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Ford, Fiat Chrysler

Ford Will Pay Suppliers After Canceling Mexico Plant

Jan. 12, 2017
“It’s not an easy decision to cancel a plant that you’ve already started. We don’t take it lightly. It was a big decision to build the plant in the first place and it was a big decision to cancel it.”

Ford Motor Co. is working on a plan to compensate parts makers that were preparing to supply the plant the company canceled last week, and will return the land to the government of Mexico, according to an executive.

The foundation was poured and some steel beams were going up at the site of the small-car factory that President-elect Donald Trump criticized on the campaign trail, Joe Hinrichs, Ford’s president of the Americas, told reporters Wednesday. The company will eventually disclose the construction cost of the aborted project, he said.

“It’s not an easy decision to cancel a plant that you’ve already started,” Hinrichs said after a speech at Automotive News World Congress in Detroit. “We don’t take it lightly. It was a big decision to build the plant in the first place and it was a big decision to cancel it.”

Ford told Mexico’s government of its intent to scrap the $1.6 billion small-car factory on the morning of Jan. 3, just before making the decision public. The Dearborn, Michigan-based company now plans to build Focus compacts at its existing plant in Hermosillo, Mexico. Executives made the decision when they saw the latest sales projections for the car were lower than anticipated, Hinrichs said. “We stayed true to our commitment to the Focus program to make it in Mexico.”

Ford has been attempting to make peace with Trump after the president-elect criticized the company during rallies and debates that preceded the November election. The second-largest U.S. automaker said when it canceled the factory last week that it will add 700 jobs to a plant in Flat Rock, Michigan. Trump tweeted his praise and turned his ire toward General Motors Co. and Toyota Motor Corp. for building cars south of the border.

“Ford just announced that they stopped plans for a $1 billion plant in Mexico and they’re going to be moving into Michigan and expanding, very substantially, an existing plant,” Trump said Wednesday during his first press conference since the election. “I appreciate that from Ford. I hope that General Motors will be following, and I think they will be.”

GM spokesman Tony Cervone declined to discuss the company’s manufacturing investment plans. “We look forward to engaging the new administration in conversation,” he said.

Ford has said it’s saving $500 million by moving Focus production to its existing Mexican plant from the now-abandoned site in San Luis Potosi.

The cost to compensate suppliers won’t be “too dramatic,” Hinrichs said. “There’s a lot of manufacturing in that area in central Mexico, so most suppliers are already there anyway. We don’t anticipate any issues, but we’re obviously working with the supply base on that.”

The chief executive officer of Linamar Corp., Canada’s second-largest parts maker, said Wednesday that a border tax that Trump has endorsed would make vehicles more expensive for consumers.

“We are going to add all this cost and inefficiency to our system or cut access to technology, great technology, in these three countries? How does that make sense?” CEO Linda Hasenfratz said in a Bloomberg Television interview from Detroit.

Ford had erected a steel skeleton at the Mexico site for the paint shop structure, Hinrichs said. He declined to say, for now, how much Ford had spent on construction that began last spring. “We’re not giving out that number,” Hinrichs said. “We’ll have more to say about that.”

By Keith Naughton, with assistance from Amanda Lang and Robert Tuttle.

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Licensed content from Bloomberg, copyright 2016.

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