MADRID/DETROIT (Reuters) - U.S. car manufacturer Ford (F.N) announced on Thursday the final part of a 2.3 billion euro ($2.6 billion) expansion of its operations in Spain, in what it called the biggest ever investment in the country’s auto industry.
The investment consists of an initial 1.1 billion euros announced in 2011, followed by another 1.2 billion euros since 2013, Ford said.
The investment in the Spanish plant continues a trend of auto production moving south in Europe, where wages tend to be lower. Ford closed a factory in Belgium last year as part of a restructuring of its loss-making European operations.
Just as Mexico has a thriving motor industry making vehicles for much of the Americas, its Spanish counterpart is prospering by keeping labor costs down and targeting markets abroad. Around 80 percent of the Ford plant’s production is for export.
Spanish Prime Minister Mariano Rajoy visited the Ford plant in the eastern region of Valencia on Thursday and said the auto industry had played a key part in the recuperation of the Spanish economy. The European Commission has sharply increased its forecasts for Spanish economic growth this year.
The investments will allow Ford to build six different model lines, up from four currently, and expand exports to markets outside of Europe, including shipments of Transit Connect compact vans to the United States, a company spokesman said.
Once the expansions are complete, the Valencia plant will have capacity to build 450,000 vehicles a year. That will make Valencia one of the two largest assembly operations in Ford’s global manufacturing system, along with the automaker’s factory in Chongqing, China.
Ford employs around 8,000 people at the facility, the company said, up from just below 5,000 in early 2013. Spain’s car industry, including auto parts manufacturers which spring up around factories to supply production lines, created 26,800 jobs in 2014, according to Spanish car producers’ association ANFAC.
With Spanish unemployment at 24 percent, unions keen to protect jobs have accepted flexible work practices and salary freezes, which together with close links to a world-class domestic car parts industry have helped attract the orders.
Additional reporting by Robert Hetz; editing by Susan Thomas