Cash & Liquidity ManagementInvestment & FundingEconomyFord scraps plans for US$1.6bn Mexico plant

Ford scraps plans for US$1.6bn Mexico plant

The motor giant said it will instead add 700 jobs to its existing Michigan factory, following criticism by US president-elect Donald Trump.

Ford Motor, the second-biggest US car manufacturer, has scrapped plans announced last April to build a new US$1.6bn plant in San Luis Potosi, Mexico.

The company’s chief executive officer (CEO) Mark Fields described the decision as “a vote of confidence” in incoming US president Donald Trump, who takes office on January 20. However, he insisted that the main reason was a decline in North American demand for small cars such as those that the new Mexican plant would have manufactured.

Fields stressed that Ford would have made the same decision even if Trump had not won the presidential election. However, the president-elect had described the company’s plans to invest in Mexico as “an absolute disgrace” during the election campaign and urged Ford to reconsider its plans.

According to the CEO, Ford had been influenced by “the more favourable US business environment that we see under president-elect Trump and some of the pro-growth policies that he’s been talking about”.

The carmarker will now invest US$700m to develop an existing plant at Flat Rock, Michigan and manufacture new electric, hybrid and autonomous vehicles there, which will create 700 new jobs.

The Mexican government said that it regretted Ford’s decision and had ensured that the company will reimburse San Luis Potosi state for any costs associated with the investment.

Meanwhile, Trump has turned his attention to Ford’s larger rival, General Motors, and warned that he intends to impose a “big border tax” on compact cars produced in Mexico.

In a Twitter post issued shortly before Ford’s announcement, the incoming president wrote: “General Motors is sending Mexican made model of Chevy Cruze to US car dealers-tax free across border. Make in USA or pay big border tax!”

GM responded that producing some of the Cruze cars in the Coahuila, Mexico plant was part of corporate strategy to serve global customers, rather than sell the vehicles in the US. A company spokesman said that only the hatchback model, representing a small percentage of sales, was made in Mexico.

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