Ford plant turns ‘cemetery’ as Trump wrenches Mexican autos

SAN LUIS POTOSI, Mexico: Ford Motor Co.’s abrupt move to scrap a planned $1.6 billion car plant in central Mexico has spooked a network of suppliers who bet on a growing customer base and dramatized the risk that US President-elect Donald Trump’s agenda poses to the country’s broader economy.
Many auto parts makers had started to expand in anticipation of Ford’s plant in the state of San Luis Potosi, where industry is “easily 70 percent” dependent on the auto sector, said Julian Eaves, managing director of Preferred Compounding de Mexico, a US-owned maker of rubber compounds operating here.
“It is going to have a huge impact on the local community,” said Eaves.
The loss to the economy, Eaves calculates, could run into the hundreds of millions of dollars, and maybe even into the billions, over the next five years, as manufacturing, contracting and indirect jobs all fall short of plans. Officials say they are still analyzing the economic impact of the Ford decision.
The hemorrhaging may be just the beginning of Mexico’s pain from Trump’s vows to shake up trade and bring manufacturing jobs back north when he takes office on Jan. 20.
“It now looks like a cemetery,” said Fernando Rosales, 28, a hydraulic hoses contractor preparing to abandon the site. “(There is) only death here, we are all leaving.”
Ford’s decision also puts the brakes on Detroit automakers’ push to build small cars in Mexico to reduce labor costs, while using higher-paid US workers for larger, more expensive vehicles.
Not far from the doomed Ford site, other major players from the global automotive industry are in the midst of multi-million dollar investments, including General Motors Co., which Trump has also repeatedly berated for investing in Mexico.
German carmaker BMW is assembling a $1 billion plant and a few miles from the Ford site, Goodyear Tire & Rubber Co. is busy building a $550 million tire facility.
The US president-elect’s broadsides against Mexico have shown how exposed companies in the supply chain are to the whims of US automakers under pressure not to offshore production.
At the Ford premises, shocked and dejected workers packed up construction materials and prepared to leave.
Workers said they had heard plans for an industrial park opposite the site for suppliers had also been suspended. The park’s developers were not immediately available to comment.
The auto sector is at the heart of a Mexican industrial boom since the 1994 North American Free Trade Agreement (NAFTA) between it, the US and Canada, a deal Trump has threatened to renegotiate in favor of the US or scrap entirely.
About half of the foreign direct investment (FDI) to Mexico since the start of the century has come from the US, where it sends around 80 percent of its goods exports.
Carmaking is no exception. Mexico produced 3.22 million autos in the first 11 months of last year, and exported 2.55 million, local industry group AMIA said. Fully 77 percent of the exports went to the US.
Some Mexican states have come to depend on autos almost entirely for growth. In San Luis Potosi, 15,000-17,000 new direct jobs are expected to be created in 2017, all in the auto sector, according to federal labor delegate Edgar Duron. The total does not include the Ford plant, which had been expected to create thousands of additional jobs in coming years.
The San Luis Potosi state government had already paid part of the 1 billion pesos ($47 million) it owed under a contract to support the Ford plant, Puente said, without specifying how much.
The federal government said Ford would reimburse the sum. Projects, both private and public, are underway to spend hundreds of millions of pesos to expand the city’s airport and build a new bus line in expectation of a busier future.
But the real fear in Mexico is that, as Trump himself tweeted after the Ford decision, “This is just the beginning.”
Outside the Goodyear plant in San Luis Potosi, 46-year-old Marcos Rodriguez, an engineer working on the facility, said that Mexico should assume that other sites are at risk.
“Here there is a lot of equipment inside, so I think it would be a little more difficult,” he said. “(But) can they cancel it? I think they can.”