Mexico returns as investment hot spot; Proximity to U.S. market lures suppliers reluctant to build plants in China.

Byline: Lindsay Chappell

Just when it seemed that carmakers had forgotten Mexico, the country's automaking industry is witnessing a spike of activity.

In 2003, investments in auto assembly plants rose by almost eight times the previous year's sleepy level, according to an annual survey by the University of Windsor.

Automakers spent $1.23 billion in Mexico on new or expanded assembly plants in 2003, the survey said. That's up from $160 million in 2002. Mexico's peak was 1996, when automakers invested $1.68 billion.

The auto industry's investment in Mexico is nowhere near last year's approximately $12.0 billion investment in Chinese assembly plants. But the upswing has some observers wondering whether automakers and suppliers are on the threshold of another wave of investment in Mexico.

Ford Motor Co., Volkswagen AG, Toyota Motor Corp. and Nissan Motor Co. are expanding production there. Ford and Toyota in particular are establishing supplier campuses for vehicle lines that will serve the United States. In Ford's case, that will mean 35 suppliers locating at its newly expanded Hermosillo, Mexico, plant.

"All eyes have been on China, but we're seeing a resurgence in Mexico now,'' says A.J. Feria, a marketing professor at the University of Windsor who conducted the …