Ford Factory Isn’t Going to Mexico
Donald Trump took a victory lap on Twitter this week, saying that his pressure on Ford Motor Company (NYSE:F) led to the carmaker keeping its production in the United States.
The President-elect had taken several shots at Ford while on the campaign trail, suggesting that he would tax the company extra if it moved U.S. jobs out of the country. His criticisms began in April when Ford announced a plan to invest $2.5 billion in Mexico.
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Ford confirmed the shift in September, saying that 3,800 net jobs would be added in Mexico and that none would be lost in the United States. Trump eviscerated the company for the outsourcing, arguing that it was the perfect example of what is wrong with corporate America.
Trump warned Ford that his administration would exact a toll for every Ford car imported into the U.S., and now Trump claims that those warnings are showing results. (Source: “Ford tells Trump no Lincoln SUV production going to Mexico,” Reuters, November 18, 2016.)
“Just got a call from my friend Bill Ford, Chairman of Ford, who advised me that he will be keeping the Lincoln plant in Kentucky – no Mexico,” Trump wrote on Twitter.
Despite assurances that Ford would keep its Lincoln plant in Kentucky, and that no jobs would be lost in the transition, the company will still be moving small-car production to Mexico.
That detail was conspicuously absent from Trump’s statement, but Ford also seemed eager to avoid talking about it because there are tricky nuances involved. For instance, the company is going to manufacture the “Ford Focus” in Mexico, but that doesn’t mean the Detroit plant will be closed.
“We’re going forward with our plan to move production of the Ford Focus to Mexico, and importantly that’s to make room for two very important products we’ll be putting back into Michigan plants,” CEO Mark Fields said in an interview on the sidelines of the Los Angeles Auto Show. “There will be no job impact whatsoever with this move.” (Source: “Ford going ahead with moving small car production to Mexico: CEO,” Reuters, November 15, 2016.)
In fact, Ford argues that the company can raise wages and investment in the U.S. by shifting some production lines overseas. Ford will convert the current small-car plant in Detroit into a factory for light trucks and SUVs, both of which draw higher margins than the Ford Focus.
As a result, Ford expects a higher return on its investment from those factories and could, in time, offer higher wages to its U.S. workers.
