Ford, following Trump criticism, cancels plans for $1.6 billion Mexico plant

UPDATED: 1/3/17 4:20 pm ET – adds quotes, details

DETROIT — Ford Motor Co., following months of withering criticism from President-elect Donald Trump for expanding operations in Mexico, said today it will cancel its $ 1.6 billion assembly plant in the early stages of construction in Mexico, instead investing $ 700 million in Michigan to bring to market autonomous and electrified vehicles.

Ford planned to build its slow-selling Focus sedan in the new plant following 2018, but will instead build it at an existing Mexico plant in Hermosillo. The $ 700 million investment will help transform Ford’s Flat Rock Assembly Plant, which currently builds the Mustang and Lincoln Continental, into a high-tech hub capable of building a yet-to-be-determined autonomous hybrid and fully electric SUV with a 300-mile electric range.

Those new vehicles are among seven new electrified vehicles Ford detailed today, including hybrid versions of its F-150 and Mustang. 

The stunning reversal — which came less than a year after Ford announced construction of the new plant — was hailed by lawmakers Tuesday, while Mexican officials expressed disappointment and vowed to make Ford pay back any money spent on the now-canceled plant site.

Ford CEO Mark Fields called the decision a “vote of confidence” in Trump and his pro-growth policies, although he told CNBC “the main reason for not building and canceling the plant is just due to market demand.”

“We’ve made this decision independently on what’s right for Ford, but we look at all the factors,” Fields told reporters at the announcement. “Our view, we see a more positive U.S. manufacturing business environment under President-elect Trump and the pro-growth policies and proposals he’s talking about.”

Ford in December 2015 announced plans to invest $ 4.5 billion in electric car research and add 13 electrified vehicles to its lineup by 2020. Today it announced details about seven of the 13.

The new fully electric small SUV will be coming by 2020 and will be built south of Detroit in Flat Rock, Mich. It, alongside a high-volume autonomous hybrid and the hybrid version of the Mustang, will be built in Flat Rock. A Transit Custom plug-in hybrid, available in 2019, will be built in Europe; and two new pursuit-rated hybrid police vehicles will be built in Chicago.

To support this, Ford plans to invest $ 700 million and add 700 direct new jobs in Flat Rock over the next four years. Part of that money will go to create a new Manufacturing Innovation Center in Flat Rock. Fields said the plant will become “one of the world’s most flexible and high-tech manufacturing centers.”

Michigan Gov. Rick Snyder, in a statement, cited the state’s push to become a national leader in mobility. He thanked Ford for its “continued confidence in our state and our people.”

Ford said it is testing a fleet of 20 Transit Connect hybrid taxi and van prototypes.

Peaks and valleys 

UAW-Ford Vice President Jimmy Settles said he cried tears of joy when he found out about the announcement, roughly a week ago. He called the investment “the equivalent of a new assembly plant.”

Settles said that an unspecified number of UAW workers will move from temporary status to full-time. He expects Ford to add a third shift to Flat Rock.

“It’s very significant,” Settles said. “I’ve seen a lot, many peaks and valleys. This is at the top, because I know what it will mean for people at this plant and also in America.”

Settles said Ford chose to make its investments in Flat Rock for a combination of reasons.

“It’s had very successful launches of the Mustang and Continental, and they have acreage here and they’re not at full capacity,” he said. 

Hiring for the 700 new jobs will begin in 2018, Fields said.

‘Pro-growth policies’ 

Fields said Ford was “encouraged” by “pro-growth policies” Trump and the new Republican Congress are likely to pursue, citing them as one of several factors in the company’s decision to invest in the U.S. and cancel the Mexico plant.

“We believe that these tax and regulatory reforms are critically important to boost U.S. competitiveness and of course drive a resurgence in American manufacturing and high-tech innovation,” Fields said.

Fields cited changing market demands and slower sales of small cars as the decision to keep the Focus in Mexico.

Trump has threatened to slap Ford with a 35 percent tariff on any vehicles it imports from Mexico, as well as renegotiate or pull out of the North America Free Trade Agreement. This morning, Trump also targeted GM in a tweet, threatening to impose a “big border tax” for making its Chevy Cruze model in Mexico. In response, GM reiterated that Cruzes built there will mostly go to the domestic market and that it will continue to build the compact in the U.S.

Fields said Executive Chairman Bill Ford called Trump and he called Vice President-elect Mike Pence to tell them of the news this morning. A Ford spokeswoman said the calls came after Trump’s tweet about GM, and the two were unrelated.

Ford’s electrified-vehicle announcement comes the same day Fiat Chrysler Automobiles plans to reveal an all-electric minivan concept, called the Chrysler Portal, that gets 250 miles of range. The automaker recently began selling a hybrid version of its Chrysler Pacifica minivan.

General Motors is also making headlines for its Bolt EV, which went on sale in California last month and boasts 238 miles of range. It comes out a year before the planned release of Tesla’s much-hyped Model 3, the California automaker’s own 200-plus range EV.

Fields in May confirmed Ford was developing an electric vehicle with range comparable to the Bolt, Model 3 and next-generation Nissan Leaf.

Ford said it is testing a fleet of 20 Transit Connect hybrid taxi and van prototypes.

Ford assembly line workers pictured during today’s announcement at the Flat Rock Assembly Plant. Photo credit: Reuters

Mexico response

Fields said he informed officials in Mexico about the plans to cancel the plant.

“Obviously, there was some disappointment,” Fields said. “But we’ve been in Mexico over 90 years, and we’re moving our Focus down to Hermosillo, so we’ll be safeguarding the 2,900 jobs that are there, plus we’ll probably add about 200 jobs when we add Focus there.”

Mexico’s Economy Ministry said it regretted Ford’s decision to pull its investment from San Luis Potosi. The federal government has guaranteed that the automaker will reimburse the state government for its expenses on the project, the ministry said in a statement. It made no mention of Trump.

“The growth of Ford Motor Company in North America, and particularly in Mexico, has been the result of a strategy of competitiveness based on global value chains in which North America competes with other regions of the world,” the ministry said. “The jobs generated in Mexico have contributed to maintaining manufacturing jobs in the United States that otherwise would have disappeared due to Asian competition.”

The now-canceled plant was supposed to employ about 2,800 workers, Ford said when it announced the news. Fields said ground-clearing at the site began around May, but a spokeswoman said no actual construction had taken place.

“Where we’re at in the construction of the plant, any assets — and there aren’t many — can be redeployed throughout the Ford system,” Fields said.

It’s unclear how much Ford is investing in Hermosillo to add the 200 workers to build the Focus.

Automotive News reporter Laurence Iliff contributed to this report.

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