Carmakers, Amid Political Uncertainty, Still Investing On Both Sides Of US-Mexico Border

February 17, 2017
Ford Motor Co.
Automotive manufacturing has dramatically increased in the U.S., Mexico and Canada since the North American Free Trade Agreement went into effect in 2004.

Auto manufacturers will continue to invest in both the U.S. and Mexico, regardless of President Donald Trump’s claims that he’s responsible for Ford canceling some plans in Mexico.

Trump, in his first full-length press conference in office, took credit for Ford’s decision to cancel plans to build a $1.6 billion plant in the Mexican state of San Luis Potosi and instead invest $700 in an existing plant in Michigan.

But Ford Mexico CEO Gabriel Lopez says the decision was based on market demand, not politics. Also, Ford Mexico still plans on spending $2.5 billion in other plants in the states of Chihuahua and Guanajuato.

That’s not surprising, says Kristin Dziczek, an analyst with the Center for Automotive Research in Ann Arbor, Mich. Carmakers say they’ve spent $116.5 billion in plants across North America. About 73 percent of that has stayed in the U.S., Dziczek says.

“This is an industry that eats capital for breakfast,” Dziczek.

Mexico has gotten a smaller share of investment than the state of Michigan alone. However, Mexican car manufacturing is expected to significantly grow by 2020, driven largely by sales to South America and Europe, Dziczek says.

What Trump has accomplished, Dziczek says, is give businesses something they don’t like: uncertainty.