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Delphi says could move operations out of Mexico

MEXICO CITY, Aug 27 (Reuters) - Delphi Corp., the world's largest auto parts maker, could move part of its production operations out of Mexico due to high costs, an executive said on Wednesday.

Sean Kelly, executive director of Delphi Mexico, told Reuters that production volumes in Mexico have fallen by 3 to 5 percent this year from last year, and the company is evaluating the possibility of moving production contracts to countries including Brazil, China and eastern Europe.

Delphi, which posted falling earnings for the second quarter, has 55 plants in Mexico and employs 70,000 workers. A third of its worldwide operations are here.

Mexico is the world's 10th largest auto producer, but companies including General Motors Corp. and Volkswagen AG have seen production drop due to lower demand for exports amid an economic slowdown in the United States, Mexico's main trading partner.

Among high costs are shipping expenses. Kelly said it costs as much to ship a container of components to the United States from China as it costs to ship Mexico's northern Sinaloa state to El Paso, Texas.

"That's where I think we need to be working with the government to say why does this cost this much. To be here this close to the market yet it still costs me as much to move the freight as perhaps being way around the globe, that's kind of crazy," Kelly said.