On 3rd January 2017, Donald Trump took a major swipe at the FoMoCo plans for reinvestment of their corporate money in to Mexico.
Ford had intended to invest $1.6 billion in a new plant in Mexico, but President Trump (President elect at the time) tweeted “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!”
Within hours, Ford CEO Mark Fields announced that the Ford Motor Company wouldn’t now be spending that money in Mexico, he said it was a vote of confidence in Trump and the U.S. economy.
He also mentioned that sales for small cars (such as would have been made in Mexico) are in decline.
Ford will now be investing $700 million in their existing plant based in Flat Rock, Michigan. It’s thought that the investment will protect around 3,500 current employees and create as many as 700 new jobs.
But what does this mean for the rest of the U.S. motor manufacturers?
Or, more to the point… the consumers?
One big reason for manufacturers to move outside of the U.S. is for cost reduction. In many cases, building a facility and constructing a product (be that an automobile or microwave) in another country has cost benefits to the manufacturer, which of course means lower pricing for the end consumer.
Will Ford (or GM as POTUS called them) have to increase the base price of their models that are constructed within the U.S.? Or will they swallow some of the loss themselves?
One the one hand, trying to rouse support for the U.S. economy is a great thing, but it’s built on a system that is based on a whole different market. Society will need to change for the manufacturing changes to work.
Only time will tell whether Ford have done the right thing.
What are you thoughts? Do you think that Ford et al are right to give Trump a “vote of confidence”?