In a move which seriously undermines Detroit's position as an American auto manufacturing hub, Ford Motors has decided to make its next global car Fiesta not in the US, but in its southern neighbour Mexico.
The proposed $3 billion foreign investment in the Central American nation has been touted the largest of its kind with its president Felipe Calderón calling the deal a ''turning point.''
Unlike the general impression in India, the original Fiesta has always been a small subcompact. However, the fifth-generation Fiesta was rebranded and restyled in India as a four-dour sedan called the Ford Ikon.
On the other hand, the current Fiesta on the Indian roads is based on the actual fifth-generation vehicle, although the latter is not a sedan but a hatchback.
Ford's move will put more foreign money in one go into Mexico than any other manufacturing industry. Only banking acquisitions in the country have cost more. Some 4,500 Ford jobs are expected to be created and result in some 25,000 new direct and indirect jobs at suppliers.
"The auto industry has become consolidated as one of the pillars of our economy," president Calderon said. "It's one of the principal sources of exports, of foreign investment and, as a result, of jobs in the manufacturing sector."
Ford has two assembly plants in Mexico, and the hatchback will be built at the Cuautitlan facility near Mexico City starting in early 2010. The plant currently builds F-Series pickup trucks, US sales of which have been weakening as gasoline prices continue their march higher. This shift towards smaller vehicles is very much in tune with Ford's larger strategy in recent times.
While the US automaking industry sags – undergoing massive restructuring and downsizing – Mexico's production has expanded, especially for small, low-cost vehicles. Last year, Mexico produced a record number – over 2 million – and analysts forecast that by the year 2015 production could at least double.
The announcement comes as the other major automakers, including General Motors, DaimlerChrysler, Nissan, and Volkswagen have laid down massive investment plans in Mexico, building new plants, expanding production, and rolling out new models.
And, surprisingly, the country has attracted interest from other developing nations as well. In November last year, China's First Automobile Works Group (FAW) caused a stir when it announced it would be partnering with Mexican electronics retailer Grupo Elektra to build China's first automaking plant in Mexico, expected to be up and running by 2010.
However, there have been some concerns regarding the America slowdown especially since Mexico currently exports about 75 per cent of the cars it makes, most of those to the US. Therefore, a US decline would inevitably lead to a Mexican decline, unless the market diversified.
With the Fiesta, Mexico may be able to achieve just that because Ford intends this to be a truly global vehicle, going on sale in Europe, the Far East, and North America. It will become available in North America in 2010 after making its debut earlier in 2008.
The new Fiesta, which is based on the sleek Verve hatchback Ford has presented at auto shows, is a key piece of Ford CEO Alan Mulally's drive to unify Ford's global operations around "world cars" that share most of their components and can be built and sold with few changes throughout the world.
"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 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."
Mulally said in Mexico Friday that the country "is a centerpiece for Ford's global strategy today," touting its geographic location, highly qualified labor force and economic stability. There are more than one million Mexican jobs directly or indirectly linked to the auto industry.