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Japanese industry wary after Ford scraps Mexican car factory plan

Japanese industry is growing increasingly wary about their future business operations in Mexico after Ford Motor Co. scrapped plans to build a car assembly plant in that country.

Japanese companies, centering on the auto industry, have been engaged in business operations in Mexico to assemble and export their products to North America, and therefore they are concerned about the possibility of U.S. President-elect Donald Trump, who succeeded in stopping U.S. firms from moving out to Mexico, shifting his criticism to Japanese companies.

"I would like to decline to comment because Ford's decision is its own individual strategy," Mazda Motor Corp. President Masamichi Kogai said at a news conference in Hiroshima on Jan. 4 while carefully choosing his words. But Mexico serves as a key stronghold for Mazda to produce and export vehicles not only to North America but also to Europe. "There is no change in our strategy to supply vehicles to North America and Europe from Mexico." Kogai said. He went on to say, "Global automakers are implementing their strategies in line with NAFTA (The North American Free Trade Agreement). It is desirable for the auto industry to maintain that."

As of October 2015, 899 Japanese companies were operating in Mexico -- a twofold increase from five years earlier. That's because it is advantageous to export from Mexico to North America as production costs such as labor are cheaper. Toyota Motor Corp., Nissan Motor Co., Honda Motor Co., parts makers and other Japanese companies are running plants in Mexico.

According to the Japan External Trade Organization (JETRO), Japanese companies produced 1.12 million vehicles in Mexico in 2014 -- the sixth largest number of vehicles produced overseas by Japanese firms after those produced in the United States, China, etc. About 70 to 80 percent of those vehicles produced in Mexico are for export to North America. Some Japanese companies have been trying to expand their production in Mexico, with Toyota Motor holding a ceremony to start construction of its second assembly plant for finished vehicles in Mexico in November 2016 as an example.

During the U.S. presidential election, Trump criticized U.S. companies that were moving jobs to Mexico. Because Japanese automobile makers basically plan to keep factories and jobs in the United States and produce only extra vehicles in Mexico, "Japanese companies are less likely to be a focus of criticism," said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities Inc.

Nonetheless, depending on how Trump reviews NAFTA after taking office as U.S. president, Japanese companies' operations in Mexico will be affected.

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