Beetlemania

Screen Shot 2016-03-13 at 7.30.50 AM.pngBy Kary Vannice

In 1954, at an exhibition entitled “Germany and Its Industry”, Mexicans were first introduced to the German manufactured car, Volkswagen. The attendees of that exhibition, I’m sure, had no idea just how important the symbol ‘VW’ would become to their national economy.

One year later, Studebaker-Packard of Mexico had signed a contract to produce the Volkswagen Sedan. By 1964, the popularity of the German engineered car was evident, and Volkswagen de Mexico was born. The following year construction was started on a manufacturing plant just outside of Puebla,130 km south of Mexico City. The plant produced its first car, the Beetle, in 1967. By 1971, the VW Beetle became the official car for public transportation in Mexico’s capital city and was known as the Minitaxi.

In 1978, with the Beetle being so popular and the manufacturing at the Puebla plant in Mexico so economical, VW started exporting the model to the European markets in countries such as Italy, Belgium and even its home country of Germany! The 80’s marked the one-millionth car in production as well as the addition of 5 new VW models being manufactured in Mexico. That required yet another expansion of the Puebla plant and meant more jobs for the local population. In 1990, less than a decade later, VW de Mexico hit the two millionth vehicle mark and of those, one million had been the popular Beetle.

In the midst of all of their success, in 1992, VW workers initiated a strike at the Puebla plant. The highly competitive nature of automotive industry had prompted the management at the Puebla plant to try instituting a Japanese style work organization. In addition to a cultural clash of work systems, this new work organization would have restructures the traditional pay and promotion system that had been in place for decades at the Puebla plant. With so many Mexican families depending on the incomes of workers at the plant, the Mexican Government was obligated to step in and mediate. Ultimately, the strike was settled in favor of VW, not the workers and resulted in the firing and replacement of 2,000 employees.

Despite this setback in production, the 90’s saw expanded growth for VW as they added several new car models and also opened trade from Mexico to South American markets. By the end of the century, VW had produced 4 million cars and revamped the classic VW Beetle. Production of the new Beetle began in 1999. The first decade of the new century marked more growth at the Puebla plant, allowing them to increase distribution and giving them sole manufacturing rights for the new Beetle worldwide.

In May of 2010, 43 years after production of the very first Beetle, the Puebla VW plant produced its eight millionth vehicle. That milestone demonstrated they had become a force in the global car manufacturing market. Just 2 years later in May of 2012 they hit the 9 million mark, proving to the world the plant could produce a half a million cars a year.

Today, VW de Mexico assembles three cars and two minivans. The plant produces 2,250 cars a day and employs nearly 14,000 Mexican workers. With so many people in the town of Puebla associated with the VW plant, you will often hear the locals quip, “When VW sneezes…the whole city catches a cold.” One thing that has made production in Mexico so favorable is the low cost of labor. Most workers at the Puebla plant make between 50 and 80 Pesos an hour; much lower wages than in European countries or the United States, where Volkswagen also has manufacturing facilities. VW de Mexico relies principally on old models (Beetle, Combi, Panel) for the Mexican market, while producing the more modern Golf and Jetta for the U.S. and Canadian markets.

Four out of every 10 cars produced in Puebla go to the United States, their biggest customer. However, the cars manufactured there are also exported to Europe, Australia, Japan, China and South America. They export to over 80 countries worldwide, making it the second largest VW production site in the world.

And VW shows no signs of slowing down production at its Mexico plant. On the contrary, they recently announced a plan to spend $5 Billion over the next three years in North America on production of new vehicles. The Puebla plant is set to start manufacturing the Golf hatchback in 2014.

“With its existing infrastructure, competitive cost structures and free-trade agreements, Mexico is the ideal location to produce the Golf for the American market,” – Hubert Waltl, the head of production at VW’s passenger car brand. Volkswagen believes so much in the Mexican workforce that it will soon be breaking ground on a new facility in the town of San José Chiapa, Puebla to manufacture Audi cars.

So, It is likely Mexicans will be seeing Volkswagen cars and vans on the highways and byways of Mexico for years to come.

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