Ford Motor Company says it has cancelled plans to build a car factory in Mexico.

Ford said this week it will not move forward with plans to build a factory in the central Mexican state of San Luis Potosi.

The American company had planned to spend $1.6 billion to build the manufacturing center. It would have produced compact cars.

The Ford Flat Rock Assembly Plant is seen in Flat Rock, Michigan.

Instead, Ford officials announced plans to expand the company's factory in Flat Rock, Michigan, adding 700 jobs.

Officials said the Flat Rock plant will be used to develop fully electric vehicles and hybrid models, ones that use both gasoline and electricity. The plant also will build a self-driving vehicle.

Mark Fields, Ford's chief executive officer, announced the decision on Tuesday. He said the company would invest $700 million to build several different models at the Flat Rock plant.

"A new hybrid autonomous vehicle; a long-range battery electric SUV; a Mustang hybrid; an F-150 hybrid; a Transit custom plug-in hybrid; two new hybrid police vehicles; wireless charging; a $700 million investment and 700 new U.S. jobs."

Labor representatives praised Ford's move.

United Auto Workers Vice President Jimmy Settles spoke at the announcement. He said the decision would have a big effect.

"I don't know if you really can understand the impact of this investment. This is equivalent to a new assembly plant, $700 million."

Ford's decision comes as preparations continue in Washington for the swearing-in of Donald Trump as president of the United States. He will take office on January 20.

During the 2016 election campaign, Trump was highly critical of American companies that close factories in the country, but operate overseas.

Mark Fields said Ford is making the move, in part, because of what he called "pro-growth policies" discussed by Trump and the U.S. Congress.

Ford says demand for compact cars is falling in North America. The carmaker says it will build a smaller model at another factory in Mexico.

On Tuesday, Trump criticized the largest U.S. carmaker, General Motors. He said its cars sold across the country should also be made in the United States. Trump suggested what he called a "border tax."

General Motors reacted by saying the cars it makes in Mexico are not sold in the U.S.

Experts say many companies are considering what to do if Trump and his administration press for U.S.-made products.

James Nolt is with the World Policy Institute.

"I've already read that Apple, for example, has done a contingency study to see how much it would cost if they moved manufacturing back from China to the United States. Other companies are probably doing the same sort of thing. They're making contingency plans. What if Trump is really serious about this?"

Critics say political pressure adds to the complexity of decisions companies must make about how best to produce their products. They say the result could reduce choices for American consumers.

Zlatica Hoke wrote this report for VOANews. Mario Ritter adapted her report for Learning English with additional material from AP. George Grow was the editor.

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Words in This Story

hybrid – adj. something that is the result of combining two or more things

SUV –acronym a sports utility vehicle

autonomous – adj. able to operate by itself

battery – n. a device that chemically stores electricity

assembly – n. the process of manufacturing something

contingency – adj. a plan to be put into effect if there is an emergency or if the best plan cannot be carried out

consumer – n. people who buy goods or services

compact – adj. small