President-elect Donald Trump has it his way once again. The Michigan-based Ford Motor (NYSE:F) has announced they will not be opening a new car factory in Mexico after all, and will instead be making more vehicles in the United States, thus creating jobs in the country.
The carmaker was scheduled to invest $1.6 billion in a new facility in Mexico to make the C-Max and Focus vehicles. The CEO of Ford Mark Fields had said they are “going forward” with the Mexico plans in spite of threats from Trump that he would impose a 35 percent tariff on cars shipped back into the United States. He had also given an assurance that no US jobs will be lost because of this decision. Trump has earlier tweeted saying, “Make in U.S.A. or pay big border tax”.
Mark even warned Trump that such a stiff tariff won’t be just bad for the car industry, but would negatively affect the entire US economy.
Trump had also criticized the decision of General Motors (NYSE:GM) to make the Chevy Cruze cars in Mexico. General Motors replied by saying their cars are made in the US. Only the hatchback models are manufactured in Mexico, and these vehicles account for a very small percentage of sales.
The Reversal of Ford Motor
So this is a stunning reversal from Ford. On Tuesday, they disclosed Ford will now invest $700 million to expand their plant at Flat Rock in Michigan, and this would create 700 more jobs for Americans. At the Flat Rock plant, Ford Motor will be making electric and hybrid vehicles.
Mark Fields now says Ford’s decision change was because the demand for small cars is falling. It’s also a “vote of confidence” in the policies of Donald Trump. He says the decision was influenced by “more favorable US business environment that we see under President-elect Trump and some of the pro-growth policies that he’s been talking about”. Mark was confident that Trump would be able to deliver on the promises made.
Ford Will Pay Compensation to Mexico for Any Losses
The economy minister of Mexico regretted the decision of Ford (NYSE:F) not to go ahead with their proposed plant at San Luis Potosi. The minister said they had Ford’s assurance, but now the business is going back on that. Ford has agreed to pay the costs incurred because of the cancellation.
The Ford stock was up after the announcement. It went up by 3.79 percent.