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US Trade Policy - Automotive giants capitulate in face of punitive import taxes
05 January 2017

Ford Flat Rock Plant expects 700 new jobs

Ford has said it will cancel a USD1.6bn plant it planned to build in Mexico and instead extend operations at its factory in Michigan. The US car giant will spend USD700m on expanding the plant at Flat Rock.

Ford boss Mark Fields said the decision was partly due to falling sales of small cars and partly a "vote of confidence" in Donald Trump's policies.

The President-elect has criticised both Ford and its rival General Motors over production of models in Mexico. Mr Trump earlier on Tuesday tweeted criticism of GM's production of its Chevy Cruze model in Mexico.

Vote of confidence in Trump

Ford's chief executive, Mark Fields, told the BBC that the main decision to cancel the plant in Mexico was because of a "dramatic decline for the demand for small cars here in North America," allowing the company to cope with its existing plant.

But he said another factor in the decision was the "more favourable US business environment that we see under President-elect Trump and some of the pro-growth policies that he's been talking about".

"That did play a part and it's a vote of confidence that he can deliver on these things," Mr Fields added.

Electric cars

Ford is not abandoning production completely in Mexico, but is switching production of its Focus model to its existing plant in Hermosillo there to improve profitability.

It makes the current version at its plant in Wayne in Michigan. Production at that facility will switch to two new models, which it says will safeguard 3,500 US jobs.

The planned US$1.6bn plant in Mexico was to be built in San Luis Potosi, but Ford said it would now invest some of that sum in Flat Rock, creating 700 jobs building a range of electric cars.

Mexico's economy ministry said it regretted Ford's decision, adding that it had assurances that the US car firm would pay the state of San Luis Potosi for any costs incurred from the cancellation.

GM says most Chevy Cruze models are made in the US

Earlier on Tuesday, Mr Trump criticised General Motors on Twitter for making cars built in Mexico and made available tax-free in the US.

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

However, GM said most of its Chevy Cruze cars were made in the US.

A spokesman said only the hatchback model, which forms a small percentage of sales, was made in Mexico.

He added that the car was built there for global production and said that although some Cruze sedans were made in Mexico for a while last year, all the ones now sold in the US were manufactured in Ohio.

It appears that major US manufacturing corporations are taking President-elect’s Trump change in import taxes very seriously which is aimed at reshoring jobs to the US Rust Belt States such as Michigan and Ohio as promised in his presidential election campaign.

Information courtesy of Bloomberg, BBC and CNN.