Ford has said it will cancel a $1.6bn plant it planned to build in Mexico and instead extend operations at its factory in Michigan, BBC News reports.

The U.S. car giant will spend $700m on expanding the plant at Flat Rock.

Ford boss Mark Fields said the decision was partly due to falling sales of small cars and partly a "vote of confidence" in Donald Trump's policies.

The President-elect has criticised both Ford and its rival General Motors over production of models in Mexico.

Trump earlier on Tuesday, January 3 tweeted criticism of GM's production of its Chevy Cruze model in Mexico.

Mexico's economy ministry said it regretted Ford's decision, adding that it had assurances that the U.S. car firm would pay the state of San Luis Potosi for any costs incurred from the cancellation.