Ford cancels Mexico plant as Trump threatens GM with 'big border tax'

Ford cancels new $1.6B MX plant; plans to invest $700M in Flat Rock, Michigan insteadDETROIT, MICHIGAN - (January 3, 2017) - Today, Tuesday, President-elect Donald Trump threatened to impose a "big border tax" on General Motors Co. (GM) for manufacturing some of its Chevrolet Cruze cars in Mexico, which the US Automotive OEM defended as part of a strategy to serve global customers, not sell them in the US.
“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 posted on Twitter.
GM said it manufacturers all of its Chevrolet Cruze sedan in the US and that those sold in the United States are manufactured in its Lordstown, Ohio plant. “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 posted on its website without giving numbers. Shares of GM rose 1% to $35.19 after falling about 1% following President-elect’s tweet before the market opened.
Later Tuesday morning, Ford Motor Co. said it will cancel a planned $1.6-billion factory in Mexico and will invest $700-million at a Michigan factory as it expands its electric vehicle and hybrid offerings.
The U.S. automotive giant said it will add 700 direct new jobs in Flat Rock, Michigan to produce high-tech electrified and autonomous vehicles, plus the Ford Mustang and Lincoln Continental.
Ford had originally planned to build its Ford Focus at a plant in San Luis Potosi, Mexico. The company said it will continue to build its Focus at an existing plant in Hermosillo, Mexico, to improve company profitability.
Last month, Trump announced the formation of a council to advise him on job creation, a group comprised of leaders from a variety of major U.S. corporations including GM Chief Executive Officer Mary Barra.
GM said in 2015 it would build its next-generation Chevrolet Cruze compact in Mexico as automotive OEMs look to expand in Mexico to take advantage of low labor costs and free trade agreements. GM said in 2015 it would invest $350-million to produce the Cruze at its plant in Coahuila, MX as part of the $5-billion investment in its Mexican plants announced in 2014.
GM said earlier this year it would import some Cruze cars from Mexico.
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 US. 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 3" auto OEMs 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.
In November, GM said it planned in early 2017 to lay off 2,000 employees at two U.S. auto plants, including the one in Lordstown. U.S. small car sales have been hurt by lagging consumer demand and low gas prices. GM’s U.S. Cruze sales are down 18 per cent through November.
Representatives for the United Auto Workers (UAW) union could not be reached immediately for a response to Trump’s tweet.
Trump’s comments are the latest in a string of Tweets he has posted targeting companies over jobs, imports and costs before he takes office on January 20, including United Technologies Corp’s Carrier unit and U.S. defense companies.
President-elect Donald Trump campaigned with promises to protect American workers and called out several companies by name, including GM rival Ford Motor Co.