Ford: Will drop Mexican car plant; confident of Trump plans, CEO says

Mark Fields, Ford Motor Co.’s chief executive, speaking Tuesday at a factory in Flat Rock, Mich., said plans to scrap a plant in Mexico reflected “a vote of confidence” in President-elect Donald Trump’s economic policies.
Mark Fields, Ford Motor Co.’s chief executive, speaking Tuesday at a factory in Flat Rock, Mich., said plans to scrap a plant in Mexico reflected “a vote of confidence” in President-elect Donald Trump’s economic policies.

Ford Motor Co. said Tuesday that it was canceling plans to build a $1.6 billion plant in Mexico and would instead invest $700 million and add 700 jobs to increase production in Michigan.

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AP

Workers applaud Tuesday at Ford’s auto plant in Flat Rock, Mich., at the announcement that the company was scrapping plans for a $1.6 billion factory in Mexico, instead expanding in Michigan.

Ford had come under heavy criticism from Donald Trump during the presidential campaign for plans to expand production in Mexico. But at a news conference on Tuesday, Ford's chief executive, Mark Fields, said the company was optimistic that Trump and the new Republican-controlled Congress would pursue growth policies that will strengthen U.S. competitiveness in manufacturing.

"One of the factors we're looking at is the more positive U.S. business environment that we foresee under President-elect Trump and the pro-growth policies that he's been outlining," Fields told reporters at Ford's factory in Flat Rock, Mich. "This is a vote of confidence around that."

Fields added that a desire to maximize use of existing plants had prompted the decision to expand the Flat Rock factory for electric and hybrid vehicles.

The announcement brought cheers from the hundreds of workers in the audience at the news conference, held at the Flat Rock plant.

"I don't know if you can really understand the impact of this investment," said Jimmy Settles, a vice president of the United Auto Workers union, who spoke after Fields. "This is the equivalent to a new assembly plant."

Ford Executive Chairman Bill Ford called Trump this morning to inform him of the company's plans to cancel construction of the new plant in Mexico, which had begun in May. Fields said he discussed the new plan with Vice President-elect Mike Pence.

Fields said Ford planned to add to the Flat Rock plant's production by 2020 with a fully electric sport utility vehicle with at least 300 miles of range, and an autonomous hybrid vehicle for commercial ride hailing or sharing by 2021. The plant also will build a hybrid version of the Mustang sports car in 2020.

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The plant also makes the standard Ford Mustang and the Lincoln Continental.

The Mexican plant was to be in San Luis Potosi and would have produced small cars. Ford still will move production of its Focus compact to Mexico. The company said it would make that car at an existing plant in Hermosillo. The Focus is currently made in Wayne, Mich.

"We are encouraged by the pro-growth policies that President-elect Trump and the new Congress have indicated they will pursue," Fields said. "And 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."

Trump's vows to protect manufacturing jobs and his portrayal of the North American Free Trade Agreement as a job killer in the United States helped him win the support of working-class voters, including many factory workers in Michigan, Ohio and Kentucky.

Trump also slammed Ford for its plan to shift small-car production to Mexico while it would use U.S. plants to produce larger vehicles such as pickups and SUVs. Ford officials have said the change will not result in a loss of jobs at U.S. plants.

The Dearborn, Mich.-based company changed course on a plan to move production of the Lincoln MKC SUV south of the border. Fields said Trump influenced the automaker's decision to continue building the MKC in a Louisville, Ky., factory where it also produces the Ford Escape SUV.

And now, GM

Ford's unexpected news came hours after Trump turned his sights on General Motors.

In a Twitter post Tuesday morning, Trump suggested GM should pay a tax for producing certain versions of a Chevrolet compact car at a plant in Mexico.

"General Motors is sending Mexican-made model of Chevy Cruze to U.S. car dealers-tax free across border," Trump wrote. "Make in U.S.A. or pay big border tax!"

