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  March 10th, 2016 | Written by

Ford Mulls Plans to Move Some Production to Mexico

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  • Ford’s current Mexican capacity of 433,000 vehicles represents 14 percent of its North American production.
  • Costs for Ford’s possible expansion in Mexico would exceed $1 billion.
  • Mexico is looking more attractive to U.S. automakers following a new labor deal struck in November with the UAW.

Detroit-based Ford Motor Co. is seriously mulling plans to build a new assembly plant in San Luis Potosí, Mexico, and expand an existing factory near Mexico City.

If finalized, the new and expanded facilities would add 500,000 units to its annual Mexican capacity starting in 2018, more than double the total 433,000 vehicles – some 14 percent of its North American production – that it produced in the country in 2015.

Costs for the project likely would exceed $1 billion with factory construction beginning later this year, according to reports in the auto industry media.

Last spring, Ford announced that it would invest $2.5 billion in two new engine and transmission plants in Mexico and spend an additional $1.1 billion to construct an engine assembly facility at its existing plant in Chihuahua.

The new Chihuahua plant will reportedly produce small engines for its Focus and C-Max model autos. Ford last year said it would shift production of the two models from its Detroit, Michigan assembly plant to Mexico in an effort to cut costs.

Ford’s plant in Hermosillo produces two midsize sedans. The company also builds the Fiesta subcompact car in Cuautitlán at a factory it built more than 50 years ago.

Mexico is looking more and more attractive to U.S. automakers following a new labor deal struck in November with the United Auto Workers (UAW) that significantly boosted wages for U.S. factory workers.

Labor rates in Mexico are roughly one-fifth of those earned by unionized workers in the U.S., a gap that is only expected to widen as UAW wages approach nearly $30 an hour in coming years.

Several foreign auto makers – BMW and Volkswagen, for example – have announced plans to base more production in Mexico. Japan’s Honda Motor Co. invested $800 million in a new assembly facility there last year with Kia Motors Co. saying it will open a new small-car plant in Mexico this year, the South Korean auto maker’s first in the country.