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Thread: I bet Honda didn't figure in THIS cost of doing business in Mexico !

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    Banned Melonie's Avatar
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    Default I bet Honda didn't figure in THIS cost of doing business in Mexico !

    (snip)"Wednesday, 11 July 2007
    JOURNAL: Just-in-time Disruption begins in Mexico

    "The order to begin a national campaign of punishing the interests of the oligarchy and this illegitimate government has been put in play.." EPR Web site message after the attacks.

    Mexico's Popular Revolutionary Army (EPR), a splinter of the original group formed in 96 (in south-west Mexico), blew up a PEMEX 36-inch natural gas pipeline that shut down two auto assembly plants (Nissan/Honda) in Guadalajara. Two other pipelines were shut down (gas and crude oil) affecting the Salamanca oil refinery (domestic production).

    The operation was small, and according to the group required eight charges set by small teams in three locations. The charges were set with a time delay (to detonate on the 5th and the 10th in the early morning). Nobody was caught and there were zero casualties. I suspect the returns on investment for the attacks, particularly given their ability to impact just-in-time production facilities, were amazing. "(snip)

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    Default Re: I bet Honda didn't figure in THIS cost of doing business in Mexico !

    Ah. Terrorism on a border country. Wonderful.

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    Banned Melonie's Avatar
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    Default Re: I bet Honda didn't figure in THIS cost of doing business in Mexico !

    ^^^ true, but not my main point ...

    You can be sure that the board rooms of Honda, Toyota and various other companies that have heavily invested in plants located in 'low labor cost, low regulatory compliance cost' countries are now discussing the additional costs and risk factors they are facing. If the plants located in these 'low labor cost, low regulatory compliance cost' countries can be easily knocked out of production by a handful of fanatics with some makeshift explosives, and if as a consequence other plants are also knocked out of production due to an interruption in their stream of 'just in time' component deliveries (i.e. Honda / Toyota assembly plants located in the USA which depended on the timely delivery of low cost component parts made in the Mexican plants), then Honda / Toyota potentially stand to lose as much money at the hands of a dozen fanatics as they would from a strike by tens of thousands of US plant workers !!!

    In other words, the location of foreign automaker assembly plants in the USA does not work economically unless the overall costs of producing autos is counterbalanced by 'dirt cheap' component parts being shipped into those US plants. Similarly, the economics of US automakers also does not work unless they can ship in 'dirt cheap' component parts (which is increasingly the case i.e. impending death of Delphi vs GM component parts being increasingly manufactured by Chinese partner companies). This is essentially a concession that no auto maker can still afford the labor costs and regulatory compliance costs and energy costs associated with serious heavy manufacturing in the USA anymore. The fanatics / terrorists appear to be experimenting with their ability to disrupt the 'just in time' supply chain at it's weakest point, which (as is the case in this example) now lies outside the USA. In terms of net effect i.e. financial losses to Honda / Toyota, it's not really any different than if the fanatics / terrorists hit the US facilities directly. However the political fallout is far less.

    Some would speculate that if this continues, the corporate boards will start thinking in terms that additional Mexican manufacturing facilities 'married to' additional US assembly facilities are too vulnerable to disruption. This will either encourage a push for North American Union (to improve security in Mexico), or a push for a return to manufacture / assembly / export from Japan which is not subject to the same sort of vulnerability.

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    Default Re: I bet Honda didn't figure in THIS cost of doing business in Mexico !

    it always surprised me the level of lawlessness in mexico. i mean, visiting the capital (federal zone) and each and every client has a guard house filled with shotguns, rifles, armed guards and barricades.

    and this was during a stable peaceful time (under Fox).

    i agree, the stability of your flow of goods is (should be) well worth the extra costs. but worrying about the safety of your family or own frickin' life (as business execs) would've been enough for me. forgetabout the supplyline.

    "oh wait, you'll pay me how much to go into that war-zone? hmmm...naah, nope, still not enough. sowwy."

    pay the workers in pennsylvania to make the car for pete's sake. the worst you'll likely have to worry about is getting the kids to their b-day parties at chuck e. cheese on the weekends.

    i vote that it'll probably mean more biz for US. it's a cheap-ass dollar nowadays anyways.

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    Default Re: I bet Honda didn't figure in THIS cost of doing business in Mexico !

    ^^^ agreed that many of the 'third world countries' have major problems with lawlessness - and conditions pose particular risks for 'fat cat' targets. But this was not the author's main point ... which arguably was that the 'third world countries' cannot protect their (already minimal) infrastructure from terrorist attacks, which in turn can have profound negative effects not only on nearby industrial facilities but on assembly facilities that depend on those nearby industrial facilities for 'just in time' delivery of component parts.

    However, I highly doubt that the 'answer' will involve bringing back industrial operations to the USA. Not all low labor cost countries have the lawlessness problems or infrastructure vulnerability problems of Mexico. China's gov't and military, for example, are in an ideal position to deal pre-emptively with would be terrorists. China's infrastructure is also well protected by their military.

    Thus the more likely 'answer' for the Honda/Toyota syndrome is to gradually close facilities in 'third world' countries with weak gov'ts and/or corrupt military, and to instead set up new facilities in TOTALITARIAN countries where the gov't and military are prepared to deal extremely harshly with threats to infrastructure or threats to important business entities.

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    Default Re: I bet Honda didn't figure in THIS cost of doing business in Mexico !

    oh, i was just drawing an analogy of the skilled workforce being similar to the actual infrastructure, e.g. nigerian oil employees situation. i just used mexico because of the story and my (limited) personal experience there.

    agreed, with the "solution" of securing the flow, i.e. more oppression. imo, the rebels and such need to figure out the pressure points better for each situation. what they're doing hurts themselves and their bretheren more than the people in power.

    quite frankly being a sneaky bastage myself, if i was the jefe-in-charge-for-life i would fake some of what their doing just to justify the need to further secure my powerbase. wag the dog. those dumb rebels.

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