MEXICO CITY — The U.S. auto bailout lifts the threat of imminent collapse from plants that have been a steady source of jobs in Mexico. But the rescue, backed by American taxpayers, is likely to slow investment in Mexico’s auto industry, one of the fastest- growing in the world.
Lured by low labor costs, Detroit’s automakers have been critical to an industry that now makes up 3 percent of Mexico’s gross domestic production and accounts for a fifth of its exports.
The 13 plants run by Ford, Chrysler and GM account for more than 50 percent of Mexico’s auto production.
While nothing in the $17.4 billion U.S. government loan package prohibits it, expansion outside of the United States using taxpayer money would most likely lead to a huge backlash.
Lawmakers have made clear they expect U.S. carmakers to keep jobs at home. And they have leverage: $4 billion of the auto loan package will be made available only if Congress votes to release $350 billion that remains in the financial industry bailout fund.
Mexico is heavily reliant on exports to the U.S. Three-quarters of vehicles produced in the country are exported, 70 percent of them to the U.S., according to the Mexican Auto Industry Association. As U.S. car sales plummeted, Mexican auto exports fell nearly 8 percent in November and production declined 2.1 percent.
General Motors, which employs about 12,700 people in Mexico, released more than 600 workers when it stopped making the Suburban at its plant in Silao this year. Chrysler, which employs about 5,000, laid off 800.
Both companies said they will idle several Mexican plants in January to cut costs and shrink inventories.
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WASHINGTON — The Federal Reserve has granted a request by the financing arm of General Motors to tap the government’s $700 billion rescue fund, bolstering GM’s ability to survive.
The Fed announced Wednesday that it had approved GMAC Financial Services’ request to become a bank holding company. That designation makes GMAC eligible to receive a portion of the bailout fund and get emergency loans directly from the Fed.
Analysts had speculated that without financial help, GMAC would have had to file for bankruptcy protection or shut down, dealing a serious blow to GM’s own chances for survival. The Fed cited “emergency conditions” in justifying its decision.
GMAC provides financing for both GM dealers and customers as well as home mortgage loans through its Residential Capital LLC division. The company is 51 percent owned by Cerberus Capital Management LP, the investment fund that also owns Chrysler. GM owns the remaining 49 percent of the company.
Under the Fed’s order, Cerberus and GM, whose businesses are mainly outside banking, would both have to significantly reduce their ownership stakes in GMAC. GM has committed to reducing its ownership in GMAC to less than 10 percent.
Martin Crutsinger, The Associated Press
