Southern Border Update

Mexico needs to align startup with U.S., other trade partners automotive supply chains

As the U.S. debates how and when to reopen its economy, our large trading partner on the southern border is watching closely. It has been reported that Mexico has had fewer coronavirus cases and fewer deaths than the U.S., but has followed many of the U.S. social distancing and closure practices closely. Beginning in late March, it enacted shutdowns of “non-essential” businesses of its own, sharply impacting the border trade.

As a result, what’s currently being produced and moving from Mexico across the U.S. border are medical supplies, foodstuffs and other critically-needed consumer goods. But Mexican President Obrador’s action has resulted in temporary shutdowns of many of Mexico’s large maquiladora plants, including those producing automotive and truck parts, which are not presently classified as “essential”.

The rapid shutdown of businesses on both sides of the border has disrupted critical supply chains and created hardships for many manufacturers. Not only are ongoing changes happening at the national level of both countries, but in the states and cities on both sides of the border as well. Keeping clients informed quickly and continuously on both individual shipments and new local developments is a critical task.

Our TOC teams who manage the U.S.-Mexico border for the company are based in El Paso and Laredo in Texas and in Monterrey, Mexico. Responding to the evolving situation, they have stepped up the level of customer service and proactive communication with customers who are working remotely or from home, helping see them through this challenging time. While our team members themselves may be working from home, they are fully functional and connected to TOC’s shipment management and logistics systems. For example, we were able to quickly respond in finding secure storage locations on both sides of the border for several customers who had orders caught in-transit as shutdowns occurred.

Currently the Mexican government has a three-color coding system for the impact the COVID-19 virus has had on its cities. Cities that are “green” with no cases may be able to plan back to “normal”, which includes social distancing, by May 17.  “Red” cities have active virus cases and are subject to review for a possible June 1 restart with social distancing and use of face masks. “Yellow” cities are those located near “red” ones and must also follow the same restart approval process as a “red” city. Most of Mexico’s border cities are currently classified as “red”.

That being said, Mexico’s auto plants are watching their U.S. counterparts closely. President Obrador indicated in early April that he would support a globally-coordinated restart to Mexico’s automotive and truck manufacturing operations with foreign partners, which suggests an earlier start than the dates above. Some U.S. manufacturers are said to be planning to restart plants as early as next week into early May. Of particular interest to Mexico’s automotive industry is getting reclassified as an “essential” business and being able to more easily coordinate production needs with U.S. manufacturers and customers.

Another complexity in coordinating Mexico’s automotive startup are the manufacturers and suppliers from Europe, India and Asia with active supply chains linked to Mexico. With some European countries (France, Italy, Spain) and India still having plants shut down until the third week of May, the reopening of Mexico’s automotive and truck plants may not align well, potentially creating disruptions and urgent needs for parts. These manufacturers should review their transport and supply alternatives as soon as possible, as unavailable parts may drive needs for more expensive air freight to support Mexican plant startups. Currently air freight capacity globally is very tight with rates much higher than earlier this year.

The big advantage we offer to customers is expertise with customized global logistics programs, closely adapted to customer needs. These programs promote the use of consolidations to keep customer transport costs down. With the resupply challenges involved as border industries try to coordinate re-openings, our team will aggressively monitor business conditions and ensure customers are well informed on their logistics choices and alternatives.