Ford Motor Co. plans to build a $1.6-billion auto assembly plant in Mexico, creating about 2,800 jobs there and shifting small-car production away from the United States at a time when moving jobs south of the border has become a major issue in the U.S. presidential campaign.
The company announced that it would open the plant in San Luis Potosi state Tuesday without saying specifically what cars it would build there.
But the United Auto Workers union has said Ford plans to shift production of the Focus compact and C-Max small gas-electric hybrid from suburban Detroit to Mexico, where the cars can be made at lower cost and more profitably.
The UAW's new four-year contract with Ford, signed last year, guarantees new vehicles for the Wayne, Mich., assembly plant in 2018 and 2020 and a $700-million investment that preserves the plant's 3,924 jobs. Union members have said they expect the factory to get a new version of the Ranger small pickup and a new small SUV called the Bronco.
Ford announced the Mexican plant the day of the key Wisconsin primary. Republican front-runner Donald Trump has railed about corporate America moving jobs to Mexico to take advantage of what he calls a lopsided trade agreement. He has vowed to rewrite the 1994 North American Free Trade Agreement, tax imports and punish U.S. companies, including Ford.
The U.S. has long been an open economy, and specific trade deals such as NAFTA have not had a major effect on jobs, economists say. The huge wage gap between the U.S. and developing countries and the increasing use of machines to replace workers have had a far bigger effect.
The automaker has responded to Trump by highlighting its investments in the U.S. At the New York International Auto Show in March, Ford Chief Executive Mark Fields said the company spends more than 80% of its capital in the U.S. and has committed to spending an additional $8 billion to $9 billion in the next four years.
"Since 2011 we've invested over $10 billion in our facilities. We've hired over 25,000 people" in the U.S., Fields said.
Auto and other manufacturing jobs having been moving south for years. Mexican auto production more than doubled in the past decade, and the consulting firm IHS Automotive expects it to rise an additional 50% to just under 5 million vehicles by 2022. U.S. production is expected to increase only 3%, to 12.2 million vehicles, in the next seven years.
Joe Hinrichs, Ford's president of the Americas, said the company is a global automotive company that builds cars where it makes the most financial sense. He confirmed that new plant would build small cars starting in 2018. "We've talked about improving our small-car profitability and this is an important part of that," he said.
Under the new UAW contract, Ford factory workers earn about $60 an hour in wages and benefits, while auto workers in Mexico average about $8 an hour, according to the Center for Automotive Research, a Michigan industry think tank.
Trump began criticizing Ford last summer after the company said it planned to invest $2.5 billion in engine and transmission plants in Mexico. Hinrichs said the timing of Tuesday's announcement had nothing to do with the presidential race, but instead with the timing of construction of the new plant, due to start this summer.
Most of the cars built at Ford's new Mexican plant would be sold in North America, with the bulk being exported to the U.S., the region's largest market.