The success of Navistar's plant in Mexico remains tied to the uncertain future of the region's NAFTA free trade deal. Fred Katayama explains why.
The uncertain future of the NAFTA trade deal threatens this Navistar plant in Escobedo Mexico just south of Texas. It's the U.S. company's largest plant. Less than half of the trucks it produces go to North America, but Navistar relies on imported parts that currently arrive duty free under the free trade deal. Oscar Ruiz is the plant's operations director. SOUNDBITE: OSCAR RUIZ, OPERATIONS DIRECTOR AT NAVISTAR ESCOBEDO PLANT, (ENGLISH DUBBED OVER SPANISH) SAYING: "To lose this treaty would be to go backwards 40 years. It would mean going back to a situation where each country depends on what they produce themselves and it would not be mutually beneficial." Ending NAFTA would raise prices for the 12,000 parts used in a truck. For example, a Deloitte consultant says importing the engines would likely cost 10 percent more. And the tariff alone on the engine could add $5,800 to the $130,000 cost of a Prostar truck. Diversification could soften the blow. Multiple free trade deals cover exports to markets from Saudia Arabia to Australia. But it could be harder for companies in Mexico to sell their products in Latin America. Higher costs in Mexico could boost Latin American sales of trucks made in Brazil.