Ford is canceling plans to build a new plant in Mexico. It will invest $700 million in Michigan instead, creating 700 new U.S. jobs.
Ford CEO Mark Fields said the investment is a “vote of confidence” in the pro-business environment being created by Donald Trump. However, he stressed Ford did not do any sort of special deal with the president-elect.
“We didn’t cut a deal with Trump. We did it for our business,” Fields told CNN’s Poppy Harlow in an exclusive interview Tuesday.
The $700 million investment will go to the Flat Rock, Michigan, plant to produce more electric and self-driving cars. Ford believes electrified vehicles will outsell gas-powered vehicles within the next 15 years.
Ford is planning to roll out seven new electric vehicles in the next five years, including a Mustang Hybrid.
This is a major U-turn for Ford. Trump repeatedly slammed Ford on the campaign trail for shipping U.S. jobs to Mexico (a claim the company said was wrong). The president-elect has kept up the pressure. Just hours before the Ford announcement, Trump criticized GM for producing cars in Mexico. All of the big car manufacturers currently have some production in Mexico.
A big U-turn for Ford
Last year, Ford announced it would invest $1.6 billion in Mexico to transfer production of the Ford Focus from Michigan to Mexico to save costs. Now the Focus will be built at an existing plant in Hermosillo, Mexico, and Ford will instead expand its plant in Michigan.
Trump threatened to slap a 35-percent tariff on Ford vehicles made in Mexico and sold in the U.S., although experts say it is not possible for Trump do that to a single U.S. company.
The president-elect reiterated that threat again to GM Tuesday, tweeting, “Make in U.S.A. or pay big border tax!”
Ford’s CEO tried to walk a delicate line on how much Trump influenced this major change in the company’s plans. He praised Trump for his vows to cut taxes and scale back regulations on businesses, but stressed Ford’s decision was “done independently” of the president.
“This does make a heck of a lot of sense for business reasons. Political favor is an advantageous byproduct,” says Bernard Swiecki, senior automotive analyst at the Center for Automotive Research in Michigan.
Ford is saving money by investing only $700 million instead of the $1.6 billion it originally planned.
After record years of U.S. car sales, there are signs of a slowdown. Small cars have been especially lousy sellers lately, which is why Ford is still moving production to Mexico. U.S. car workers make an average of $28 an hour, Swiecki says. In Mexico, workers average about $5.50 an hour.
Ford workers cheer
Trump won a lot of support from union workers for his tough talk on stopping jobs from going abroad and renegotiating NAFTA. The United Auto Workers union that represents Ford workers was “thrilled” with Ford’s new plans. So were employees at the Flat Rock plant.
“It’s great news. Great for our future here, especially the new hires,” Chris Romano, a Ford factory worker in Flat Rock, told CNN.
Workers at the plant make $20 to $30 an hour, Romano said. He believes it was a “good call” by Trump to pressure companies to keep jobs in the U.S.
The Mexican government said it “regrets” Ford’s decision and stressed that jobs created in Mexico are not necessarily a loss for the U.S.
“Jobs created in Mexico have contributed to maintaining manufacturing jobs in the United States, which would otherwise have disappeared to Asian competition,” the Mexican government said in a statement Tuesday.
Trump taking credit for jobs
Ford currently employs 85,000 Americans, up 28,000, or nearly 50 percent, from five years ago. In Mexico, Ford employs 8,800.
The automaker fought back against Trump’s rhetoric on the campaign trail, saying he had his facts wrong and that the company never planned to cut any U.S. jobs. In October, Bill Ford called Trump’s criticism of the automaker founded by his great-grandfather “infuriating.” Now the company is softening its tone.
Ford stock jumped over 3 percent after the announcement.
Trump adviser Kellyanne Conway tweeted out the Ford news with just one comment: “#AmericaFirst.” Trump has been taking credit for a number of announcements companies like Carrier and Sprint have made in recent weeks to keep jobs in the U.S. or create new ones.
So far, commitments of 51,500 jobs have been made by Carrier (800 jobs), Ford (700 jobs) and SoftBank (50,000 jobs, which includes the 5,000 at Sprint), although it’s controversial how much of a role Trump played.
The U.S. has been averaging about 125,000 private sector job gains a month for the past year under President Obama.