Mexico's once stalwart automotive industry has suffered due to the financial crisis [EPA]

Mario Verdugo heard the bad news after finishing an exhausting 12-hour shift making Jettas at the sprawling Volkswagen plant in central Mexico.

Due to declining global demand for cars, his foreman told him, his job no longer existed.

"It was like a slap in the face with a machete," said Verdugo, 40, waiting outside the factory gates in the scorching heat for a severance-pay check.

"There is no unemployment benefit for me here in Mexico, so how am I going to feed my wife and three children?"

Auto industry suffers

Verdugo is one of half-a-million Mexicans who have lost jobs since November as the nation's auto industry and other manufacturing sectors nose dive amid the tumbling global economy.

In the last two decades, Mexico has carefully geared itself toward exports and successive presidents have proudly boasted it is one of the most globalised countries in the world with more than 30 free trade pacts.

The vast majority of these exports – from cars to cameras - travel across the nation's 2,000-mile northern border to the biggest economy and market in the world: the US.

But as the credit crunch becomes a global recession, Mexicans are remembering the warnings many raised about over-dependence on the seemingly-invincible economy of their northern neighbor.

When the America gets the flu, they had said, Mexico will get pneumonia.

"Worst year"

Recent statistics indicate that the Mexican economy is indeed suffering.

Mexico's car production for January was down by 51 per cent compared to the same month in 2008 – mostly due to a sharp drop in exports.

"We are going through the worst year in the last five decades," Eduardo Solis, president of the Mexican Auto-Industry Association, told Al Jazeera.

"While our principal competitors have created strategies to kick start their internal markets, Mexico is paralysed."

In Puebla, home to the biggest Volkswagen plant in the continent, the effects are hitting residents hard.

The factory and its part providers layed off 1,400 workers, and gave many employees forced holidays – on half-pay.

Trade unions complain about the tactic – known in German as a kurzarbeit – but say they are powerless to fight it.

"We have no room to maneuver," said Gilberto Martinez, a member of the Authentic Worker's Front – a union federation.

"Some leaders say we should go on strike. But that would be doing a favor to the companies not the workers. All we can do is try and keep our jobs."

The slump has also walloped many communities in northern Mexico, such as the "Mexican Detroit," – an area with Ford, General Motors and Chrysler factories over the border from Texas.

American autoworkers had complained bitterly when their jobs went south of the Rio Grande in the 1990s. However, of the Mexicans who took those jobs are now finding themselves unemployed.

Massive layoffs

Things are even worse to the west in Ciudad Juarez, a border city with thousands of assembly plants – known as maquilas - in which multinational corporations churn out duty-free goods for American shops.

While many of the jobs pay as little as $6 a day, they have been plentiful and provided a steady source of income for millions of Mexicans.

But amid massive layoffs, a TV newscast showed hundreds queuing up at dawn for a single job opening on a production line.

Officially, Mexican unemployment stands is 4.3 per cent, or some 1.7 million of its 40 million-strong workforce.

However, many say the real number is much higher, as the government counts anyone working one hour a week as employed, and fails to take into account millions scraping by selling goods on street corners for want of better work.

Furthermore, every year some 400,000 young workers have been heading north to the US to sweat in fields, restaurants and construction sites and wire the dollars home to their loved ones.

Destination: Unknown

But that option too is drying up, with less jobs and more deportations north of the border.

Remittances sent from the US to Mexico fell by almost $1bn in 2008, the first drop since the Central Bank started keep records.

The most dire prediction of economic instability came from Mexican billionaire Carlos Slim, the telecoms tycoon of Lebanese descent who is the second richest man on the planet after Warren Buffet.

Last week, he warned that "unemployment will rise as we have never seen in our personal lives [and] companies small, medium and large will go bankrupt".

Felipe Calderon, the Mexican president, rebuked the mogul as being "alarmist".

Many worry that the pressures of unemployment will also push Mexico's degenerating security situation further over the edge.

Amid a widespread breakdown in law and order, there were more than 5,000 drug-related killings and thousands of kidnappings for ransom last year.

Felipe Lopez, a migrant worker and activist who recently returned from the US due to lack of work, predicted that many of the newly jobless will turn to crime.

"There are some desperate people who will not sit and watch their families go hungry," Lopez said.

"If they cannot get money by working then they will take it by any means necessary."

Source: Al Jazeera