Ford Cancels Plans for New $1.6 Billion Mexico Plant

January 03, 2017


Ford Motor Co. will scrap plans to build a $1.6 billion plant in Mexico, after coming under criticism by President-elect Donald Trump for shifting small-car production south of the border. 

[Keith Naughton| January 3, 2017 |Bloomberg]

The next-generation Focus compact car will be built at an existing factory in Hermosillo, Mexico, and Ford will cancel plans to build a plant in San Luis Potosi, Chief Executive Officer Mark Fields said Tuesday. The second-largest U.S. automaker will build two products at a factory in Wayne, Michigan, where it assembles the Focus now, protecting about 3,500 jobs.

“One of the factors we’re looking at is the more positive U.S. business environment that we foresee under President-elect Trump and the pro-growth policies that he’s been outlining,” Fields told reporters at Ford’s factory in Flat Rock, Michigan, where the company is investing $700 million and adding 700 jobs. “This is a vote of confidence around that.”

Ford Executive Chairman Bill Ford called Trump this morning to inform him of the company’s plans to cancel construction of the new plant in Mexico, which had begun in May. Fields said he discussed the new plan with Vice President-elect Mike Pence.

Mexico Message

The automaker would have made the same decision even without Trump’s involvement, Fields told Bloomberg Television today. U.S. buyers are simply not as interested in the small cars that are being built in Mexico, while electric vehicles and hybrids have the potential for growth, he said.

“It is the wrong time to build new plants in Mexico,” Erik Gordon, a professor at the University of Michigan’s Ross School of Business, said in an e-mail. Ford will save money, “American jobs, and will avoid the risk of a border tax and a smack in the face from the new president.”

Ford said it will add production by 2020 of a fully electric sport utility vehicle with at least 300 miles of range, and an autonomous hybrid vehicle for commercial ride hailing or sharing by 2021 at the Flat Rock factory. The plant will also build a hybrid version of the Mustang sports car in 2020.

Shares of Ford rose 3.3 percent to $12.36 at 12:21 p.m. in New York, while the Mexican peso dropped 0.9 percent against the dollar.

The second largest U.S. automaker already builds the Mustang and Lincoln Continental models from its Flat Rock plant, which employs more than 3,700 workers. Until February of last year, Ford also built the Fusion family sedan in Flat Rock. After sales for the model slumped, the automaker consolidated production of Fusion at its primary plant in Hermosillo. Fusion sales fell more than 10 percent last year through November.

Trump Target 

Ford was a target of President-elect Trump during his campaign for plans to move small car production from the U.S. to Mexico. The Dearborn, Michigan-based company changed course on a plan to move production of the Lincoln MKC SUV south of the border. Fields said Trump influenced the automaker’s decision to continue building the MKC in a Louisville, Kentucky, factory where it also produces the Ford Escape SUV. 

Earlier today, Trump threatened to punish General Motors Co. for building a version of its fading compact car in Mexico, rekindling a months-old feud with the auto industry and earning a terse response from the company challenging his assertions.

Trump said in a Twitter post that the largest U.S. automaker, which manufactures a Chevrolet Cruze hatchback model in San Luis Potosi, should build the car at home or face a hefty tariff. However, GM has sold only 4,900 such hatchbacks north of the border, said spokesman Tony Cervone. The almost 200,000 Cruze sedans that Americans have bought were all built in a plant in Lordstown, Ohio.

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