Under pressure from Donald Trump, Ford scrapped its plans to build a $1 billion plant in Mexico that would’ve produced its Focus compact car. But in a move that’s likely to vex the president, the automaker has decided to relocate its production to China in 2019.
Ford currently builds the Focus at its factory in Wayne, Michigan, and in facilities in Germany and China. The automaker had originally planned to shift the car’s production from Michigan to Mexico in order to pay lower labor costs. In January, however, Ford announced that it had nixed the project after facing stiff criticism from President Trump, who was pushing manufacturers to keep jobs in the U.S.
Trump called the Mexico move an “absolute disgrace” and threatened to levy tariffs on Mexican-made Ford vehicles.
On Tuesday, Ford announced it will shift its Michigan production of the Focus to China. According to Bloomberg, the automaker plans to then sell those made-in-China vehicles to the U.S. market. Once this transition is completed, the Focus will reportedly be the biggest automotive export ever from China to the U.S.
Joe Hinrichs, Ford’s head of global operations, cited lower costs as the reason to outsource production to China. The company will save $1 billion by building the Focus in China instead of Mexico, he said.
″[We] have looked at how we can be more successful in the small car segment and deliver even more choices for customers in a way that makes business sense,” Hinrichs said in a statement.
He said the savings would be so significant that even if Congress slapped tariffs on foreign-made imports, the change would still make financial sense.
“We think the significant capital savings outweigh any of the risks associated with any adjustments to the border,” said Hinrichs.
Ford stressed that no American jobs would be lost in the China move. Starting in late 2018, its Michigan plant will simply focus on making bigger, more profitable vehicles, including the Ranger midsize pickup truck. The automaker also announced on Tuesday that it will invest $900 million in a Kentucky factory to build big SUVs, like the Lincoln Navigator, which would secure 1,000 jobs at the plant.
Although Trump has not responded to the news, members of his staff have had a muted reaction thus far.
White House Press Secretary Sean Spicer “deflected a question” on Tuesday about Ford’s China decision, saying that tax reform would boost American-based manufacturing, The New York Times reported.
“The general consensus is that the president wants to create a tax system that encourages companies to bring jobs and factories back here,” Spicer said.
In a statement, Commerce Secretary Wilbur Ross said Ford’s move “shows how flexible multinational companies are in terms of geography.”
Analysts said Ford’s gamble on China could signal the larger role that the country will play in vehicle production for the U.S.
“Times have changed,” auto analyst David Whiston told Bloomberg. “No American would consider buying a Chinese-built car 20 years ago. Now people just want their car to work.”