Ford Motor Company (NYSE:F) has made an announcement that the company is moving all North American production of small cars from U.S. to Mexico. Ford’s CEO Mark Fields said in a meeting in Dearborn, Michigan, “Over the next two to three years, we will have migrated all of our small car production to Mexico and out of the United States.” Americans prefer larger vehicles for their personal use, especially pickup trucks, SUVs, and crossover vehicles. Those vehicles carry much higher profit margins than for small vehicles.
Mexico allows automakers to reduce their costs with average auto worker wages set at fraction of their U.S. counterparts. According to the Center for Automotive Research, Mexico has seen a 40 percent increase in auto jobs since 2008 while the U.S. saw only a 15 percent increase in the same period.
Fiat Chrysler Automobiles also said earlier this year it will end production of all cars in the U.S. by the end of this year. General Motors, Honda, Hyundai, Nissan, Mazda, Toyota and Volkswagen have all announced plans to either expand existing plants or build new ones in Mexico in recent years. Fiat Chrysler also has said it is considering an expansion of its production in Mexico.
The move will undoubtedly serve as presidential debate fodder. The development drew fresh criticism from Republican presidential nominee Donald Trump. Trump was campaigning in Flint, Michigan, which has been hard hit by the loss of auto worker jobs. Trump said, “We shouldn’t allow it to happen. They’ll make their cars, they’ll employ thousands of people, not from this country and they’ll sell their car across the border.” He continued, “When we send our jobs out of Michigan, we’re also sending our tax base.”
In April, Trump called Ford’s plans to move production to Mexico as an “absolute disgrace.” That month, a new $1.6 billion Mexican assembly plant was announced, and Ford indicated it would create 2,800 Mexican jobs. The automaker has made record pretax profit over the past 18 months, being on pace to bring in $10.2 billion in 2016.
Ford has said it continues to invest heavily in its U.S. plants and isn’t cutting jobs here. Last fall, the committed to investing $9 billion in its U.S. plants, with roughly half of that amount going to 11 facilities in Michigan. A new four-year contract with the United Auto Workers union created or retained more than 8,500 jobs.
The union has indicated the shift to Mexico is not likely to have a meaningful impact on U.S. employment. However, UAW President Dennis Williams has repeatedly criticized Ford and other automakers for investing so much money in Mexico. In a previous statement, he said, “For every investment in Mexico, it means jobs that could have and should have been available right here in the USA.”