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-   -   Trump effect: Ford cancels Mexico plant (https://www.team-bhp.com/forum/international-automotive-scene/183112-trump-effect-ford-cancels-mexico-plant.html)

Ford Motor Co. has decided to cancel its plans of building a $ 1.6 billion production plant in Mexico. Instead, the company will now be investing $ 700 million to expand the capacity of its existing factory in Michigan, USA.

This announcement comes after US President-elect - Donald Trump - constantly criticised Ford's decision to invest in Mexico. During his presidential election campaign, Trump repeatedly stressed that, if elected, he won't allow Ford to build its planned Mexico plant. He also recently indicated that the elected government will impose a hefty Border Tax on cars that are imported into the US from Mexico. In the current scenario, no tax is levied on products that are imported from Mexico to the United States thanks to a trade agreement between the two countries.

Ford officials claim that the decision has been taken due to declining demand for Ford's popular models, including the Focus and the Fusion. The automaker is thus trying to fully utilise the capacity of existing plants, before making any bigger investments on all-new facilities. Ford will be building new electric, hybrid and autonomous vehicles at its Michigan factory. The increase in capacity of the Michigan plant will also introduce 700 new jobs in the country.

General Motors, another US-based automaker, appears to be the next manufacturer on Trump's radar, as the President-elect recently 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!"

Source: ET Auto

That is typical dictatorship kind of behavior even before assuming the office. If there are cross border trade agreements between two nations, is it this simple that the new president will roll back things so quickly?

If that is so, it means no company can make mid to long term business plans and only look at short term plans for business operations.

This is insane !

In the short to medium term, I bet most companies will be in a holding pattern on future decisions.

Trump has made Carrier, and now Ford, toe his line.

Whatever sops he is offering, be it unhealthy tax breaks or the ''fear'' of his wrath, they seem to be working.

http://www.bbc.com/news/world-us-canada-38160330

http://www.reuters.com/article/us-us...-idUSKBN13Q55W

Looks like he is sticking to his word about Mexico; there's a wall alright, just a metaphorical one.

He takes over the office in two weeks; looks like it's going to be a bumpy ride or everyone, Americans included!

India imposes nearly 320% tax on all cars imported as CBU's and there are substantial tariffs on CKD units as well. Similar taxes are imposed on many other products as well.

I am not a politician nor am I an economist. I don't understand why is it so outrageous if the US does the same? Don't they have the same rights as India?

Its not the policy per say but switching from a free trade agreement to a protectionist arrangement overnight that hurts industry. South America is a strategic market for ford and a local footprint would've been a competitive advantage. I assume that the plan from ford was to leverage available capacity to ship cars back to the US.

Business decisions and investments ought to driven by market forces. For sure government SoPs are part of the deal. But Arm twisting to deliver on political promises is a different thing. I wonder what kind of stand the president will take on automation in manufacturing which, in theory, takes jobs away from people. (Straying off-topic the most worrisome development from my perspective, apart from the rhetoric on all things non-American, is Mr Trumps view on climate change and the gentleman he's nominated to head the EPA !)

Hello to all. Had come across this informative article in Bloomberg today. It seems that some of the vehicle production in these planned factories might not have been for the US. There might be some impact in the short term but in over the long term vehicle production in Mexico might actually go up.

The main reason Mexico is favoured by Automakers is because of it's lower wages.

Most US based companies have all the manufacturing work done somewhere other than the US because of lower costs. If Trump wants to bring manufacturing back into the US, Americans might suffer as prices will go up. This not only applies to Autos, but most of the products.

I'm not sure Mexico would be affected too much because of this. They would still cotinue manufacturing cars for European, Latin and South American markets.

Dictatorship or not, I'm a firm believer of the 'if you want to sell it here, BUILD IT HERE' philosophy. Local car production = economy production (investment, jobs, community development etc.). Take India as an example = the local auto industry makes up a whopping 20% of the manufacturing industry. It is an 'industry of industries'. As you would've guessed, I fully support the Indian government taxing the heck out of CBUs & restricting imports.

:thumbs up

The truth behind Ford's decision on the cancelled Mexico investment

https://www.washingtonpost.com/news/...=.06035d7c775d

Totally agree. Even though myself and my family is being fed by a US company for last 12 years, I feel US people are not getting any tangible benefits out of this free trade agreements. Money is flowing from US to countries like China, Mexico, Japan etc and to a lesser extent to India. Even a company like Apple which has around $350B in cash holds it mostly out of US. It holds about $200B in tax havens getting massive deferred taxes.

If we go by the same logic, the car manufacturers will not use India as a export hub. If that happens the overall investments and output goes down, lowering the number of jobs. Lower output numbers will also mean components may not be sourced locally, because suppliers might not set shop here because they do not find the investments worth it. After a while every market will reach a saturation point and local demand alone cannot sustain the investments. And US or in India people want comparatively lower prices.

We'll never know what happens behind closed doors. But one thing for sure: When the leader of a country sends out a strong message on 'building it here', it resonates within the corporate community.

Good point. But we have to understand that not every country can have a local production facility. USA is a huge market, and India is now a top 5. Such economies should do all they can to restrict imports. On the other hand, smaller countries with low volumes cannot support local production. In their case, imports become mandatory. I wasn't talking about these nations.

Big factories in large markets will always have an opportunity to export to these countries.

great point, and in addition, Mexico has free trade agreements with over 40 countries in the world. Probably the most for any country. Which is why most of the major automakers build in Mexico and export including Audi to Europe, Nissan to the Middle East and soon Corolla to several markets.

I was also thinking about the environmental considerations. I'm reasonably sure that Mexico will have less stringent air pollution norms compared to USA. Could that be a small factor to push industries there?

The Indian government taxes the hell out of the car Industry in India too. lol: Cars are still a desirable item and not a need in our country.

If you want to do manufacture it, you will. Japan makes so many cars for such a small nation. I won't disagree that it is an exception more than a norm.

Here's another directive. This time, towards Toyota