Mexico presents a unique business environment to international automobile manufacturers. The country offers the ease of doing business afforded by several free trade agreements, cheap labour and an easy access to the market in the United States. It is no wonder then that leading car manufacturers, from around the world, such as General Motors Company (GM, Financial), Volkswagen AG (VLKAY, Financial), and Japan’s Nissan Motors (NSANY, Financial) have invested billions of dollars in the country. Recently, Toyota Motor Corp. (TM, Financial) announced its billion dollar factory for manufacturing 200,000 Corollas in the country, to be exported to the U.S.
The latest announcement
On Friday, Ford Motor Corporation (F, Financial) joined this list by announcing a $2.5 billion expansion plan for its Mexican operations to create two new facilities for developing fuel-efficient engines and transmissions. Adding to its existing Chihuahua Engine Plant, Ford’s investment of $1.1 billion will create capacity for it to expand its small car line-up and export engines to the U.S., Canada, South America and the Asia Pacific. Additionally, the car manufacturer will invest $200 million in expanding its I-4 and diesel engine production facilities.
“Ford is making a significant commitment to our business in Mexico with investment in two new facilities, while aiming to make our vehicles even more fuel-efficient with a new generation of engines and transmissions our team in Mexico will build,” Joe Hinrichs, Ford’s President of The Americas, said in a statement, “These new engines and transmissions will help deliver even better driving experiences and fuel economy gains for customers around the world.”
The remaining $1.2 billion will be invested in building a transmission plant on transmission supply partner Gertrag’s site in Irapuato city, Guanajuato. The new transmission facility, will be the first of its kind in the country. It will enable Ford to produce two new automatic transmissions, for key products intended for the markets of North and South America, Europe and Asia Pacific.
Ford employs 11,300 people in the country, including 1,100 engineers who provide technical support to Ford’s projects around the world. The combined investment is expected to create 3,800 jobs in the country.
“Today’s announcement is an important milestone in Ford’s 90-year history in Mexico,” said Gabriel Lopez, Ford of Mexico’s president and CEO. “Currently within Ford, Mexico is the fourth vehicle producer, the fourth largest engine producer and is the second largest nation supplying Ford’s global manufacturing facilities. We look forward to delivering even more great products, including new engines and now transmissions, to serve Ford customers around the world.”
Market reactions
Analysts are hopeful that Ford’s investment in Mexico will reap multiple benefits for the auto maker which is taking such a stand to maintain a competitive space in the automotive industry. And as Mexico is a ripe destination for automotive investment, Ford hopes to build its firm stand in the country in terms of enhancement of production capacity to offer tough competition to its peers in the upcoming days.
