Ford is Building a New Manufacturing Plant in Mexico for Small Cars

Ford announced today that it will build a new manufacturing plant in Mexico. Construction of the new plant, located in Mexico’s San Luis Potosi State, will begin this summer and will be completed by 2018 at a cost of about $1.6 billion.

The automaker says the plant will build small cars and should result in an estimated 2,800 jobs by 2020.

While Ford hasn’t announced which models the new Mexican plant will build, the announcement coincides with previous reports citing the automaker’s plan to relocate production of its Focus and C-Max models from its Michigan Assembly Plant by 2018. Demand for those two models has slumped in the U.S. and led to Ford laying off 700 employees at the plant last April due to decreased demand.

Ford says the new plant in Mexico will boost competitiveness and profitability for its small car lineup. In an interview with Bloomberg, Joe Hinrich, Ford’s president of the Americas, said “Mexico has more competitive labor cost” and “good support from the government…But importantly also, as part of our global manufacturing footprint, Mexico is a good shipping location to many countries around the world with their trade agreements.”

United Auto Workers President Dennis Williams told Bloomberg those trade agreements, specifically the North American Free Trade Agreement, are a bad deal for U.S. workers. “Companies continue to run to low-wage countries and import back into the United States,” Williams told Bloomberg. “This is a broken system that needs to be fixed.”

Hinrich, however, claims the move was agreed upon during contract negotiations between Ford and the UAW last fall. That contract states that a “new product” will replace the Focus and C-Max at the Michigan plant and speculation suggests the new model could be the Ranger pickup truck or the rumored Bronco SUV.

Ford also points out that the U.S. is still the automaker’s largest manufacturing site while Mexico is fourth (behind China and Germany). The automaker claims bolstering foreign manufacturing is key to staying profitable and to its “One Ford” global strategy. Ford currently has two assembly plants in Mexico. Its Cuautitlan facility builds Fiesta subcompacts, while its plant in Hermosillo produces the Ford Fusion and Lincoln MKZ.

Source: Ford, Bloomberg

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