Ford Plant in Mexico Cancelled

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Ford Motor Company CEO, Mark Fields, has announced the company would no longer pursue a new Ford plant in Mexico and would instead invest in revamping local plants in America. The move creates 700 more jobs in the United States as well as bolsters plants that were at risk of closure.

There’s been mounting pressure from U.S. president-elect Donald Trump, aimed directly at automotive manufacturers. Throughout his presidential campaign, Trump has put the crosshairs squarely on Ford, lambasting their cross-border plans for a new Ford plant. Threats of tariffs on importing vehicles from Mexico have carried into his vocabulary since the election, and Ford has responded.

Changing Directions

In an interview on CNBC, Fields spoke about Ford’s shifting direction. Regarding the cancelled Ford plant in Mexico, he said it was less about politics and more about demand. The plan to build a $1.6 billion plant was no longer necessary since small-car sales have diminished in recent years. The Ford Focus, whose production would have been moved to the new facility, has waned in popularity.

Instead, Ford will add 700 jobs to the plant in Flat Rock, Michigan, to build electric and hybrid vehicles. Along with the job creation, $700 million dollars will be invested into upgrading the plant.

Is It Just Politics?

Fields was quick to brush off questions that Ford’s shift in direction was purely motivated by politics. Yet, while the decline in the small-car market may be true, it’s not the only segment affected. Ford had planned to move production of a Lincoln SUV from their Kentucky plant to Mexico also. That move would have put the Louisville assembly plant in jeopardy of closing, and the vehicle they planned to move is part of the strongest segment in sales currently.

There’s more to it than just building cars, too. Trump has been vocal about the North American Free Trade Agreement (NAFTA), vowing to restructure its terms. He wants to impose a substantial tax on vehicles imported into the US, a move that could further hit American automakers. Since most of the imported vehicles are the lower-priced cars, an import tax could cut deeply into profits and raise the selling price.

Trump on the Offensive

After claiming victory in the battle with Ford, America’s largest carmaker, Trump quickly set his sights on another target. He tweeted, “General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A. or pay big border tax!”

In just a few weeks, Trump will take office. That’s when we’ll see if Trump has the support to back his bold claims of cross-border tariffs, or if it’s another wall he won’t actually build.