Mexican Pipeline Blast Prompts Factory Shutdowns

 More than 100 companies in Mexico including automaker Nissan Motor Co. and cereal maker Kellogg Co. reduced or suspended production after a pipeline explosion yesterday interrupted natural gas supplies.

The blast in the central state of Queretaro damaged a 36- inch pipeline operated by state-owned oil monopoly Petroleos Mexicanos, cutting supplies to the cities of Guadalajara, Queretaro, Aguascalientes and Leon. A guerilla group that calls itself the Popular Revolutionary Army claimed responsibility.

Petroleos Mexicanos said in a statement today it will resume natural gas service to Queretaro as soon as tonight by installing bypasses to the damaged pipeline. Natural gas will flow normally to the other cities by the morning of July 13.

In the central state of Queretaro alone, 90 factories were left without natural gas as well as 1,000 retail businesses and 58,000 households, said Pedro Ruiz, head of the state's industrial trade group.

``This will be a big cost for the companies,'' Ruiz said. ``This will cause setbacks in production and sales will drop.''

The state of Queretaro, located north of Mexico City, has drawn foreign industry, including a Bombardier Inc. plant that produces plane fuselages. The state has a population of 1.6 million people, according to the 2005 census.

Auto Plants

Nissan idled its plant in Aguascalientes and plans to resume work tomorrow using liquid propane gas. The factory produces about 1,300 vehicles daily and employs 6,000 workers, spokesman Diego Arrazola in Mexico City said. Honda Motor Co.'s El Salto plant, which produces 120 vehicles daily, is operating at 60 percent capacity today because its natural gas supply has been irregular since yesterday's blast, spokesman Eduardo Aragon said.

Kellogg shut down its plant in the city of Queretaro that makes cereals such as Corn Flakes and Froot Loops, said spokeswoman Paulina Ruiz.

Without natural gas to fire its furnaces, Monterrey-based glassmaker Vitro SAB suspended work at two of its six glass bottle plants, which serve the beer, food and wine industries. The shutdown will cost $800,000 per day of earnings before interest, taxes, depreciation and amortization -- a measure of cash flow known as Ebitda, Vitro said.

An Industrias CH SAB unit that produces steel and Grupo Urrea, a valve and faucet manufacturer, also closed factories near Guadalajara, according to the state of Jalisco's industrial trade group. Guadalajara is the country's second largest city, behind Mexico City.

Grupo Modelo SAB, the maker of Corona beer, continues to operate its plant in Guadalajara because it has the capability to use fuel oil instead of natural gas, said spokesman Jorge Siegrist.

Rebel Vows

The government said it would increase security in oil facilities. The guerilla group, which first appeared two years after the 1994 Zapatista rebel uprising, said the bombings will continue until President Felipe Calderon and the governor of the southern state of Oaxaca, Ulises Ruiz, return missing members.

The attorney general's office, Mexico's top enforcement ministry, said today in an e-mail that the people the armed group demanded be freed aren't in federal custody or prisons. The ministry said it's looking into whether they have been detained by state or city authorities.

The guerilla group's threat, posted to a Web site used by revolutionary organizations, adds to a sense of insecurity created by mounting drug violence that has killed more than 1,300 people this year.

``There has been some psychological damage and that will probably end up being greater than any damage to the real economy,'' said Gray Newman, chief Latin America economist at Morgan Stanley, in a telephone interview from Mexico City. ``This has demonstrated that there is vulnerability that people thought didn't exist.''

Mexican soldiers and federal police are coordinating with Petroleos Mexicanos to protect ``strategic centers'' and are making aerial and ground patrols of the oil company's pipelines, the company said in its statement today.

Guanajuato

The rebel group also claimed responsibility for two explosions last week on a separate Petroleos Mexicanos gas pipeline in Guanajuato state that prompted the evacuation of 4,100 people. The blasts damaged nearby gasoline and gas-liquids lines.

Following those explosions, Honda idled its El Salto plant for two days, company spokesman Aragon said. Losses were as much as 4 million pesos ($369,720) for each day of missed production, he said.

The Mexican attorney general's investigation of the Guanajuato blasts indicated it was sabotage because they were detonated outside of the pipeline at the same time and used the same technical pattern, according to a government statement yesterday. An investigation of the Queretaro explosion was too preliminary to determine the cause, the attorney general said.

Nissan shares fell 1.9 percent to 1,305 yen in Japanese trading. Shares of Honda declined 1.3 percent to 4,470 yen. Shares of Kellogg increased 16 cents to $51.50 in New York Stock Exchange composite trading at 6:05 p.m.

On the Mexican Stock Exchange, shares of Vitro fell 6 centavos to 29.69 pesos. Shares of Grupo Modelo fell 40 centavos to 57.45 pesos. Shares of Industrias increased 1.44 pesos, or 2.8 percent, to 52.77 pesos.