Chrysler invests US$1.2 Bn in Mexico and could cast away the IMMEX drawback

Posted by in Automotive, Aerospace & Manufacturing

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Photo credit: Chrysler Building at 42nd Street by Andrew Tarvin

Chrysler is adding US$164 Millions to its facilities in Saltillo, Coahuila for manufacturing the new line of “Tigershark” engines for the models Dodge Dart and Jeep Cherokee. This investment totals US$1.249 Billion of investment together with the plant manufacturing of the Ram ProMaster, to be sold in Mexico, United States y Canada. This will add 470 jobs to the facilities for a total of over 6,400 jobs.

These are great news for an automotive industry in Mexico expectant to the changes included inside the tax and customs reforms. Currently, manufacturing companies with approved IMMEX program, may elect to import raw materials, machinery and tools using zero tax rate, as long as they sell manufactured products to other IMMEX companies or export them.

According to tax and customs Reforms, IMMEX companies could loose the benefit of zero tax rate. If the Reforms passes, all IMMEX companies would pay import tax and ask for drawback. Meaning? A cash flow challenge.

These two weeks are crucial in the Congress, as discussions on this IMMEX benefit could have a benefical outcome for automotive companies. Following the debates, it seems that Partido Acción Nacional (PAN, centre-right) is supporting the side of IMMEX companies and Partido Revolucionario Institucional (PRI, centre) could follow, in order to push forward the remains of the tax reform proposed by President Peña Nieto (party member of PRI).

My guess? Chrysler investment could actually cast away these Reforms. IMMEX will remain untouched, as automotive industry is a top-tier industry in terms of profits and investments for the country. As Banco de Mexico cut the expected growth to 1.2 for year 2013, seems very unpopular for Congressmen to set obstacles on an industry that generates so much jobs. What is your guess?