Reflecting changed priorities as rising fuel prices bite, Ford is transforming a Mexican large truck plant to make the European-designed Fiesta small car for North America from early 2010.

Ford also said it would sell a hatchback version alongside the popular sedan and add diesel engine production and a gearbox joint venture in Mexico.

Beginning this year, the Cuautitlan facility near Mexico City will be converted from current production of F-Series pickups for Mexico – future supplies will be imported from the US – to small cars for all North America.

The Chihuahua engine plant, which builds I4 engines, also will assemble diesels for light- and medium-duty trucks in a variety of global markets.

In addition, through a joint venture with Getrag (GFT), Ford will establish a new transmission plant in Guanajuato to supply various vehicle lines.

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Ford said the multi-plant development project is a US$3bn investment, including the support of local suppliers, as well as Mexico’s largest ever automotive investment, expected to create approximately 4,500 direct jobs. Together with indirect employment at suppliers, the moves affects 30,000 jobs in Mexico.

“Ford is absolutely committed to leveraging our global assets to accelerate the shift to more fuel-efficient small cars and powertrain technologies that people really want and value,” said Ford president and CEO Alan Mulally.

“Our investments in these facilities in Mexico are part of our plan to further realign our manufacturing capacity in line with the introduction of more small cars and crossovers.”

“Customers responded very positively after seeing both the sedan and hatchback versions of the Verve small car concept [at motor shows],” noted Mark Fields, Ford’s president of The Americas. “We know the market is headed toward more small cars and crossovers. With our product and manufacturing flexibility, we will be able to offer both models and add production capacity.”

Momentum in small-car sales is outpacing overall industry growth worldwide, the automaker said.  Globally, small car sales have grown from 23m in 2002 to an estimated 38m in 2012.

Driving the growth in the North American market is a group of young people aged 13 to 28 years – dubbed ‘millennials’. Today, this group stands 1.7bn strong worldwide and will represent 28% of the total US population by 2010.

The new investment is expected to increase Ford of Mexico’s annual production to almost 500,000 vehicles and 330,000 engines by 2012, with about 80% of the vehicles and most engines headed for the North American market.

Ford also has stamping and assembly plants in Hermosillo, Sonora, where the Fusion, Mercury Milan and Lincoln MKZ sedans are built. These mid-size cars are sold throughout North America as well as Venezuela and Brazil.

The Associated Press (AP) said Ford’s move was a blow to the United Auto Workers union, which last year approved a contract that granted concessions to the automaker.

Earlier this year, according to AP, UAW president Ron Gettelfinger said the union would try to convince Ford that its US plants were competitive enough that the automaker could make money building its smallest cars in the US. Currently, all subcompacts sold in the US were built overseas, he said at the time.

AP noted that Ford has sold 12m Fiestas since the vehicle was introduced in 1976. Although a familiar name to customers in Europe, Asia and South America, it was only sold in the US [sourced from a new plant built specifically for the line in Spain] – from 1978 to 1980.