By Christina Rogers and Mike Spector 

Ford Motor Co. will forge ahead with shifting small-car production to Mexico despite repeated criticism from President-elect Donald Trump, who has warned that companies face consequences for leaving the U.S.

Ford's plan to rehouse output of the Focus compact car from Michigan to a new $1.6 billion plant being built in Mexico, which isn't expected to result in job losses, remains on track for 2018, Chief Executive Mark Fields said in an interview on Friday.

"We have made the decision to move the Focus out, and we're making that investment now," Mr. Fields said. "When you look at moving the Focus out of our Michigan assembly plant, that's to make room for new products -- zero jobs affected, zero jobs impacted."

The Dearborn, Mich., auto maker is expected to replace the cars headed to Mexico with more-profitable pickup trucks and sport-utility vehicles to keep the Michigan plant humming amid soaring demand for such vehicles. Unionized auto workers would keep their jobs and potentially receive larger profit-sharing checks should Ford's operating profits in North America increase.

Mr. Field's remarks came a day after Mr. Trump took credit for United Technologies Corp.'s decision to keep open a Carrier Corp. furnace factory in Indiana and prevent about 800 jobs from moving to Mexico. In exchange, United Technologies, Carrier's parent, will receive $7 million in tax breaks over the next decade.

"This isn't a Carrier situation," Mr. Fields said of Ford's plan. He said Ford decided to produce the car in Mexico partly to keep the vehicle's price in line with customer expectations. "In our business, it's a long-lead investment," Mr. Fields said of the Focus plan.

He added that Ford's U.S. investment commitments remain "as strong as ever," pointing to the company's commitment to invest $9 billion in its U.S. plants over the next three years as part of a new labor contract struck last year with the United Auto Workers union. The investment would support or create 8,500 blue-collar jobs at Ford's U.S. plants.

Vice President-elect Mike Pence, currently Indiana's governor, helped broker the Carrier deal. Carrier still plans to move 600 jobs from the factory to Mexico, and United Technologies intends to proceed with closing a separate plant in Huntington, Ind., moving another 700 jobs across the southern U.S. border.

Mr. Trump has said companies going forward would no longer "leave the U.S. anymore without consequences." He has threatened to slap Ford and other manufacturers with a 35% tariff for importing goods from countries with lower labor costs. The pledge resonated with blue-collar workers, helping Mr. Trump win close election battles in Wisconsin, Michigan and Pennsylvania, the three decisive states that propelled him to the White House.

Mr. Fields said Ford would weigh future Trump administration policies when pursuing business matters. "Clearly any kind of tariff would impact the entire industry and not one specific company," said Mr. Fields, who previously said such a move would cause economic harm. "We share the same objective as Mr. Trump and his new administration. We want a strong economy."

Separately, Mr. Fields said Mr. Trump had "an influence" on the auto maker's decision not to move production of a Lincoln SUV from Louisville, Ky., to Mexico. "We had been looking at it," Mr. Fields said, adding that it "made sense" to keep the vehicle in Kentucky, given Mr. Trump's positions on tax reform and infrastructure spending.

Ford never intended to close the factory or cut jobs, but rather ramp up production of another hot-selling SUV, rendering it a largely symbolic move. Mr. Trump two weeks ago took credit on Twitter for Ford's decision, but overstated the move, suggesting Ford would no longer relocate the factory to Mexico.

Nevertheless, Ford's move to keep the low-volume Lincoln MKC rolling off the lines of the Kentucky plant reflected a willingness to extend an olive branch to Mr. Trump, who has taken a hard line on trade agreements affecting U.S. workers.

Bill Ford, great-grandson of automotive pioneer Henry Ford, had called Mr. Trump to tell him the company would reverse course on the Lincoln SUV. The move handed Mr. Trump a political victory after the New York real estate mogul hammered Ford during the presidential campaign over the separate plan to relocate small-car production to Mexico.

After the election, Mr. Fields wrote Mr. Trump a congratulatory letter, another sign the company hopes to mend fences with the president-elect.

Ford and other auto makers could get some relief from the incoming Trump administration on stringent fuel-economy standards.

Mr. Fields criticized a proposal the Environmental Protection Agency made on Wednesday to keep intact tougher fuel-economy standards that call for auto makers to sell vehicles averaging 54.5 miles a gallon in 2025. The proposal was part of a midterm review of the standards that wasn't expected to be completed until 2018.

The EPA, after a 30-day public comment period, could make a final determination to leave the targets intact before Mr. Trump is sworn in as president on Jan. 20.

"We are extremely disappointed that 11th-hour politics are short-circuiting" the process that called for regulators to weigh data and market conditions when deciding whether the mileage targets should be relaxed, toughened or unchanged, Mr. Fields said in the Journal interview.

Low gasoline prices are sending consumers flocking to pickup trucks and SUVs that have lower fuel economy and pollute more than smaller cars, making the targets difficult to meet, car makers contend.

The EPA released a draft technical report earlier this year and has defended its process as exhaustive. Regulators point to gasoline direct injection and other technologies allowing auto makers to meet future fuel-economy targets, which are intended to cut emissions to address climate change and dependence upon foreign oil.

Still, car executives had agreed to the rules, codified in 2012, knowing a review would occur years before the toughest standards were enforced. "We all agreed at the halfway point to have a midterm review," Mr. Fields said, adding the mileage standards were "unprecedented."

Trump policy adviser John Mashburn in November said the incoming administration would conduct a "comprehensive review" of the mileage and emission regulations, and expressed the view the rules were meant to deal with foreign-oil dependence as opposed to climate change.

Auto executives hoping existing regulations would be relaxed now face the prospect of needing to lobby for a broader overhaul or rollback. "We'll work with a new administration on a way forward," Mr. Fields said, adding it isn't yet clear "what form or fashion" that would take.

Write to Christina Rogers at christina.rogers@wsj.com and Mike Spector at mike.spector@wsj.com

 

(END) Dow Jones Newswires

December 02, 2016 17:48 ET (22:48 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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