Employer-assisted housing in maquiladoras in Mexico : a case study of the Delphi Automotive Housing Program

Abstract

In June 1996, the US and Mexican press announced a unique partnership that sought to address the dramatic housing shortage in Ciudad JuAirez, Mexico. This public-private partnership involved construction companies, a major US multinational corporation, and the national Mexican housing agency. General Motors and its subsidiary, Delphi Automotive, formed a partnership with INFONAVIT, the Mexican worker-housing agency, that would provide 7000 housing credits to Delphi employees in 7 Mexican cities. Grupo Condak, a Mexican construction company, would build the homes with the financial backing of Pulte Mortgage Company, the largest US homebuilder at the time. The Mexican government has attracted foreign direct investment through the maquiladora program because of low labor costs due not only to low wages, but also because of low levels of employee benefits. Why then, would a foreign company voluntarily choose to increase employee benefits, implicitly as a substitute for increasing wages? This thesis will analyze the underlying incentive structure that brought about this unique housing partnership, and ultimately examine if this program is a desirable way of mitigating worker housing shortages in Mexico. Analyzing how the benefits of the program accrue to different actors sheds some light on the motives for starting the program. Although an evaluation of the program is not the main purpose of this thesis, this study will examine the benefits of housing program from the perspective of all participants. In particular, this research examines the incentives that prompted General Motors to offer housing benefits. If Employer-assisted housing is to be replicable, and if there is a future for other public-private partnerships in social interest housing, then understanding the firm's motives for participating in such a program is of critical importance. There are two mainstream hypotheses of why a private firm like Delphi might offer housing benefits. The reduction of employee turnover and associated training costs are the main reasons that Delphi Automotive cites as its incentives for starting the program. Additionally, the desire to generate a positive corporate image and the importance of public relations is a second prominent theory. This research will also examine more closely two alternative hypotheses on the motives of General Motors and Delphi Automotive in offering employer-assisted housing benefits in Mexico: 1) to discourage labor organizing in Mexico and to counteract the US labor force's anti-Mexico propaganda and 2) external pressure from the construction industry and US sources of capital interested in using Mexican government subsidies to create housing markets in Mexico.