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Ford to build new small-car plant in Mexico

$1.6 billion US investment may nearly double Mexican production

Published: April 5, 2016, 9:30 PM
Updated: April 8, 2016, 8:12 PM

Ford Fiesta production - Ford Fiesta production line

Ford is investing in a profitable future by building a new plant in Mexico.

The move to build a new plant in San Luis Potosi (about 410 km north of Mexico City) at an investment cost of $1.6 billion U.S. will allow Ford to build more small cars in a low-cost environment, with the intent to have 2,800 additional people employed by 2020.

Construction will begin on the central Mexico plant in summer 2016, and the first new cars are expected to start coming off the line in 2018. Ford did not announce plant capacity (though Reuters is claiming 350,000 cars per year and the Wall Street Journal 500,000) but did say the majority of cars would be exported to the states (and presumably also to Canada), although the move also allows Ford to more cheaply export vehicles to other parts of the world (such as Argentina, China and South Korea, among others).

Ford announced earlier this year that it would stop building its Focus and C-Max compacts in Michigan and move them to a location that would allow low-profit vehicles such as those two to be built more cheaply, though it would not confirm that the new plant would be the new production facilities for them. Ford has said it would find other products (presumably with higher profit margins than small cars) to build in Michigan.

The United Auto Workers (UAW) union, which has already stated Focus production was moving to Mexico, was quick to react. UAW President Dennis Williams called the announcement “a disappointment and very troubling,” stating that “every investment in Mexico … means jobs that could have and should have been available right here in the USA. Companies continue to run to low-wage countries and import back into the United States. This is a broken system that needs to be fixed.”

The announcement comes in the middle of a divisive Presidential campaign in the US, where candidates from both sides of the political divide — Donald Trump and Bernie Sanders — have taken companies such as Ford to task about increased manufacturing investment in Mexico rather than in America.

Trump called the Ford announcement an “absolute disgrace,” adding that “these ridiculous, job-crushing transactions will not happen when I am president.”

He stated early on in his campaign that if he were to become president, he would impose a 35% import tariff on cars from Mexico being sold in the US.

If the speculated production numbers are correct, the added yearly capacity would put over a quarter of Ford’s total North American annual production in Mexico, and add billions annually from Ford alone to US treasury coffers under President Trump.

For its part, Ford says the move is strictly a business decision to serve global markets and deliver profitable growth to its shareholders, with President of the Americas Joe Hinrichs saying the move was about increasing profitability of its small cars.

“We have to make decisions on a global scale because we compete globally,” said Hinrichs. “The investments in Mexico are not having an offsetting effect in the U.S.; we’re not losing any jobs at Michigan Assembly Plant or southeast Michigan.”