By Ben Bain and Isabella Cota, Bloomberg News
MEXICO CITY — For Kia Motors Corp., Mexico's historic car boom isn't working out as planned.
A dispute with a recently elected state leader may prevent the start of production in May at a northern Mexico car factory representing more than $1 billion in investment, South Korea-based Kia said April 5. The plant is in the cross hairs of Nuevo Leon Governor Jaime Rodriguez, a former rancher who threw out the ruling party in a landslide last year and said he opposes the deal Kia signed with his predecessor.
The factory already lags five months behind schedule and South Korean President Park Geun Hye appealed to her Mexican counterpart, Enrique Pena Nieto, to intervene in the conflict during a state visit to Mexico City during the first week of April. The tiff is a rare snarl for Mexico's success at using cheaper labor and trade deals to win billions of dollars in foreign investment from the likes of Nissan Motor Co. and Ford Motor Co., which announced plans April 5 to build a $1.6 billion small-car plant in the state of San Luis Potosi.
“Mexico has a lot to offer the auto industry, that's a big part of why Nuevo Leon was chosen,” Kia said in an emailed response to questions from Bloomberg News. “However, if there is legal uncertainty or the rule of law isn't respected in the state, then this could obviously have a negative impact on foreign and local investment as well as any other activity.”
At issue are the tax benefits and infrastructure investment the former governor used to lure Kia to Nuevo Leon. Mr. Rodriguez became Mexico's first state governor elected as an independent last year after electrifying voters with his plainspoken criticism of the political establishment. Known as “El Bronco” — the nickname can refer to a wild horse and also be roughly translated as “the brazen one” — he reiterated his opposition to the existing pact with Kia the week of April 4 while saying an agreement may be near.