Mexico prepares for (Ford) Fiesta

The announcement comes as the other major automakers, including General Motors, DaimlerChrysler, Nissan, and Volkswagen have laid down massive investment plans in Mexico, building new plants, expanding production, and rolling out new models.

Mexico's draw is geographic and economic. The average Mexican worker makes roughly one-sixth as much as the average American worker. And because the major industries have long had a presence here, it has an experienced labor pool and a slew of auto parts suppliers supporting the industry.

"Now and in the past, US manufacturers have been producing in Mexico because the quality is high and the labor market is very reliable," says Pascual Francisco, an automative analyst for Latin America at Global Insight, an economic forecasting firm headquartered in Waltham, Mass.

In the past year, Mexico has also drawn interest from much farther away. In November, China's First Automobile Works Group (FAW) caused a stir when it announced it would be partnering with Mexican electronics retailer Grupo Elektra to build China's first automaking plant in Mexico, expected to be up and running by 2010.

Their goal, according to Group Elektra, is to tap into the growing number of middle-class Mexicans who can afford small cars. But their sights might be on the US. "By bringing those vehicles into Mexico, Mexico can be used as a testing ground for the US market," says Mr. Francisco.

Mexico currently exports about 75 percent of the cars it makes, most of those to the US. And many say that growth here cannot exist without growth north of the border. "We are an appendix of the North American market," says Huberto Juarez Nunez, an auto industry expert at the University of Puebla in Mexico.

So as concerns about the cooling US economy grow, any investment is good news, he says. But Mexico's industry needs to mature, too, he says, adding that the fact that China will be making its own car here, while Mexico, after years working with the US industry, has not yet, underscores the point. "After decades of presence of the major automakers, we still have no possibility to export a car called 'Pancho,' " he says. "The Chinese have achieved this."

• Wire services were used in this report.

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