Ford Plans to Build Assembly Plant in Mexico

Ford Motor Company (NYSE: F) has recently announced that it is planning to establish a new assembly plant in Mexico. This assembly plant will be located in the state of Luis Potosi and the investment for this will come in at approximately $1.6 billion.

The Detroit-based car manufacturer is aiming to build a new  assembly plant in the Mexican state, in order for it to boost the profitability of Ford’s small vehicles in a region with lower costs. The construction of Ford’s assembly plant will start in the summer of this year, and the manufacturing of the vehicles is anticipated to commence by the year 2018. The American multinational automaker’s investment in Mexico will bring about employment of about 2,800 people by the end of the year 2020.

General Motors Company and Toyota Motor Corp. have already made their investments in Mexico in order to generate lower profit margin cars, benefiting from the low cost of labor in the country, as well as favorable conditions for automobile export.

The investment plans of the US car maker  have come for criticism from Mr. Donald Trump. The Republican candidate has threatened that he will implement an import tariff of 35 percent on every vehicle manufactured in Mexico that would be sold in the United States.

The resident of Ford Motor Company Mr. Joe Hinrichs said in turn that the automobile giant had made investments of approximately $10.2 billion in the United States and has also brought about 25,000 job opportunities within the last 5 years. The Ford President further added that the auto manufacturer is considering to make an additional investment of about $9 billion by the end of the year 2019, through a 4-year deal with the United Auto Workers.

“The facts bear out that our investment in the US continues to be substantial. The investments in Mexico are not having an offsetting effect in the US; we’re not losing any jobs at Michigan Assembly Plant or southeast Michigan,” stated Mr. Hinrichs.

Ford Motor Company is also making an investment in South Africa amounting to $170 million, in order to grow its operations at Silverton Assembly Plant in Pretoria. The American multinational car maker is planning to manufacture the new Ford Ranger and new Ford Everest in this assembly plant. When the $170 million investment is accomplished, it will be able to produce 1,200 jobs at Ford South Africa. The manufacturing of the all-new Ford Everest will start during the third quarter of fiscal year 2016, and the first car units are anticipated to hit the markets in the fourth quarter of fiscal year 2016. The South African car models will be sold locally, and will also be exported to Sub-Saharan Africa.

As of the time of writing, the shares of Ford are changing hands at $12.77, down by 0.23 percent or 0.03. The market capitalization of the US auto manufacturer currently stands at 49.67 billion. Meanwhile, its P/E ratio posts at 6.93, and its dividend yield registers at 4.70 percent.