After Trump's twitter threat, Ford scraps Mexico plant

Reuters Michigan, United States Jan 03, 2017, 09.40 PM(IST)

Ford logo is displayed on a building in this photo illustration Photograph:( Reuters )

Ford Motor Co on Tuesday scrapped a planned Mexican car factory and added 700 jobs in Michigan following criticism by Donald Trump, as the US president-elect turned his attention towards rival General Motors Co with the threat of a "big border tax" over compact cars made in Mexico.

Ford CEO Mark Fields called the move "a vote of confidence" in Trump, but primarily a response to a decline in the North American demand for small cars like those that would have been made at the Mexican plant. He said the company would have made the same decision even if Trump had not been elected.

Ford will cancel plans unveiled in April to spend $1.6 billion to build the new plant in San Luis Potosi, Mexico, a project that Trump urged the company to abandon and described as an "absolute disgrace" during the election campaign. 

The number two US automaker also said it would invest $700 million in the Flat Rock, Michigan factory plant and would make new electric, hybrid and autonomous vehicles there.

Trump's efforts to browbeat the US car industry show that he may go further than other modern presidents to try to influence corporate decisions, especially those related to trade and investment. 

Investors on Tuesday sold off shares of Kansas City Southern railroad, a company that is heavily dependent on shipping goods across the US-Mexico border. 

In a Twitter post hours before Ford's announcement, Trump 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, the largest US automaker, said making some of the Cruze cars in the plant in Coahuila, Mexico was part of its strategy to serve global customers, not sell those vehicles in the United States.

Trump's GM tweet was his latest broadside aimed at an American company over jobs, imports and costs even before he takes office on January 20.

Such remarks have signalled an uncommon degree of intervention for an incoming US president into the affairs of US corporations.

Mexico's government said it regrets Ford's decision and has made sure that the company will reimburse the state for any costs associated with the investment. 

Ford spokeswoman Jennifer Flake said the automaker will save $500 million by not opening the new plant in the near term, but will have some undisclosed costs to retool the other Mexican plant to build the Focus. GM shares were up 0.5 per cent, or $0.17, to $35.00. Ford shares rose 3.3 per cent, or $0.40 a share, to $12.53.


Trump Notified

Top Ford executives personally notified Trump and Vice President-elect Mike Pence of their decision. Fields praised tax and regulatory proposals advocated by Trump and his fellow Republicans who control Congress.

"Our view is that we see a more positive US manufacturing business environment under President-elect Trump and the pro-growth policies and proposals that he's talking about, so this is a vote of confidence for President-elect Trump and some of the policies that they may be pursuing," Fields said.

Trump said during the presidential campaign that if elected he would not allow Ford to open the new plant in Mexico and would slap hefty tariffs taxes on imported Ford vehicles.

Trump during the campaign also accused Mexico of sending criminals and rapists into the United States and vowed to build a border wall to combat illegal immigration.

Since winning the November 8 election, Trump has targeted a wide range of American companies also including United Technologies Inc, Boeing Co and Lockheed Martin Corp. Trump also has touted decisions by companies to keep some production in the United States, including United`s Carrier unit in Indiana.

Trump previously vowed to hit companies that shift production from America to other countries with a 35 per cent tax on their exports into the United States. He also has denounced the North American Free Trade Agreement between the United States, Mexico and Canada.

Fields said there were no negotiations between Ford and the incoming president over the decision to cancel the Mexico plant or invest in Michigan.

Ford will build a battery electric SUV with a 300-mile (482-kilometre) driving range at the Michigan plant by 2020, and will launch production there by 2021 of a fully autonomous vehicle without a steering wheel or a brake pedal for use in ride services fleets. Ford also plans new hybrid versions of its F-150 pickup truck, Mustang and police vehicles by 2020.

GM said it sold about 190,000 Cruze cars in the United States in 2016. All of the sedan versions sold in the United States, or about 185,500, were built at its plant in Lordstown, Ohio. About 4,500 hatchback versions of the Cruze were assembled in Mexico and sold in the United States.

Union workers gathered at the Flat Rock factory cheered Fields as he announced the new jobs. Hiring of the 700 new workers there will probably start in 2018 and the majority of it in 2020, Fields said.