Engine manufacturer Cummins Inc. is shifting more production to plants in Mexico in preparation for updated requirements in the new United States, Mexico and Canada (USMCA) trade agreement.
Cummins will move some of its operations from the U.S., China, India and Brazil to Mexico, including its filters division to a facility in Ciudad Juarez near El Paso, Texas.
“We’re moving lines of filtration production from the U.S. to Mexico and expanding the plant in Ciudad Juárez in order to meet demand for diesel fuel injection in the Americas,” Cummins Latin America Vice President Ignacio García said in an interview with El Economista.
“The tariffs levied by the U.S. on Europe and China are helping this process; it makes companies look to Mexico as a place where they can relocate production lines to supply the U.S. market,” Garcia said.
Columbus, Indiana-based Cummins’ two plants in Mexico include the one in Ciudad Juárez and another in San Luis Potosí.
Garcia added that the decision was partly made to meet requirements affecting automakers in the new USMCA, but also to maximize efficiency at its plants.
While the North American Free Trade Agreement (NAFTA) required automakers to use 62.5% of North American-made parts in their cars to be imported duty free, the USMCA gradually raises the requirement to 75% by 2023, which aims to push automakers to increase the amount of North American parts they use in their cars and trucks.
The new USMCA trade deal, which would replace NAFTA, still needs to be approved by the U.S. Congress.
When NAFTA was introduced in 1993, trade between the U.S., Canada and Mexico was around $280 billion. Today, annual trade between the U.S., Canada, and Mexico is around $1.3 trillion and supports 14 million American jobs, according to the Office of the U.S. Trade Representative.
While Cummins is expanding operations in Ciudad Juarez, on Oct. 17 the company announced it would lay off 10% of its workforce at its San Luis Potosí plant. The company cited slower demand for Class 8 trucks, Garcia said in an interview with Milenio.
Cummins also recently announced on Nov. 6 it was closing its plant in Cumbernauld, Scotland, laying off 130 workers. It blamed market conditions.