Understanding the reasons for GM’s shift of work from Mexico to Canada

An article in the New York Times (September 20, 2016) titled “G.M. Job Shift From Mexico Tests a Trump Premise”, describes a decision by General Motors to shift work from an automobile engine plant in Mexico to Canada and shutting down the Mexican plant. But the decision to move work to Canada was accompanied by an acceptance of a flexible benefits agreement by their unions, thus making it a profitable decision for GM. The article also claims that demands for US manufacturing of automobiles that are not profit maximizing for GM risk decreasing demand for US component suppliers to GM and thus making the US economy worse off overall. Should US manufacturers who sell to US consumers be mandated to have a certain fraction of US manufacturing or is it better to let the market dictate their optimal supply chain configurations ? In the GM example, are there lessons learned for auto unions that might permit them to trade off benefit flexibility for domestic job size growth ?

1 Response to Understanding the reasons for GM’s shift of work from Mexico to Canada

Matt Slane says:

February 21, 2018 at 8:28 pm

This is an intersting development for sure. My intial suspicion is that GM would move to the US given the improved Tax environment etc. The firms should be able to place the plants whereever they feel provides the best business case. That being said, each country also has the right to apply tax policy that stimulates and protects its’ interests as well. I believe the need for adaptibility from the union would allow for more opportunities to earn and regain lost jobs that were exported to more favorable countries. It seems like often there is a fear that giving in 1 negotiation, may lead to the same concessions in others. This transparency may actually cause the union to forfeit certain concessions, to limit erosion nationally.