Ford cancels $1.6 billion Mexican plant after Trump criticism

Ford Motor Co said Tuesday it will cancel a planned $1.6 billion factory in Mexico and will invest $700 million at a Michigan factory, after it had come under harsh criticism from President-elect Donald Trump for its Mexican investment plans.

The second largest U.S. automaker said it would build new electric, hybrid and autonomous vehicles at the Michigan plant.

Ford Chief Executive Mark Fields on Tuesday said the decision to cancel the new plant in Mexico was in part 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 used the occasion to endorse "pro growth" tax and regulatory policies advocated by Trump and the Republican led Congress.

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

A Ford source said the Trump team was told this morning about the decision. It was influenced by Trump's policy goals such as lowering taxes and regulations but there were no negotiations between Ford and the Republican over the decision to cancel the Mexico plant or invest in Michigan, the source said.

Also on Tuesday, Trump threatened to impose a "big border tax" on General Motors Co for making some of its Chevrolet Cruze cars in Mexico, an arrangement the largest U.S. automaker defended as part of its strategy to serve global customers, not sell them in the United States.

"General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A. or pay big border tax!" Trump said in a post on Twitter.

GM, the world's No. 3 automaker, said it sold about 190,000 Cruze cars in the United States in 2016. All of the sedan versions sold in the United States, or about 185,500, were built at its plant in Lordstown, Ohio. About 4,500 hatchback versions of the Cruze were assembled in Mexico and sold in the United States.

"GM builds the Chevrolet Cruze hatchback for global markets in Mexico, with a small number sold in the U.S." it said in a statement posed on its website.

According to Automotive News, GM began producing the Cruze in Mexico last year, making 52,631 cars there. In comparison, it built 319,536 of them in the United States. Previous versions of the Cruze sold in Mexico were made in a GM South Korea plant, it reported.

The shift is part of a larger trend among Detroit's Big Three automakers to produce more small cars for the North American market in Mexico in an effort to lower labor costs, while using higher-paid U.S. workers to build more profitable trucks, sport utility vehicles and luxury cars.

Since winning the Nov. 8 presidential election, Trump has targeted GM, Ford, United Technologies Inc, Boeing Co and Lockheed Martin Corp. Trump also has touted decisions by companies to keep some production in the United States, including United's Carrier unit in Indiana.

Last month, Trump announced the formation of a council to advise him on job creation comprised of leaders from a variety of major U.S. corporations including GM Chief Executive Officer Mary Barra.

His latest comments come as a congressional Republican tax proposal meant to boost U.S. manufacturing faces mounting pressure from industries that rely heavily on imported goods or parts.

Last month, 81 industry groups including several automaker groups rejected the proposal, known as "border adjustability." The policy would help manufacturers by exempting export revenues from corporate taxes. But it would tax imports, hitting import-dependent industries.

Ford's CEO said the company plans to build a battery electric SUV with a 300-mile driving range at the Flat Rock, Michigan plant by 2020, 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 will add 700 jobs at the Flat Rock plant, Fields said, to cheers from union workers gathered at the factory for the announcement.

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

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