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Ford Commits to $700M U.S. Plant as Trump Blasts GM on Mexican-Made Chevy

Donald Trump tweeted his fury at General Motors for importing the Chevrolet Cruze from a plant south of the border.
To match Analysis USA-AUTOS/ECONOMY
Fully assembled Chevrolet Cruze cars reach the end of the assembly line at the General Motors Cruze assembly plant in Lordstown, Ohio. REUTERS/Aaron Josefczyk

Ford Motor announced Tuesday it was canceling a $1.6 billion plant in Mexico in order to invest $700 million in its Michigan operation — a deal the automaker said would add 700 jobs.

The surprise announcement from Ford CEO Mark Fields came just hours after President-elect Donald Trump blasted General Motors for importing its Chevrolet Cruze from south of the border.

Fields told CNBC the move stemmed from a "market decline in small vehicles" and that Ford's change of plans was due to the importance of remaining "strong and vibrant" in the U.S.A.

"Bottom line is we are not seeing the volume and demand that we had expected" for small cars, said Fields.

Additionally, President-elect Trump was "very happy that we were making these investments here in the U.S. and in U.S. workers," noted the Ford CEO.

Earlier on Tuesday, Trump had slammed GM, tweeting, "Make in U.S.A. or pay big border tax!"

General Motors quickly responded to the Trump attack by noting that all of the Chevrolet Cruze sedans sold on the American market are produced in the U.S. A small number of Cruze hatchbacks recently began being imported from Mexico.

Ford took heat late last year when it announced it would move all small car production to Mexico. But the maker also noted that it would replace slow-selling models like the Ford Focus with high-demand trucks like the new Ford Bronco it is expected to soon start building at its plant in the Detroit suburb of Wayne, Michigan.

Fields had previously warned that the President-elect's proposed 35 percent tariff on Mexican-made goods, including cars, would have a “huge impact” on the American economy, during a speech at the Los Angeles Auto Show in November. The chief executive and other Ford officials have since tried to ease relations with the next president.

Related: Ford CEO Warns of 'Huge Impact' of Trump's Trade Plans

For its part, GM said in a statement Tuesday, “General Motors manufacturers the Chevrolet Cruze sedan in Lordstown, Ohio. All Chevrolet Cruze sedans sold in the U.S. are built in GM’s assembly plant in Lordstown, Ohio. GM builds the Chevrolet Cruze hatchback for global markets in Mexico, with a small number sold in the U.S.”

Hatchbacks haven’t been popular in the U.S. market in recent decades and the move to introduce the Cruze five-door has been seen as a test to see if the market is beginning to shift. Analysts say that were GM to have to retool an American plant to add the Cruze hatchback it would more likely drop the model entirely.

Indeed, automakers routinely defend their import strategies, noting that they need to carefully balance manufacturing footprints to reflect globally demand and manufacturing logistics.

The latest Trump tweet on GM does have its supporters, including the United Auto Workers Union. Though the labor group strongly favored Democratic candidate Hillary Clinton during the recent campaign, it has expressed a willingness to back the president-elect in reframing or eliminating NAFTA.

"I’m prepared to sit down and talk to him about trade. NAFTA is a problem," UAW President Dennis Williams told reporters after the November election. "I think his position on trade is right on."

The Ohio plant that produces the Chevy Cruze is expected to drop its third shift — a move eliminating 1,200 jobs, on January 23. That reflects a general weakening in demand for passenger cars, especially smaller models, as Americans shift to SUVs and other light trucks. The anticipated volume for the imported Cruze hatchback would not be enough, analysts have said, to justify retaining that shift.

GM shares fell by less than one percent in premarket trading in response to the tweet, but have since recovered.