Six years ago, with the U.S. auto industry digging out from a crisis that drove two Detroit car makers into bankruptcy, Ford Motor Co.’s conversion of a Michigan sport-utility vehicle plant to make compact cars was seen as the Motor City’s commitment to reinvention.

But faced with rising demand for light trucks and deepening losses on small-car production, Ford is spending several billion dollars to reverse that strategy and move the small-car production to Mexico. Some paint Ford’s decision as the latest blow to American...