Ford cancels $1.6 billion Mexico plant after Trump criticism

Ford CEO Mark Fields made his comments on CNBC's "Fast Money Halftime Report" after the company canceled its plans for a $1.6 billion plant in Mexico.

Ford cancels $1.6 billion Mexico plant amid Trump criticism

Ford Motor said Tuesday it will cancel a planned $1.6 billion factory in Mexico and invest $700 million at a Michigan factory after President-elect Donald Trump had harshly criticized the Mexico investment plan.
The second-largest U.S. automaker said it would build new electric, hybrid and autonomous vehicles at the Flat Rock, Michigan plant and add 700 jobs.

Ford Chief Executive Mark Fields said the decision to cancel the new Mexico factory was the result of sagging demand for small cars in North America and not because Trump was elected president. He told Fox Business that the automaker would have made the same decision even if Trump had not been elected.

"There was no quid pro quo because there was no negotiation" with Trump over the decision to cancel the plant, Fields said.

Fields told reporters the decision related to the need to "fully utilize capacity at existing facilities" amid declining sales of small and medium sized cars such as the Focus and Fusion.

Fields also endorsed "pro-growth" tax and regulatory policies advocated by Trump and the Republican-led Congress. "This is a vote of confidence for President-Elect Trump and some of the policies he may be pursuing," Fields said.

Trump repeatedly said during the election campaign that if elected he would not allow Ford to open the new plant in Mexico, which he called an "absolute disgrace" and would slap hefty tariffs taxes on imported Ford vehicles.

Ford executive chairman Bill Ford Jr. told reporters he spoke with Trump to notify him of the decision. The company said the decision was influenced by Trump's policy goals such as lowering taxes and regulations but that there were no negotiations over the decision announced on Tuesday.

By contrast, Trump's team held talks with United Technologies Corp in November before the company agreed to keep about 800 jobs at its Carrier air conditioning unit in Indiana out of 2,100 set to go to Mexico. Trump has also held high profile meetings with the chief executives of Boeing and Lockheed Martin to talk about the cost of military contracts.

Also on Tuesday, Trump threatened to impose a "big border tax" on General Motors for making some of its Chevrolet Cruze cars in Mexico.

The New York businessman, who has vowed to bring back American jobs that have been outsourced overseas and be tough on illegal immigration from Mexico, takes office on Jan. 20.

Fields said Ford will build a battery electric SUV with a 300-mile driving range at the Michigan plant by 2020 -- taking on companies like Tesla Motors Inc, Volkswagen AG and GM -- 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 as the auto industry faces rising fuel efficiency mandates.

Ford will add 700 jobs at the Flat Rock plant, Fields said, to cheers from union workers gathered at the factory for the announcement.

TRUMP PREDICTION

Ford in April announced it would invest $1.6 billion in the new plant in San Luis Potosi, Mexico to build small cars. The company said it will shift production from Michigan of its Focus to an existing plant in Hermosillo, Mexico.

When Trump announced his campaign in June, 2015, he said Ford would cancel its planned Mexico investments. "They'll say,'Mr. President we've decided to move the plant back to the United States - we're not going to build it in Mexico.' That's it. They have no choice," Trump said.

Trump tweeted a link on Tuesday to a story about the decision.

Ford shares rose 3.3 percent to $12.54, up $0.41 a share, while the Mexican peso fell on Tuesday to touch its weakest level in seven weeks.

Ford said it will add two new unnamed products at its Michigan Assembly Plant in Wayne, Michigan, where the Focus is manufactured today.

Ford CEO: Main reason for canceling Mexico plant was market demand, not Trump

CEO Mark Fields told CNBC on Tuesday that President-elect Donald Trump wasn't the main factor when Ford (F) decided to cancel its plans for a $1.6 billion plant in Mexico.

In an interview on CNBC's " Halftime Report ," Fields said the decision not move forward with its San Luis Potosi, Mexico, plant was due to market demand.

