Has Donald Trump just been played by Mark Fields?

Has Donald Trump just been played by Mark Fields?

US president-elect Donald Trump has thanked Ford for its decision to cancel a new plant to make small cars in Mexico and for creating new jobs in the US.

Earlier this week Ford said it will scrap plans to build a new plant at San Luis Potosi in Mexico. At the same time, it announced a strategy to invest more heavily in electric vehicles and to add related jobs at its Flat Rock, Michigan, plant.

Previously, Trump had criticised Ford for investing in Mexico and said that his administration would consider imposing tariffs on cars imported from Mexico to the US, in order to discourage manufacturing companies from opting for low-cost facilities there rather than investing in US manufacturing capacity.

In a Twitter post following Ford's announcements this week, Trump thanked Ford for the Mexico plant cancellation and suggested that more announcements in a similar vein could follow.

The tweet reads: "Thank you to Ford for scrapping a new plant in Mexico and creating 700 new jobs in the U.S. This is just the beginning - much more to follow"

Analysts have suggested that Ford's announcements this week are business driven as well as politically smart ahead of Trump's inauguration as US President on January 20th. Indeed, on the day of the Ford announcements, Trump turned his twitter fire away from Ford and directed it at General Motors, which imports the Chevrolet Cruze model - in small numbers - to the US from Mexico. Ford's announcement that it is creating more jobs in the US and cancelling a new Mexico plant lends itself to the interpretation that the company is reacting to the change of administration in the White House and political pressure exerted by the president-elect.

However, in a research note issued this week, JP Morgan analyst Ryan Brinkman noted that the "move will save Ford money."

Brinkman's analysis notes that the production of the next generation Focus will still transfer to Mexico (Hermosillo plant), where labour is substantially cheaper.  "We expect the higher cost Wayne, Michigan, facility will concentrate on producing more expensive vehicles that can be profitably manufactured in the United States, such as the Ford Ranger and Bronco mid-size pickup and SUV," he said in his note. "Ford will still enjoy the variable cost savings of producing the Focus in Mexico but now will also enjoy the lower fixed costs associated with not constructing the new facility." 

See also: Ford cancels Mexico plant and invests more in US

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