Ford is among at least a half-dozen automakers that have either expanded production or built new plants in Mexico in recent years.
Ford said today it will invest $1.6 billion to build a new plant in San Luis Potosí, Mexico, that will be manufacturing small cars by 2018, making it the latest automaker to expand its presence there.
Ford said construction of the new plant will begin this summer. It expects to begin producing cars there in 2018. Ford’s investment in Mexico 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, and prompted a swift reaction from the union.
“Today’s announcement…is a disappointment and very troubling,” UAW President Dennis Williams said in a statement. “For every investment in Mexico it means jobs that could have and should have been available right here in the USA.”
Ford’s investment also comes amid a presidential election where the the leading Republican candidate, Donald Trump, has publicly pressured Ford to drop its plans to expand in Mexico.
Ford said today 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,” Joe Hinrichs, Ford’s vice president and president of the America’s, told the Free Press. “But lets 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.
Last month Trump said he would stop Ford from building in Mexico if he is elected president said he would threaten the company and any other automaker who does so with a 35% tariff on any products or parts imported into the U.S.
“Within 24 to 48 hours I will get a call from the head of Ford and he will say, ‘Mr. President, we have decided we’re going to build our new plant in the United States.’ … That’s 100% sure,” Trump said in March when he spoke in Warren. “They’re going to say, ‘We’re moving back. You want us to move to Michigan?’ And I’ll say, ‘Yeah.'”
Since then Ford CEO Mark Fields has repeatedly said the automaker remains committed to investing in the U.S. but will not alter its plans to also expand in Mexico.
Today, Hinrichs said the investment in Mexico will not result in a loss of jobs in the U.S.
In fact, Hinrichs said said Ford made a commitment in November to invest $9 billion in U.S. plants and creates or retain 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, Michigan to another country by 2018. Ford has said it will replace those cars with other products but has not said what those vehicles will be. Analysts have said the plant will most likely get the mid-size Ford Ranger pickup and a new Ford Bronco SUV.
Hinrichs declined to say today what products Ford the automaker plans to make at its new plant in Mexico but 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.
Last fall, the UAW’s pushed Ford as well as General Motors and Fiat Chrysler Automobiles to largely eliminate a two-tier wage scale. Under the new contact 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 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, and Volkswagen have all announced plans to either expand existing plants or build new plants 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.
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 of 18.6 million units.
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 TPP would be a disaster for the citizens of the United States,” the UAW’s Williams said Tuesday. “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.