"The bottom line is we're not seeing the volume and the demand that we expected for that plant. And, therefore, we're looking at our capacity and saying, 'You know what, we can build that in an existing facility and use capacity that we already have,'" he said.

"Over the last couple of years we've seen small cars markedly decline. Every year we're looking at our capacity. We're looking at our forecast for demand. It became very clear that we didn't need this plant."

On Tuesday, Ford announced it will instead invest $700 million in its Flat Rock, Michigan, plant and add 700 direct new jobs. The company said it will continue to build its Ford Focus at an existing plant in Hermosillo, Mexico, to improve company profitability.

Trump has previously slammed the company for plans to move all small-car production to Mexico, and claimed that he helped stop Ford from shifting an entire factory from Kentucky to Mexico . Ford has repeatedly said it has no plans to close any U.S. plants.

Fields said the company informed Trump and Vice President-elect Mike Pence about its decision. He said they were "very happy" about the new investments in the U.S.

"And we mentioned also at the same time this is what we do as a business," he said. "Listen, we're a global multinational. Our home is here in the U.S. It's really important for us to be strong and vibrant here in our home, and build on the investment in job creation we've been able to produce over the last five years."

Fields also pointed out that the company could do well with a more positive U.S. manufacturing business environment under Trump. "We see the pro-growth policies that he's proposing. So, this is a vote of confidence in what we think the president-elect is going to pursue and it's right for our business," he said.

Ford Cancels Plans for New $1.6 Billion Mexico Plant

Ford Motor Co. will scrap plans to build a $1.6 billion plant in Mexico, after coming under criticism by President-elect Donald Trump for shifting small-car production south of the border.

The next-generation Focus compact car will be built at an existing factory in Hermosillo, Mexico, and Ford will cancel plans to build a plant in San Luis Potosi, Chief Executive Officer Mark Fields said Tuesday. The second-largest U.S. automaker will build two products at a factory in Wayne, Michigan, where it assembles the Focus now, protecting about 3,500 jobs.

“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, Michigan, where the company is investing $700 million and adding 700 jobs. “This is a vote of confidence around that.”

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.

Mexico Message

The automaker would have made the same decision even without Trump’s involvement, Fields told Bloomberg Television today. U.S. buyers are simply not as interested in the small cars that are being built in Mexico, while electric vehicles and hybrids have the potential for growth, he said.

“It is the wrong time to build new plants in Mexico,” Erik Gordon, a professor at the University of Michigan’s Ross School of Business, said in an e-mail. Ford will save money, “American jobs, and will avoid the risk of a border tax and a smack in the face from the new president.”

Ford said it will add production by 2020 of 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 at the Flat Rock factory. The plant will also build a hybrid version of the Mustang sports car in 2020.

Shares of Ford rose 3.3 percent to $12.36 at 12:21 p.m. in New York, while the Mexican peso dropped 0.9 percent against the dollar.

The second largest U.S. automaker already builds the Mustang and Lincoln Continental models from its Flat Rock plant, which employs more than 3,700 workers. Until February of last year, Ford also built the Fusion family sedan in Flat Rock. After sales for the model slumped, the automaker consolidated production of Fusion at its primary plant in Hermosillo. Fusion sales fell more than 10 percent last year through November.

Trump Target

Ford was a target of President-elect Trump during his campaign for plans to move small car production from the U.S. to Mexico. The Dearborn, Michigan-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, Kentucky, factory where it also produces the Ford Escape SUV.
Earlier today, Trump threatened to punish General Motors Co. for building a version of its fading compact car in Mexico, rekindling a months-old feud with the auto industry and earning a terse response from the company challenging his assertions.

Trump said in a Twitter post that the largest U.S. automaker, which manufactures a Chevrolet Cruze hatchback model in San Luis Potosi, should build the car at home or face a hefty tariff. However, GM has sold only 4,900 such hatchbacks north of the border, said spokesman Tony Cervone. The almost 200,000 Cruze sedans that Americans have bought were all built in a plant in Lordstown, Ohio.