General Motors Company (NYSE:GM) has selected Mexico as the location to build the new Chevrolet Cruze, its next-generation car. This might not have been a surprise to experts as the automakers were trying to take advantage of free trade agreements and lower labor costs in Latin America. The company is also ready to invest $350 million in its plant in Coahuila to build the Cruze. Last year, America’s biggest automaker said that it would invest $5 billion in its Mexican production unit. The latest is part of that move.
Until now, GM had identified three plants as options to produce the next generation This included a plant in China. The company also indicated that its Gunsan assembly plant in South Korea would continue to build the existing Cruze model to take care of domestic demand and export markets.
The company has already agreed to build the next-generation Cruze as part of a fresh wage settlement in Korea last year. It is expected to commence next year. The automaker’s executives were worried about increasing labor costs in Korea. The automaker had run into problems with its workers there. An official from the union has reportedly said that it was evaluating the latest announcement impact of developing the Cruze in Mexico.
Focus On Domestic Market
GM said that it would be the first time that a Mexican plant would be used to build the Cruze. The company clarified that its production would be primarily for the domestic market in Mexico. Currently, the model is imported from the South Korean plant to Mexico. The company’s South Korean official clarified that the export volume to Mexico was small and that it would not have a big impact on its production.
GM was not ready to say whether the Coahuila plant’s capacity would be expanded to produce the Cruze. Alternatively, the company could also shift some of the models it currently builds at the production facility to make room. Globally, the automaker was making the Cruze model in eleven plants. However, the next-generation model would not be built in some of the plants like Australia where it was closing the assembly unit.