Ford to invest $1.6 billion for new plant in Mexico

Ford sparked outrage from the UAW and Republican front-runner Donald Trump on Tuesday, uniting two unlikely foes, after the automaker said it would invest $1.6 billion to build a new plant in Mexico and create 2,800 jobs.

The Dearborn automaker has been among Trump's targets for months because of the widely expected investment south of the border. The UAW, which reached a new four-year contract with the automaker last November, also has long been critical of automakers increasingly building new plants in Mexico.

The union and Trump said Tuesday that America's trade deals lead to job losses.

"These ridiculous, job-crushing transactions will not happen when I am president," Trump said in a statement issued by his campaign. "NAFTA has incentivized plants to move to Mexico, closing factories across the United States. When I am president, we will strongly enforce trade rules against unfair foreign subsidies, and impose countervailing duties to prevent egregious instances of outsourcing."

Trump has previously said if elected president he would threaten the company and any other automaker with a 35% tariff on products or parts imported into the U.S. Critics point out the president has no such unilateral power and say such a move, even if authorized by Congress, could touch off a trade war.

Ford has found itself in the cross-hairs of criticism over investing in Mexico, even though almost every other global automaker has also announced plans to expand or build new plants in Mexico in recent years.

Ford said construction of the new plant in the north-central Mexican state of San Luis Potosí will begin this summer. It expects to begin producing cars there in 2018. Ford's investment will create more than 2,800 jobs by 2020, delivering a blow to the UAW, which pushed for higher wages in its contract talks with the automaker last year.

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"Today’s announcement ... is a disappointment and very troubling," UAW President Dennis Williams said in a news release. "For every investment in Mexico it means jobs that could have and should have been available right here in the USA."

Ford said it remains committed to investing in the U.S. and adding jobs in America even as it expands its presence in Mexico.

"We have to make decisions on a global scale because we compete globally," said Joe Hinrichs, executive vice president and president, The Americas. "But let's be clear: We are a proud American company and the majority of our investment happens here in the U.S."

Hinrichs said Ford has hired 25,000 workers in the U.S. in the past five years and produces more cars in America than any other automaker.

He also said the investment in Mexico will not result in a loss of jobs in the U.S. Mexico is Ford’s fourth-largest vehicle manufacturing site for global customers — behind the U.S., China and Germany.

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In fact, Hinrichs said Ford made a commitment in November to invest $9 billion in U.S. plants and creates or retains more than 8,500 jobs as part of a new four-year contract with the UAW. Of that, $4.8 billion goes to 11 facilities in Michigan.

Despite that commitment, Ford made it clear last summer that it planned to move production of its Ford Focus and C-Max hybrids cars from a plant in Wayne,  to another country by 2018. Ford has said it will replace those cars with other products but has not said which vehicles. Analysts have said the plant will most likely get the midsize Ford Ranger pickup and a new Ford Bronco SUV.

Hinrichs declined to say today which products Ford plans to make at its new plant in Mexico, but he did say the company intends to make the Focus in a "lower-cost" country.

"When we look at our manufacturing footprint, especially with small cars, we have not made it a secret that we want to improve the profitability of small cars," Hinrichs said.

Jobs, plant investment cornerstone of Ford-UAW contract

Last fall, the UAW pushed Ford as well as General Motors and Fiat Chrysler Automobiles to largely eliminate a two-tier wage scale. Under the new contract, entry-level workers hired after 2007 who are making between $15.78 and $19.28 per hour will see their wages raised immediately to $17 to $22.50 and then up to about $29 per hour over an eight-year period.

​The automaker also said last year that it plans to spend $2.5 billion on new engine and transmission plants in the states of Chihuahua and Guanajuato in central Mexico, creating 3,800 jobs.

But Ford is hardly alone. In recent years, automakers that include General Motors, Honda, Hyundai, Nissan, Mazda, Toyota and Volkswagen have all announced plans to either expand existing plants or build new ones in Mexico. Fiat Chrysler Automobiles also has said it is considering an expansion of its production there.

Mexico has seen a 40% increase in auto jobs since 2008 to 675,000 last year while the U.S. saw only a 15% increase in the same period to more than 900,000, according to the Center for Automotive Research in Ann Arbor.

Why Mexico is winning the auto jobs war

In 2014, automakers announced $18.25 billion in additional investments in North America. The breakdown: almost $10.5 billion for the U.S., $7 billion in new projects for Mexico, and a single $750-million project for Canada, according to the Center for Automotive Research. That investment is on top of the 18 plants already in Mexico, and at least five more planned or under construction.

By 2020, Mexico is expected to build one in four vehicles in a North American industry producing 8.6 million units a year.

Union leaders often say automotive jobs are going to Mexico because of the North American Free Trade Agreement that was signed into law in 1993 by U.S. President Bill Clinton, but that is just one among several factors.

"This is another example of what’s wrong with NAFTA and why the Trans Pacific Partnership would be a disaster for the citizens of the United States," the UAW's Williams said Tuesday, referring to a trade agreement that the U.S. might join involving major countries in Asia. "Companies continue to run to low-wage countries and import back into the United States."

In addition to NAFTA, Mexico has 10 other free trade agreements covering 43 countries, according to ProMexico, an economic development arm of the Mexican government. Automotive executives also say Mexico's ports and rail systems make it easy to export cars out of the country.

Mexico's wages are also far lower than U.S. wages. The average Mexican worker assembling vehicles or making parts earns $7.79 per hour including benefits, according to the Center for Automotive Research. That's substantially less than $37.38 in the U.S. and $39.04 in Canada.

"When you talk about small car profitability, all of these factors matter," Hinrichs said.

Contact Brent Snavely: 313-222-6512 or bsnavely@freepress.com. Follow him on Twitter @BrentSnavely.