VILLA DE REYES, MEXICO - Word spread quickly through cellphone messages and shouts between co-workers that Ford Motor Co. had canceled its new $1.6 billion car plant at its sprawling 700-acre high desert site in north-central Mexico.
“When I saw it on the phone, [I thought], ‘Well, no, it can't be,’ ” said Higinio Salazar, a security guard who spent the past five months logging traffic into and out of the site and hoped to have steady work for months to come. “It was on orders of Mr. Trump,” he said bitterly.
That was not the case, Ford insists, but the perception here in Mexico's burgeoning auto assembly region was largely that President-elect Donald Trump, who had promised for months to bring manufacturing jobs back to the U.S. while at the same time disparaging Mexicans, had made good before even settling into the White House. Trump took a shot at Toyota on Thursday over its move to make Corollas in this region, though the Japanese company defended its plan.
Ford's announcement sent shock waves across Mexico, which has become tightly meshed with the U.S. economy since the advent of the North American Free Trade Agreement, sending 80 percent of its $532 billion in exports across the border in 2015. The U.S. government says $100 billion of that was in vehicles and parts, making Mexico the biggest exporter of automotive products to the United States. Mexico's auto plants now account for 20 percent of all light vehicles built in North America, industry figures say.
State officials in San Luis Potosi did not find out much earlier than Salazar that plans had been scrapped for the long-awaited plant, which promised 2,800 direct jobs and more than 10,000 indirect ones through Ford's supply chain. State Economic Development Secretary Gustavo Puente Orozco said Ford told state officials about an hour before CEO Mark Fields made the announcement Tuesday.
Puente said Ford made very clear it was a “definitive cancellation,” citing supply and demand rather than politics.
“They told us that it was a market issue — the issue that the Ford Focus that was the vehicle they thought to build, this light vehicle they planned to build in San Luis Potosi, they say the demand had dropped,” Puente said.
BMW plant to open in 2019
Low gas prices have Americans turning again to larger vehicles, and Focus sales have fallen victim to that trend. Fields said Ford will produce the Focus at an existing plant in Hermosillo, Mexico, and use some of the savings to invest $700 million in an existing Michigan plant to make hybrid, electric and autonomous vehicles.
The San Luis Potosi plant was well past the theoretical stage and there were high hopes the state would see further economic growth from the opening of its third auto plant — General Motors Corp. has been producing the small Aveo and Trax vehicles up the road since 2008 and a BMW plant nearby is scheduled to begin production in early 2019.
The steel bones of Ford's plant had begun to rise and signs designated the future spots for each part of the operation, from “stamping” to “final warehouse.”
Suppliers move on
On Wednesday, Fernando Rosales Ortuno, who deals in hydraulic hoses for Parker Hannifin Corp. was pacing the site's perimeter with a cellphone pressed to his ear, trying to arrange for a trailer to get hauled away. It's essentially a portable store that had been set up to service the big machines preparing the site.
He had hoped that once Ford was up and running, the plant might become a long-term client.
“It hit us like a bucket of cold water,” Rosales said. “Everyone here was hoping for a lot of growth in the state and this region, too.”
Four clustered states in central Mexico — San Luis Potosi, Queretaro, Aguascalientes and Guanajuato — have seven auto assembly plants that are operating or will be within the next two years. Around them are nearly 800 auto parts suppliers, Puente said.
Workers make $8 an hour
In San Luis Potosi alone, between 50,000 and 60,000 jobs depend on the auto industry. An average worker in Mexico costs automakers $8 an hour, including wages and benefits, compared to the $60 an hour that Ford said it was spending on an autoworker in the U.S. at the end of 2015.
In Villa de Reyes' town square, residents said the younger generation would be hurt most by the cancellation.
Retiree Ignacio Segura Rocha said fewer people from town are migrating to the U.S. now because the crossing has gotten harder than when he went in 1977 and 1978. He said the auto industry offers good alternatives for kids growing up on the region's isolated ranches.
“They were already dreaming of going there [to Ford], and at the last minute there's nothing,” he said.
Construction worker J. Refugio Waldo Contreras feels Trump is putting Mexicans in an impossible situation.
“This Trump, he doesn't want people there, so where is he going to send them?” Contreras asked. “And he doesn't want work to open here? So then he's going to close the doors.”
On to the next job for some
Trump also sent tweets this week threatening to impose heavy tariffs on General Motors and Toyota cars produced in Mexico for the U.S. market. GM said it exports only a small number of Cruze hatchbacks it makes in Mexico. Toyota stood by its plan to produce Corollas in Guanajuato, while stressing that its production and employment in the U.S. will not be affected.
There were some notes of optimism among Mexicans. As security guard Juan Gonzalez watched contractors haul away giant earth movers on flatbed trailers, he said he didn't expect the site to stay vacant for long.
“If it's not the United States it could be Japan, China,” he said. “This is going to continue.”
Jorge Alvarez, who spent five months at the site working on perimeter roads, said his company had already told him his next project will be at the airport, so work would continue for him at least.
Change of focus
Another option could be that Mexico turns inward and focuses more on developing its internal market, said Roy Campos, president of the Mexico City-based Mitofsky consulting group. According to industry figures, 82 percent of vehicles manufactured in Mexico are exported now.
“Sooner or later, because of the nearness and the border, the personal relationships, the human relationships, the Mexico-United States relationship is going to return to what it was or even better than before,” Campos said. “So meanwhile, develop the other markets that could be very beneficial to Mexico.”
Billboards welcoming Ford had been sprinkled around San Luis Potosi in recent months. But only a day after the company's announcement, the welcome sign across the highway from the plant was already down,