Ford Motor Co. said it will invest $1.6 billion on a new small-car factory in Mexico, angering its U.S. union and drawing another rebuke from Republican presidential candidate Donald Trump.
Construction will begin this summer, and the plant in San Luis Potosi state will create 2,800 jobs by 2020, Ford said in a statement Tuesday. Production is slated to start in 2018. The automaker, which is moving output of slow-selling, lower-priced small cars out of a Michigan factory, didn’t specify which vehicles will be built at the Mexico site.
Ford wants to “improve the profitability of our small-car lineup,” said Joe Hinrichs, its president of the Americas. United Auto Workers President Dennis Williams called the company’s plan “very troubling” and said the investment means creating jobs that “should have been available right here in the U.S.A.” Trump, who often assails Ford’s Mexican investments, called the new plant “an absolute disgrace” in a statement he issued to CNBC and other news outlets.
Hinrichs said in an interview that “Mexico has more competitive labor costs, supplier costs, good logistics, good support from the government. But importantly also, as part of our global manufacturing footprint, Mexico is a good shipping location to many countries around the world with their trade agreements.”
He said the new Mexico factory is “consistent with the discussions we had with the UAW last fall” during successful negotiations for a new four-year contract.
Williams said the company’s decision reveals the shortcomings of the North American Free Trade Agreement and the proposed Trans-Pacific Partnership trade pact.
On the campaign trail, Trump has repeatedly criticized Ford’s investments in Mexico. He has said that as president he wouldn’t let Ford move jobs to Mexico and would persuade the automaker’s chief executive officer, Mark Fields, to bring jobs back to the U.S.
“I would say, the deal is not going to be approved, I won’t allow it. I want that plant in the United States,” Trump said at a campaign stop in Michigan last August, responding to reports that Ford’s small-car output would shift to Mexico. He added, sarcastically, “Why don’t we just let the illegals drive the cars and trucks right into our country?”
Ford noted that it has been manufacturing vehicles in Mexico since 1925 and that from 2011 to 2015, it has invested more than $10 billion in the U.S., adding 25,000 jobs.
“I don’t want to speak for any political candidates, but I think the facts strongly support how committed we are to the U.S.,” Hinrichs said. “While we’re the second-largest producer of vehicles in North America, we the fifth-largest — No. 5 — in Mexico, behind Renault-Nissan, GM, Fiat Chrysler and Volkswagen.”
The Ford plant will build on a rush of investments in Mexico as global automakers take advantage of the nation’s lower labor costs, network of trade agreements and proximity to the U.S., its biggest export market. In the last two years, BMW AG, Toyota Motor Corp. and Kia Motors Corp. have announced plans to assemble cars in the country.
Low gasoline prices in the U.S. have slowed sales of fuel-efficient small cars, such as the Focus and C-Max. That’s part of the reason Ford is moving small-car production to Mexico, Hinrichs said.
“There certainly is pressure on the small-car business in the U.S. given where fuel prices are,” Hinrichs said. “It is part of the consideration, clearly, of where we want to build our small cars.”