Ford Strives To Increase Production Capacity In Mexico By More Than Double

Ford Motors decision to grow follows the signing of a costly labor deal with UAW in the US.

Ford plans to establish its new assembly plant in Mexico and rapidly increase the factory output produced in that state. The facility would represent the most recent shift of investment overseas by the Michigan-based automaker. The decision to develop the facility follows the signing of a new costly labor agreement.

The automaker has planned to boost its yearly Mexican production capacity by 500,000 units in 2018 over two time of what it manufactured last year. The plan reflects the $5 billion worth investment of General Motors to increase its capacity in Mexico by 2018. Ford will set up a new assembly complex in the Mexican city San Luis Potosi and extends an existing plant located near Mexico City.

This will make capacity for many models, including a yet-to-be-revealed hybrid automobile known as Toyota “Prius Fighter”, and will allow Ford to focus on SUVs and profitable trucks.

A spokesperson of the company refused to talk about the plans. Last year, Ford manufactured 433,000 automobiles in the Mexican region, equal to 14% of its production in North America. Costs of the venture will probably surpass $1 billion with construction of the factory starting later in 2016.It follows an investment of $2.5 billion announced by Ford past year to develop a transmission and engine facility in Mexico.

In recent years, billions of dollars in pledges to invest in automotive commitments are attracted by Mexico, engaging vehicle manufacturers with enhanced logistics, arsenal of free trade agreements and low wages.

Most foreign automotive organizations, such as Toyota Motor Corporation, Volkswagen AG and BMW AG, have recently announced plans to establish an assembly plant in the country or have established one already.

Honda Motors recently started to manufacture its subcompact Fit in the region by investing $800 million in its new assembly plant. In 2016, Kia Motors will also establish a new small-car factory in Mexico, the South Korean carmaker’s first in the region.

Detroit automakers have been manufacturing trucks and cars in the country for a long period, but the state looks much attractive after a new labor agreement is signed in November with the United Auto Workers that increases wages offered to American factory workers.

In Mexico, the wages are approximately 20% of the income earned by unionized employees in the United States, a gap that will probably increase as the wages of UAW reach nearly $30 per hour in the future, which represents a $10 increase for some newly hired workers.