GM makes most Cruzes at a plant in Lordstown, Ohio, but last summer it disclosed plans to produce a hatchback version at a factory in Ramos Arizpe, about 100 miles south of the Texas border.

In a statement, the company said it exported most of the Cruze hatchbacks from Mexico to "global markets." GM sold about 190,000 Chevy Cruze models in the the U.S. in 2016, and only 4,500 were the Mexican model, GM spokesman Pat Morrissey said said.

"The hatchback is a very small volume vehicle," Morrissey said. "There's just not a lot of demand for it."

Cruze hatchback production amounts to less than a day of output at the Lordstown plant, said Glenn Johnson, president of a United Auto Workers union local at the factory. The union, he said, is not protesting the move to build the hatchback in Mexico.

"It makes for news, that's all," Johnson said of Trump's tweet. The Lordstown factory, he said, is not equipped to build the hatchback model.

Nearly every automaker produces small cars in Mexico to take advantage of lower labor costs. Companies have said it's difficult to make lower-margin small cars profitably in the U.S. because of higher wages here.

Last year, GM, Ford and Fiat Chrysler made about 1.6 million vehicles in Mexico, about 17 percent of the vehicles produced overall in North America, according to the Center for Automotive Research in Ann Arbor, Mich. That's projected to rise to 2.5 million, or about 26 percent, by 2022. Automakers and parts supply companies have added 12,000 U.S. jobs in the past year, according to government statistics.

The Cruze sedan manufactured in Lordstown has suffered from declining demand. In November, GM announced it would eliminate the factory's third shift, cutting 1,245 salaried and hourly workers in the process. The jobs will end this quarter. The plant currently employs about 4,500.

"We are not reducing a shift based on quality or performance," wrote Scott Brubaker, chairman of United Auto Workers Local 1714, one of the two that represent the factory, in a message to members posted on the union website. "Unfortunately, the market dictates our livelihoods, and this is a business that changes based on consumer demand. To date, small cars as well as all passenger vehicle sales are slowing due to the strong market demand for SUV's and trucks. The auto industry is a cyclical business and hopefully, the tide will eventually turn in our favor."

Under the North American Free Trade Agreement, the United States does not impose tariffs on products imported from Mexico and Canada, but renegotiating the long-standing treaty was one of Trump's key campaign promises.

House Speaker Paul Ryan, R-Wis., has put forth a plan that would fundamentally restructure the way the federal government taxes businesses both at home and abroad. That proposal would allow companies to deduct the cost of goods made in America and sold in other countries. However, businesses that import products for sale in the United States would not be able to deduct that cost.

Trump previously has said little about GM, which is investing billions of dollars to expand production in Mexico. He named GM's chief executive, Mary Barra, to an economic policy board that is supposed to advise him on the economy after he takes office.

Trump spokesman Sean Spicer said the GM tweet wasn't about just one company. "I think he generally made it very clear he wants to bring American jobs home. He doesn't want jobs to leave this country," he said.

Immediately after the tweet, which was posted around 7:35 a.m., GM shares fell about 1 percent in pre-market trading. But by early afternoon they had rebounded and were up 0.5 percent to $35.01.

The attack on GM is the latest by Trump on a big U.S. corporation. In recent weeks, he has criticized Boeing over the cost of a new Air Force One and did the same to Lockheed Martin about the cost of developing a new F-35 fighter jet.

During the campaign, he railed against air conditioner-maker Carrier and its decision to close a plant in Indianapolis and open one in Mexico. Carrier recently agreed to keep about 850 jobs in Indianapolis, although it is still moving about 1,000 to Mexico.

Information for this article was contributed by Neal E. Boudette of The New York Times; by Keith Naughton of Bloomberg News; by Ylan Q. Mui and Steven Overly of The Washington Post; by Tom Krisher, Josh Boak and Christopher S. Rugaber of The Associated Press.

A Section on 01/04/2017

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