Ford to invest $1.6 billion in new Mexico small-car plant, create 2,800 jobs

Editor's note: A previous version of the table accompanying this report omitted Ford's Kansas City plant. It has been added.

DETROIT -- Ford Motor Co. today said it will invest $1.6 billion to build a new small-car assembly plant in Mexico, creating 2,800 jobs by 2020.

The factory will be in the state of San Luis Potosi, Ford said in a statement today. Construction will begin this summer, and production is scheduled to begin in two years.

Ford said the move will not affect jobs in the U.S., where it has hired 25,000 workers in the past five years. Still, the news reinvigorated criticism from Republican presidential candidate Donald Trump and others over Mexico’s growing role in the North American auto industry.

“We’re a proud American company,” Joe Hinrichs, Ford’s president of the Americas, told Automotive News today. “We set up our global manufacturing footprint and our facilities where we think it makes the most sense for our business.”

UAW President Dennis Williams called the news “very troubling.”

“For every investment in Mexico, it means jobs that could have and should have been available right here in the USA,” Williams said in a statement. “Companies continue to run to low-wage countries and import back into the United States. This is a broken system that needs to be fixed.”

Ford had previously said it plans to discontinue production of the Focus and C-Max compact cars at its Michigan Assembly Plant in 2018.

Hinrichs declined to identify which vehicles the plant will make or give an indication of the plant’s annual production capacity. UAW officials and analysts have said they expect Focus assembly to move to Mexico in 2018.

The move comes amid waning demand for small cars, which are generally among the least-profitable vehicle segments, as consumers buy more crossovers, SUVs and pickups instead. Ford is expected to build a midsize pickup and eventually at least one SUV at the Michigan Assembly Plant after Focus production ends there, though it has not made any official announcement.

San Luis Potosi will be the site of Ford’s first all-new North American assembly plant since 1986, when its Hermosillo, Mexico, factory opened. Ford overhauled an existing facility to create the Dearborn Truck Plant a few miles from its headquarters in 2004.

Trump, the leading Republican candidate for president, has repeatedly criticized Ford for an announcement last year of a $2.5 billion investment in engine and transmission production in Mexico. He has threatened to charge Ford a 35 percent tariff on any vehicles imported from Mexico and incorrectly claimed that the automaker is abandoning factories in the U.S. as it raises output south of the border.

Trump called Ford's plan "an absolute disgrace."

"These ridiculous, job-crushing transactions will not happen when I am president," he said in a statement.

Hinrichs said Ford’s most recent contract with the UAW calls for investments totaling $9 billion in its U.S. plants by 2019, on top of $16 billion invested in the past five years. Ford currently has more factory workers in the U.S. than any other automaker, even though General Motors sells more vehicles.

In addition to the Focus, Ford could build a competitor to the Toyota Prius hybrid at the plant starting in 2019, according to the research firm AutoForecast Solutions. The Prius fighter, which Ford may call the Model E, would be available as a traditional hybrid, a plug-in hybrid and battery-electric vehicle, said Sam Fiorani, vice president of global forecasting at AutoForecast Solutions.

“Ford is anticipating some high volumes on it,” Fiorani said.

He said the plant would have an annual production capacity of at least 300,000 or 350,000 vehicles, with the Model E accounting for up to 50,000 of that. Ford built 261,540 vehicles at Michigan Assembly in 2015, with the Focus accounting for 91 percent of that volume, according to the Automotive News Data Center.

Ford, which first became famous for selling the Model T and Model A, has had a trademark application for the “Model E” name pending with the U.S. Patent and Trademark Office since December 2013. Documents show it filed a third extension of the application in January 2016. Ford got Tesla Motors to drop an application to use “Model E” in 2014; Tesla last week introduced the vehicle it planned to call the Model E, which will instead be known as the Model 3.

The Model E would replace the C-Max, which has struggled to attract buyers since Ford admitted its original fuel-economy ratings were overstated, in Ford’s U.S. lineup.

Larry P. Vellequette and John Irwin contributed to this report.