |
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