| SAN LUIS POTOSI, Mexico
SAN LUIS POTOSI, Mexico Jan 6 Ford Motor Co's
abrupt move to scrap a planned $1.6 billion car plant in
central Mexico has spooked a network of suppliers who bet on a
growing customer base and dramatized the risk that Donald
Trump's agenda poses to the country's broader economy.
Many auto parts makers had started to expand in anticipation
of Ford's plant in the state of San Luis Potosi, where industry
is "easily 70 percent" dependent on the auto sector, said Julian
Eaves, managing director of Preferred Compounding de Mexico, a
U.S.-owned maker of rubber compounds operating here.
"It's going to have a huge impact on the local community,"
The loss to the economy, Eaves calculates, could run into
the hundreds of millions of dollars, and maybe even into the
billions, over the next five years, as manufacturing,
contracting and indirect jobs all fall short of plans. Officials
say they are still analyzing the economic impact of the Ford
The hemorrhaging may be just the beginning of Mexico's pain
from Trump's vows to shake up trade and bring manufacturing jobs
back north when he takes office on Jan. 20.
Ford ascribed its move to a decline in North American demand
for small cars like the ones it planned to make in San Luis
Potosi. But Trump had been lambasting Ford for its Mexico
operations, months before he was elected president in November.
Trump upped the ante on Thursday, threatening to slap a
"border tax" on Japanese automaker Toyota Motor Corp
for cars it sells to the United States from a new plant in
Mexico, fueling fears of an all-out offensive by his government
on Mexican industry.
"He's gonna keep on trying to do something, and that's the
alarming part," Eaves said.
In a matter of days, Ford's retreat has turned the factory
site into a barren plain bereft of its economic promise.
"It now looks like a cemetery," said Fernando Rosales, 28, a
hydraulic hoses contractor preparing to abandon the site.
"(There is) only death here, we are all leaving."
Ford's decision also puts the brakes on Detroit automakers'
push to build small cars in Mexico to reduce labor costs, while
using higher-paid U.S. workers for larger, more expensive
Not far from the doomed Ford site, other major players from
the global automotive industry are in the midst of multi-million
dollar investments, including General Motors Co, which
Trump has also repeatedly berated for investing in Mexico.
German carmaker BMW is assembling a $1 billion
plant, and a few miles from the Ford site, Goodyear Tire &
Rubber Co is busy building a $550 million tire facility.
The U.S. president-elect's broadsides against Mexico have
shown how exposed companies in the supply chain are to the whims
of U.S. automakers under pressure not to offshore production.
Shares in Kansas City Southern, one of the main
railroad operators in Mexico, fell following news of the Ford
cancellation and have lost 3.3 percent since Tuesday morning.
Between 40 and 50, mostly foreign-owned, suppliers were
ready to come and supply the San Luis Potosi plant, said Sergio
Resendez of real estate broker Colliers International.
"This was going to catapult us," Gustavo Puente, the state
economy minister of San Luis Potosi, said of the plant Ford
originally announced in April of last year. Ford told him the
plan was off about an hour before it went public with the news,
Around 12 to 14 of the suppliers had already invested money
buying land or signed a contract with developers, said Resendez
of Colliers, though Puente suggested the number was fewer.
"It's a very, very complicated hole," Resendez said. "The
suppliers, depending on their level of advancement, will lose
money. They had already made big investments."
'KICK IN THE TEETH'
At the Ford premises, shocked and dejected workers packed up
construction materials and prepared to leave.
"This is a massive kick in the teeth," Rosalio Rocha, 52, a
construction worker on the site from a nearby town said.
"It looks like he is going to keep going on about it," he
added, referring to Trump.
Some of the ground at the 280-hectare site had already been
leveled and the skeletons of two large, white buildings stood
out against a rusty brown and green backdrop.
Workers said they had heard plans for an industrial park
opposite the site for suppliers had also been suspended. The
park's developers were not immediately available to comment.
The auto sector is at the heart of a Mexican industrial boom
since the 1994 North American Free Trade Agreement (NAFTA)
between it, the United States and Canada, a deal Trump has
threatened to renegotiate in favor of the United States or scrap
"It hurts because we're partners in trade, culture, sports,
we're partners in everything," said Puente, the San Luis Potosi
economy minister. "It hurts because they - he - is pushing a
policy that wants to break those ties."
About half of the foreign direct investment (FDI) to Mexico
since the start of the century has come from the United States,
where it sends around 80 percent of its goods exports.
Carmaking is no exception.
Mexico produced 3.22 million autos in the first 11 months of
last year, and exported 2.55 million, local industry group AMIA
said. Fully 77 percent of the exports went to the United States.
Some Mexican states have come to depend on autos almost
entirely for growth. In San Luis Potosi, 15,000-17,000 new
direct jobs are expected to be created in 2017, all in the auto
sector, according to federal labor delegate Edgar Duron. The
total does not include the Ford plant, which had been expected
to create thousands of additional jobs in coming years.
The San Luis Potosi state government had already paid part
of the 1 billion pesos ($47 million) it owed under a contract to
support the Ford plant, Puente said, without specifying how
much. The federal government said Ford would reimburse the sum.
Projects, both private and public, are underway to spend
hundreds of millions of pesos to expand the city's airport and
build a new bus line in expectation of a busier future.
But the real fear in Mexico is that, as Trump himself
tweeted after the Ford decision, "This is just the beginning."
Outside the Goodyear plant in San Luis Potosi, 46-year-old
Marcos Rodriguez, an engineer working on the facility, said that
Mexico should assume that other sites are at risk.
"Here there's a lot of equipment inside, so I think it would
be a little more difficult," he said. "(But) can they cancel it?
I think they can."
(Editing by Dave Graham, Christian Plumb and Mary Milliken)