Ford is cancelling plans for a $1.6bn (£1.3bn) plant in Mexico as car manufacturers come under pressure from Donald Trump over jobs.

The announcement came hours after the President-elect threatened Ford's rival General Motors with a "big border tax" over its manufacture of vehicles outside the US.

Ford said it was creating 700 new jobs as it expands a new assembly plant in Flat Rock, Michigan, that will build high-tech self-driving and electric vehicles.

It said the investment was being paid for using money it had previously earmarked to build a new plant in San Luis Potosi, Mexico.

General Motors is sending Mexican made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A.or pay big border tax! — Donald J. Trump (@realDonaldTrump) January 3, 2017

But Ford also said that "to improve company profitability" it would build the next generation of its Focus model at an existing plant in Hermosillo, Mexico.


This would make way for "two new iconic products" at another plant in Wayne, Michigan, safeguarding 3,500 jobs, Ford said.

Chief executive Mark Fields told CNN it looked at factors including a "more positive US manufacturing business environment under President-elect Trump" before making the decision.

He said: "It's literally a vote of confidence around some of the pro-growth policies that he has been outlining and that's why we're making this decision to invest here in the US and our plant here in Michigan."

The U-turn on plans to build a big plant in Mexico follows criticism by Mr Trump over Ford's investments in the country.

It came after the President-elect took aim at GM on Twitter.

He wrote: "General Motors is sending Mexican-made model of Chevy Cruze to US car dealers tax free across border.

"Make in USA or pay big border tax!"

Image: Donald Trump has warned US firms about moving jobs abroad

Mr Trump has threatened to slap tariffs of 35% on imports of products made by companies that have moved production out of the US, and said he would tear up a major trade agreement with Mexico and Canada.

Last month he warned that firms shifting jobs away from America could be "making a very expensive mistake" and would face "retribution or consequence".

Mr Trump has also pledged to lower the corporate tax rate and scale back regulations to create a better climate in the US for business.

General Motors brands include the Chevrolet, Cadillac and Buick as well as Germany's Opel and Britain's Vauxhall.

GM said that it makes the sedan model of its Chevy Cruze in the US and that all of those sold in the US were made at a plant in Ohio.

A hatchback version is made for global markets in Mexico, with a small number sold in the US, it said in a statement.