Cisco Systems Inc. (IW 500/21) plans to spend as much as $4 billion in Mexico through 2018 to expand production, adding jobs in the country even as the American company cuts its global workforce by 7%.
The spending will lead to the creation of 270 new Cisco jobs and 77 outside positions, according to a statement from the Mexican government Tuesday. The biggest maker of equipment that runs the internet plans to upgrade its factories and increase production through contract manufacturers, a person familiar with the matter told Bloomberg News earlier. The investment figure includes some spending that had already been planned.
The plan aids Mexican President Enrique Pena Nieto as he seeks to show his economic reforms are attracting more investment. The timing could be delicate for Cisco, coming just after the U.S. presidential debate this week in which Republican candidate Donald Trump threatened to increase taxes on companies that move jobs to Mexico and other countries.
Cisco, based in San Jose, Calif., announced about 5,500 job cuts six weeks ago, without saying which countries would lose positions. Savings from the job reductions will be invested in newer businesses that Cisco expects to fuel sales growth, such as cloud computing and connected services, the company said.
Including the new hires, the spending plan will affect 4,830 Cisco employees in Mexico, the government said. The expansion enables the manufacturing in Mexico of products including routers, servers and video-conferencing screens.
The plan is one of the first major investment announcements by a U.S. company in Mexico since April, when Ford Motor Co. said it would spend $1.6 billion on a new small-car factory in Mexico, drawing a rebuke from Trump. It’s one of the top five spending announcements since Pena Nieto became president in 2012.
Ford has begun fighting back against Trump’s accusations and took to Twitter during the presidential debate to rebut the Republican candidate’s assertion the company is cutting U.S. employees to move work to Mexico. The second-largest U.S. carmaker tweeted it “has more hourly employees and produces more vehicles in the U.S. than any other automaker.” Earlier this month, Chief Executive Officer Mark Fields went on CNN to say the company is “absolutely not” cutting U.S. jobs.
In June of last year, AT&T Inc. said it would invest about $3 billion to extend mobile Internet service to Mexico in addition to spending $4.4 billion earlier in the year to acquire Iusacell and Nextel Mexico.
By Nacha Cattan and Andrea Navarro