President-elect Donald Trump on Tuesday notched the biggest victory of his campaign to get automakers to keep jobs in the U.S. when Ford Motor Co. canceled a $1.6 billion Mexican expansion, saying it would add positions in Michigan instead.
The company’s announcement culminated a dizzying morning that started with Trump threatening to punish General Motors Co. for building a version of its fading compact car in Mexico. GM challenged his assertions, but minutes later Ford -- a frequent target of Trump’s campaign-trail criticism -- struck a different note.
Trump was “very pleased we were making this investment in U.S. jobs,” Mark Fields, Ford’s chief executive officer, told reporters at the automaker’s plant in Flat Rock, Michigan, where it will add 700 positions. “One of the factors we’re looking at is the more positive U.S. business environment that we foresee under President-elect Trump and the pro-growth policies that he’s been outlining. So this is a vote of confidence around that."
Trump has pledged to revive U.S. manufacturing that has steadily migrated to countries with cheaper labor over the past couple decades. His persistent interventionist campaign has targeted companies including Boeing Co., Lockheed Martin Corp. and United Technologies Corp., singling out those whose job moves or prices have rankled him. While many analysts doubt the long-term efficacy of his approach, short-term gains, like Tuesday’s, can be had.
|Ford CEO Mark Fields at the Flat Rock Assembly Plant announcement.
Photo: Ford Motors
The Ford decision reverberated on the first trading day of 2017, with its shares rising 3.5 percent to $12.57 at 3:28 p.m. in New York. The Mexican peso weakened beyond 21 to the dollar on concern that Trump is succeeding in curtailing investment in the country. In a statement, the Economy Ministry said Mexico “regrets” the automaker’s move and remains committed to the 1994 North American Free Trade Agreement.
The auto industry has been a special prize for Trump, conjuring visions of a thriving, 1950s-era Detroit where shift work created jobs that paid for mortgages, college educations and an annual vacation. His feud with the auto industry emerged during the campaign. He appeared eight times in Michigan, driving home a message that he would cancel Nafta, which he blamed for sending auto-factory jobs to Mexico. Trump was the first Republican presidential candidate to win the state since George H.W. Bush in 1988.
Companies aside from Ford may find it more advantageous to work with Trump rather than to battle his unprecedented social-media reach and willingness to get involved in individual deals.
“You’re just setting yourself up to lose,” said Joe Watkins, a Pennsylvania-based Republican consultant and former aide to the first President Bush. “He can continue to keep you front and center in the news just with a single tweet, so why do you want to engage in a fight?”
Fields said the decision to scrap the new compact-car plant in Mexico reflected shifting consumer tastes, not pressure from the president-elect. While Ford did notify Trump and Vice President-elect Mike Pence before the announcement, Fields said the same decision would’ve been made regardless of Trump’s comments.
“What we’ve seen is a marked decline in demand for small vehicles here in North America,” Fields told Bloomberg Television. “So we don’t need that capacity, and we’re going to take the Focus that was supposed to be produced there and produce it in an existing facility that we have in Mexico.”
United Auto Workers Vice President Jimmy Settles, who took the stage at Flat Rock after Fields, said he cried when he first learned of the new investment. The UAW has contended with declining membership for decades, and Settles said he had feared that any investment in electric cars might go to the U.S. West Coast. Now, temporary workers at Flat Rock have a chance to move into permanent positions.
“The UAW has long believed that companies that sell in our country should build their products in our country,” UAW President Dennis Williams said in a statement.
Mexican autoworkers earn less than $6 an hour on average, with a minimum wage of $4.50, according to the Center for Automotive Research. Their UAW peers average $28 an hour.
Still, new contracts have helped automakers keep U.S. labor costs under control, and the decision is a way to mitigate risks, said Kristin Dziczek, director of the center’s Industry, Labor & Economics Group . “Ford would not make a decision that did not make good business sense to them,” she said. “If it happens to make political sense, too, then that’s good.”
GM in Crosshairs
Earlier in the day, Trump trained his sights on GM. Trump said in a Twitter post that the largest U.S. automaker, which manufactures a Chevrolet Cruze hatchback model in San Luis Potosi, should build the car at home or face a hefty tariff.
“General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border,” Trump tweeted. “Make in U.S.A. or pay big border tax!”
That barb elicited a terse response from GM spokesman Tony Cervone challenging his assertions: "General Motors manufactures the Chevrolet Cruze sedan in Lordstown, Ohio. All Chevrolet Cruze sedans sold in the U.S. are built in GM’s assembly plant in Lordstown, Ohio. GM builds the Chevrolet Cruze hatchback for global markets in Mexico, with a small number sold in the U.S."
The automaker has sold only 4,500 hatchbacks north of the border, said another spokesman, Jim Cain. The 190,000 Cruze sedans that Americans have bought were all built in Lordstown, according to Cervone, who declined to say whether the company would engage further with Trump.
There is no tariff on cars built in Mexico and shipped over the border for sale in the U.S. Mexico’s government has courted car companies around the world by entering into 13 free-trade agreements with 44 countries that make up 60 percent of the global gross domestic product. The country has tariff-free access to 47 percent of the worldwide vehicle market, compared with 9 percent for the U.S.
Nine global carmakers, including Toyota Motor Corp. and Nissan Motor Co., have announced more than $24 billion in Mexico investments since 2010. BMW AG, Daimler AG and Volkswagen AG’s Audi each build or plan to assemble luxury vehicles, engines or heavy trucks in the country.
Toyota, which broke ground in November on a $1 billion plant in Guanajuato, has made no change in plans to build Corolla compacts there from 2019, spokeswoman Kelly Stefanich said. BMW AG’s construction of a 3 Series sedan plant in San Luis Potosí is “moving briskly along” in order to start production the same year, according to spokesman Kenn Sparks.
Nissan, which together with Daimler is investing $1 billion in a plant in Aguascalientes, said its business plans “remain unchanged,” according to spokesman Brian Brockman. The Mexican plant is scheduled to start producing cars this year.
Fields on Tuesday expressed skepticism that Trump would slap a 35 percent tariff on the Focus, which will still be built in Mexico.
“The right policies will prevail because we share the same aspirations that I think the president-elect does -- we want a very strong U.S. economy,” Fields said. “The president elect has run on many of these stances and he seems to be a man of his word.”