DETROIT -- When the UAW and the Detroit 3 open contract talks next month, a third party will hover over the discussions and almost surely influence the outcome: Mexico.
The union will seek an agreement that keeps as much Detroit 3 production as possible in U.S. plants, while rival automakers increasingly seek to take advantage of lower labor costs in Mexico.
At the same time, the Detroit manufacturers will use the prospect of shifting work to Mexico as a bargaining chip to blunt union demands for higher wages.
Mexico "is the union's biggest target for in-sourcing [production], and it is also the biggest threat the companies can wield," said Kristin Dziczek, director of the industry and labor group at the Center for Automotive Research in Ann Arbor, Mich.
The labor talks are the latest example of how Mexico's rise as an auto producer -- it may soon rival Germany -- is reverberating across the industry. German and Japanese automakers are rushing to build Mexican plants to lower their dependence on high-cost labor in their home countries, gain access to the North American market and take advantage of Mexico's extensive free-trade agreements.