Ford canceling plans for new plant in Mexico, will invest $700 million in U.S.

Ed noted earlier this morning that President-elect Trump started the day by tweeting about General Motors. But a bit later he had some positive news to tweet out. Ford is canceling plans to invest $1.3 billion in a new manufacturing plant in Mexico. Instead it will be investing $700 million to expand production here in the U.S.:

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https://twitter.com/realDonaldTrump/status/816324295781740544

Ford CEO Mark Fields gave an interview to CNN this morning in which he discussed the reasoning behind the decision. “Are you canceling the plans to build this huge plant in Mexico because of the President-elect?” CNN correspondent Poppy Harlow asked. “When we make decisions like this as a company we look at…first we do what’s right for our business,” Fields replied. “This makes sense for our business and we look at all factors including what we view as a more positive U.S. manufacturing business environment under President-elect Trump,” he added. “It’s literally a vote of confidence around some of the pro-growth policies that he has been outlining and that’s why we’re making this decision to invest here in the U.S.”

Pressed on what specific policies might help Ford, Fields mentioned “tax policy and regulatory policy.” Trump has talked many times about lowering corporate tax rates significantly to make it more appealing for manufacturers to keep jobs in the U.S. As for regulatory policy, that was partly a reference to fuel efficiency standards which were agreed to under the Obama administration. Later in the interview, Fields pointed out that the fuel efficiency standards are scheduled for a review in 2018. “When we agreed to the…one national standard back in 2011 that set the fuel economy standards out to 2025, it was an unprecedented agreement and as part of that agreement there would be a midterm review in 2018,” Fields said. “We agreed that we would look at the assumptions, back in 2011. A lot of those assumptions have changed, whether it’s the price of a barrel of oil or a gallon of gas,” he added. “A lot of changes in assumptions on adoption of new technologies. And we just wanted that to be a fact-based discussion in developing regulations.”

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That’s a very politic answer but here’s what Fields seems to be saying. In 2011 oil prices were high and gas prices were at record highs. Assuming those prices were going to remain high or even gradually increase, it made sense to agree to a fuel economy scheme that would drive manufacturers toward the production of smaller, more efficient cars. But the price of oil and gas has dropped in the past two years and so has the demand for small cars. In light of that, Ford might be looking for a relaxing of fuel economy standards that would allow a larger average size of its fleet, more in keeping with current market demand.

CNN’s Harlow asked Fields if the announcement today represented a kind of crony capitalism in which Ford makes a deal to keep jobs in the U.S. in exchange for favors from the Trump administration. Fields rejected this saying, “we didn’t cut a deal with the President-elect, we did what’s right for our business…that’s what’s drives us.”

Here’s the CNN interview with Fields:

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