Ford announces $1.6 billion investment in Mexico, derided by Trump

DETROIT/WASHINGTON/MEXICO CITY (Reuters) - Ford Motor Co F.N on Tuesday announced it would invest $1.6 billion to build more small cars in Mexico, starting in 2018, triggering a fresh blast of criticism from Republican front-runner Donald Trump.

A Ford logo is pictured at a store of the automaker, in Mexico City, Mexico, April 5, 2016. REUTERS/Edgard Garrido

Following the announcement, Trump labeled the move “an absolute disgrace.”

“These ridiculous, job crushing transactions will not happen when I am president,” the real estate billionaire said in a statement released by his headquarters.

Ford stood by comments on the issue made two weeks ago by its chief executive, Mark Fields, who said the company would not back down on its production strategy.

“We are a global, multinational company and we will invest to keep us competitive and we will do what makes sense for the business,” Fields said.

The automaker announced the investment in Mexico as Trump, U.S. Senator Ted Cruz of Texas and Ohio Governor John Kasich competed in a primary in Wisconsin seen as crucial in the race to become the Republican presidential candidate in the November election.

Trump, who has criticized U.S. companies for “sending jobs to Mexico,” has singled out Ford for some of his harshest remarks.

But data indicates that Ford builds fewer vehicles and employs fewer workers in Mexico than do its Detroit-based rivals, General Motors Co GM.N and Fiat Chrysler Automobiles' FCHA.MIFCAU.N Chrysler unit.

In the United States, Ford has 55,300 hourly paid plant workers, GM has 54,000 and FCA has 36,600, the companies said.

Related Coverage

GM has about 12,000 hourly paid workers in Mexico, while FCA has 9,547 and Ford has 6,191, the companies said on Tuesday.

In 2015, 80 percent of Ford’s North American production came from its U.S. plants while 63 percent of GM’s North American production came from its U.S. plants and 64 percent of FCA’s North American production came from its U.S. plants, according to IHS Automotive.

A senior Mexican official said Mexico had stepped back from a high-profile announcement on the Ford plant to avoid stoking tensions in the U.S. election debate stemming from Trump’s comments.

“Due to the (election) debate, they (Ford) don’t want to be in the spotlight,” the official said, speaking on condition of anonymity.

Citing Mexican sources, Reuters reported the Ford plans in January.

Joe Hinrichs, Ford executive vice president and head of the Americas, said on Tuesday that the automaker is investing more money in Mexico “to improve our small-car profitability.”

In Detroit, United Auto Workers President Dennis Williams described the new Ford investment in Mexico as “a disappointment and very troubling.”

U.S. Senator Sherrod Brown, an Ohio Democrat, said corporations moving jobs out of the United States only to profit by shipping products back “is why people are so upset with corporate America that outsources so often.”

Slideshow ( 3 images )

Hinrichs declined to say which products Ford plans to build at the San Luis Potosi plant, which is slated to open in 2018 and will employ 2,800 by 2020.

U.S. supplier sources have said the plant is expected to build the next-generation Ford Focus compact, as well as a Focus-based hybrid gasoline-electric model aimed at rival Toyota Motor Corp 7203.T and described as a "Prius fighter."

Ford joins a growing list of automakers investing billions in new production capacity in Mexico, where lower labor costs and favorable currency exchange mean companies have a better chance of turning a profit on low-margin small cars. And Mexico’s numerous international free trade agreements allow for more profitable exports from Mexico to many countries, said Sean McAlinden, chief economist with the Center for Automotive Research.

McAlinden said that Ford’s Mexico workers make about $8.25 per hour in wages and benefits, compared with Ford’s U.S. workers, who get $60 per hour in wages and benefits.

During contract talks last summer, Ford confirmed that it would move Focus production out of its Wayne, Michigan plant in 2018. The UAW said at the time that Ford planned to build the next Focus in Mexico.

Hinrichs on Tuesday reiterated that Ford is planning to build two new vehicles at the Wayne plant, beginning in 2018, but declined to provide details.

Reporting by Paul Lienert and Bernie Woodall in Detroit, David Shepardson in Washington and Ana Isabel Martinez in Mexico City; Editing by Jonathan Oatis