Ford (NYSE:F) said Tuesday it will build a new factory in Mexico, fueling a debate in the presidential race and confirming earlier reports that America’s No. 2 automaker will shift production of small cars south of the border.
The Dearborn, Mich.-based company will invest $1.6 billion in the new assembly plant, which will create about 2,800 jobs by 2020. Ford didn’t disclose what vehicles it plans to build in Mexico. However, during labor negotiations last year, the United Auto Workers union indicated that Ford expected to make the Focus, a compact car, and the C-Max, a small hybrid, at a Mexican facility.
The new deal between Ford and the UAW allocated new models for Ford’s plant in Wayne, Michigan, the current location of the Focus and C-Max. Construction of the new factory in Mexico is scheduled to begin this summer.
Ford has been a lightning rod on the presidential campaign trail. Last summer, Ford revealed plans to spend $2.5 billion on expanding engine and transmission plants in Mexico, and Republican frontrunner Donald Trump criticized Ford—in addition to other companies—for outsourcing jobs. Trump has also used Ford as an example of what he calls an unfair trade pact with Mexico, saying the U.S. should tax imports to level the field.
“Today’s announcement that Ford is investing in Mexico is a disappointment and very troubling. For every investment in Mexico it means jobs that could have and should have been available right here in the USA,” UAW President Dennis Williams said in a statement. “This is another example of what’s wrong with NAFTA and why the TPP would be a disaster for the citizens of the United States.”
In its latest announcement, Ford noted that 2016 marks the company’s 91st year in Mexico. The company added that Ford has invested $10.2 billion in America during the past five years.
The news of Ford’s expansion in Mexico comes on the day of the Wisconsin primaries. A recent FOX Business Network poll showed Texas Sen. Ted Cruz leading Trump, 42% to 32%.
Small cars are far less profitable for Ford, General Motors (NYSE:GM) and its U.S. rivals, especially compared to surging pickup trucks and SUVs that have lifted earnings. By building a plant in Mexico, Ford can build its small cars at a lower cost, thereby increasing profit margins.
GM has also increased its production footprint in Mexico. The company picked Mexico as the location of Chevrolet Cruze production. The 2016 Cruze, a compact car, was redesigned for the current model year.
In a twist, GM will begin importing the Envision, a Buick SUV, from China this summer.