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Ford (F) Stock Gaining on Mexico Plant Cancellation, "Vote of Confidence" in Trump

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Shares of Ford Motor Company (F - Free Report) jumped more than 2.5% in morning trading Tuesday following the automaker’s announcement that it is cancelling plans to build a new manufacturing plant in Mexico and instead will invest $700 million in its home state of Michigan.

New Plans

The $700 million investment will go to Ford’s existing plant in Flat Rock, Michigan with a focus on creating more self-driving and electric vehicles. Ford is expected to create 700 new U.S.-based jobs with the move.

In an interview with CNN, Ford CEO Mark Fields said the decision was a “vote of confidence” in President-elect Donald Trump’s proposed pro-business environment. However, Fields stressed that Ford did not cut any specific deals with Trump.

The Trump Effect

President-elect Trump has already been maneuvering with several businesses ahead of his inauguration on January 20. Last month, he worked out an incentive-based deal with Carrier, a United Technologies subsidiary, which will see the company retain some of the jobs at its Indianapolis unit (Also read: Carrier Gets Tax Incentive to Retain Some Indiana Jobs).

Trump also joined SoftBank (SFTBY - Free Report) CEO Masayoshi Son to announce a $50 billion investment that will supposedly create 50,000 new jobs in the United States (Also read: SoftBank and Sprint Soaring on Trump-backed Investment Plan).

The SoftBank deal was quickly criticized as a possible front to help push through a merger between SoftBank’s Sprint (S - Free Report) subsidiary and T-Mobile (T - Free Report) , and Trump also clashed with a union rep from Carrier over the details of that deal.

Bottom Line

Nevertheless, Ford has given the nod to Trump and solidified its confidence in the U.S. economy. Interestingly enough, Ford was a target of Trump’s rhetoric on the campaign trail, as he repeatedly slammed the company for its plans to move production of the Ford Focus to a new plant in Mexico. Trump promised to impose a 35% tariff on Ford vehicles imported from Mexico.

Ford pushed back at Trump’s claims and argued that the company never planned to cut U.S. jobs. Now those plans have changed, and not only will Ford not be cutting jobs, it will be creating new ones. Production of the Focus will now move to an existing plant in Hermosillo, Mexico and the Flat Rock plant will be expanded.

Ford plans on rolling out seven new electric vehicles over the next five years, so it’s encouraging to see the company double down on that bet with even further investments in the U.S.

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