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theodore M I R A L D I mpa ... editor, publisher, writer
Wednesday, September 14, 2016
Ford MOVING ALL U.S. Small-Car Production to Mexico
Greg Gardner and Brent Snavely
CEO Mark Fields told investors the move is part of plans to make production simpler and less expensive
Ford plans to eventually shift all North American small-car production from the U.S. to Mexico, CEO Mark Fields told investors Tuesday, even though the company's production investments in Mexico have become a lightning rod for controversy in the presidential election.
"Over the next two to three years, we will have migrated all of our small-car production to Mexico and out of the United States," Fields said at a daylong investor conference in Dearborn.
The news sparked a fresh round of criticism of Ford from Republican Presidential candidate Donald Trump, who was campaigning in Flint on Wednesday.
"We shouldn’t allow it to happen. They’ll make their cars, they’ll employ thousands of people, not from this country, and they’ll sell their car across the border," Trump said during his visit. "When we send our jobs out of Michigan, we’re also sending our tax base."
The impact on Ford's U.S. employment will be minimal in the near-term. Ford already builds the Fiesta subcompact and the Fusion mid-size sedan in Mexico. There is an expectation that Ford will build a new Ranger mid-size pickup truck in Wayne and possibly a new Bronco compact sport-utility.
The automaker also still will make the Ford Mustang at its plant in Flat Rock, Michigan and will begin making the full-size Lincoln Continental there later this year. It also makes the full-size Ford Taurus in Chicago.
Ford isn't the first automaker to move small car production out of the U.S. Mexico has become an auto production Mecca for new industry investment, surpassing Canada in annual automotive production.
Fiat Chrysler Automobiles said earlier this year it will end production of all cars in the U.S. by the end of this year as it discontinues production of the Dodge Dart in Belvidere, Ill., and the Chrysler 200 in Sterling Heights, Mich.
It's an ironic twist for the Wayne because Ford spent $550 million in 2010 to convert the aging plant from a big SUV factory to one that could build the efficient Focus compact car.
The industry has known for decades that domestic manufacturers struggle to make a profit on small cars in the U.S.
In recent years, automakers that include General Motors, Honda, Hyundai, Nissan, Mazda, Toyota and Volkswagen have announced plans to either expand existing plants or build new ones in Mexico. Fiat Chrysler Automobiles also has said it is considering an expansion of its production there.
The number of auto jobs in Mexico reached 675,000 last year, a 40% increase from 2008. U.S. auto jobs increased 15% over the same period to more than 900,000, according to the Center for Automotive Research in Ann Arbor.
In addition to the North American Free Trade Agreement, automakers are also drawn to Mexico because of its lower wages, trade agreements with 44 other countries, a robust rail and shipping infrastructure and a workforce that has proven it can make high-quality cars.
Ford's decision to shift the assembly of small cars to Mexico can reduce costs to a point. But some of these cars are over-engineered.
For example, Fields said the current Ford Focus can be ordered in 300 different configurations of options and colors. Ford wants to reduce that to 30, which will make the production process simpler and less expensive.
Americans prefer larger vehicles, especially pickups and higher-riding SUVs and crossover vehicles for their personal use.
UAW President Dennis Williams also has repeatedly blasted Ford and other automakers for investing so much money in Mexico.
There is no reason, mathematically, to go ahead and run to countries like Mexico, Thailand and Taiwan, Williams said earlier this year. "We all recognize there is a huge problem in Mexico. So we have to address it as a nation. The UAW cannot do it alone. We are not naive."
Unifor, the Canadian union that represents autoworkers, also is struggling to hold on to its automotive industry. It is currently in negotiations with the Detroit Three over a contract that expires on Monday. Unifor is worried that three plants could close in the coming years if automakers refuse to commit to new investments.
Ford has said it continues to invest heavily in its U.S. plants and isn't cutting jobs here. Last fall, the automaker made a commitment to invest $9 billion in U.S. plants and create or retains more than 8,500 jobs as part of a new four-year contract with the UAW. Of that, $4.8 billion goes to 11 facilities in Michigan.
Ford is reassessing much of its business to prepare for a future when it needs to make cars for new modes of transport, to generate money from shared use, all without jeopardizing profits still generated by many of its cars and trucks.
The future of smaller cars in the U.S. may depend on the ability to electrify their powertrains and introduce them to ride-sharing fleets where they can generate revenue from fares paid by multiple riders.
Ford also reiterated its commitment to developing an autonomous vehicle by 2021 for use in a ride-hailing service. The company believes that autonomous vehicles could account for up to 20% of vehicle sales by 2030.
Investors didn't reward Ford or other U.S. automakers when they posted record profits last year and early this year. Now that U.S. sales are leveling off Wall Street is even less enthusiastic about the sector. Ford shares have fallen 12% from the beginning of the year from $14.09 to Tuesday's closing price of $12.38.
Fields spent the first half of his 45-minute presentation assuring analysts that Ford's core business remains strong, especially in its most profitable segments such as full-size pickup trucks, commercial vans and its resurgent Lincoln luxury brand.
But he also said the company must respond to a global shift away from personal vehicle ownership to one in which personal ownership will be challenged by on-demand shared mobility.
In exploring how a traditional manufacturer can profit in a market where the vehicle becomes a service platform, Fields said the first question he and fellow executives had to define is "What’s our point of view on autonomy?"