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July 10, 2018

Japan's Jtekt delays Mexico auto parts expansion plan pending NAFTA

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Japan's Jtekt delays Mexico auto parts expansion plan pending NAFTA
The flags of Canada, Mexico and the U.S. are seen on a lectern before a joint news conference on the closing of the seventh round of NAFTA talks in Mexico City

NAGOYA (Reuters) - Japanese auto components supplier Jtekt Corp (T:6473) said it was holding off on expanding production in Mexico, awaiting the outcome of talks over the North American Free Trade Agreement, known as NAFTA.

Japan's auto industry has been plagued by uncertainty since U.S. President Donald Trump last year launched a renegotiation of NAFTA, seeking to repatriate manufacturing jobs to the United States. Automobiles and auto parts are key export products for the country.

Jtekt President Tetsuo Agata said prospective automaker clients were waiting for the outcome of the talks before making new decisions on their Mexico operations.

"They are watching the NAFTA situation carefully. So we also have to hold off on new production plans," he told reporters at its Nagoya headquarters.

Jtekt is a Toyota Motor Corp (T:7203) group supplier that manufactures vehicle steering systems for the automaker and other customers. It operates a plant in San Luis Potosí state in Mexico.

Jtekt also operates more than 10 plants in the United States, mainly in Tennessee, South Carolina and Texas.

Most of Japan's major automakers and suppliers operate plants in the United States. Top producers Toyota, Nissan Motor Co (T:7201) and Honda Motor Co (T:7267) locally produce about 50 percent to 70 percent of all vehicles sold in the country.

They also operate plants in Mexico and Canada, exporting a portion of the output from those plants, along with some vehicles made in other countries, to the United States.

In addition to uncertainties surrounding NAFTA talks, Japanese automakers have also been rankled by Washington's move in May to launch a national security investigation into car and truck imports to the country which could lead to new tariffs.

Japan's automobile lobby has criticized any regulations which could raise costs for Japanese automakers doing business in the United States, the world's No. 2 auto market.

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