Ford to build $2.5 bn Mexico engine, transmission plants

The Ford Motor Company unveiled Friday a $2.5 billion investment for engine and transmission plants in Mexico, the second major project announced in the country by a foreign auto power this week.

The US firm's plan to expand an engine plant in the northern border state of Chihuahua and build a transmissions factory in the central state of Guanajuato will create 3,800 jobs, the company said.

The investment was announced by Ford's president for the Americas region, Joseph Hinrichs, and President Enrique Pena Nieto at the Mexican leader's official residence in Mexico City.

Just two days earlier, Pena Nieto had invited Toyota executives to his residence for the Japanese auto giant's announcement that it was ending a new plant freeze with a $1 billion factory in Guanajuato to produce the Corolla sedan.

The back-to-back announcements "prove to the world that Mexico has conditions for competitiveness, conditions to be more productive and conditions to attract more investments," Pena Nieto said.

"This makes the world turn to look at Mexico," he said.

Mexicans officials said the new investments will boost the country's goal of becoming a top five auto producer in the world by 2020, producing 5 million vehicles per year.

The auto industry's growing success brought the government much-needed good news as falling oil prices have led to budget cuts and a reduction of economic forecasts for 2015, from 3.0-4.0 percent growth to 2.5-3.5 percent.

- 'A perfect week' -

The country's proximity to the world's biggest market, the United States, its relatively cheap and skilled labor, and its free trade agreements with several nations make it an attractive destination for investors.

Mexico overtook Brazil last year to become the top auto producer in Latin Americans and the seventh biggest in the world. It is the sixth producer of auto parts in the world.

Mexico produced more than 3.3 million vehicles last year, some 500,000 fewer than number six power India.

It also surpassed Japan as the top exporter of vehicles to the United States in 2014, and analysts say it is closing in on first-placed Canada.

Economy Minister Ildefonso Guajardo said that, since Pena Nieto took office in December 2012, the government has announced 22.6 billion dollars in auto sector investments.

"It has been a perfect week for the Mexican automobile industry," Guajardo said.

Ford said the new $1.1 billion gasoline-powered engine facility will be built within Ford's plant in the northern border state of Chihuahua to boost engine exports to the United States, Canada, South America and the Asia-Pacific region.

The company will also spend $200 million to expand the Chihuahua plant's production of I-4 and diesel engines, he said, turning the facility into the biggest engine plant in Mexico.

The new $1.2 billion transmission plant will be built on the premises of Ford supplier Getrag in the city of Irapuato, Guanajuato.

Ford said its first transmission facility in Mexico will produce "two all-new automatic transmissions for key products primarily in South America, Europe and Asia Pacific as well as other North American markets."

Eduardo Solis, president of the Mexican Auto Industry Association, said it was too soon to know whether Mexico's production will surpass other countries soon but that it the sector will keep growing.

"More investments are coming," Solis told AFP. "We expect more announcements in the future."