CEO Mark Fields told investors the move is part of plans to make production simpler and less expensiveFord is shifting all North American small-car production from the U.S. to Mexico, CEO Mark Fields told investors today in Dearborn, even though its plans to invest in Mexico have become a lightening rod for controversy in this year's 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.
Ford isn't the first automaker move small car production out of the U.S. as Mexico has become a mecca for new automotive industry investment and has surpassed 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, Michigan.
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 all 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.
Mexico has seen a 40% increase in auto jobs since 2008 to 675,000 last year while the U.S. saw only a 15% increase in the same period to more than 900,000, according to the Center for Automotive Research in Ann Arbor.
While the North American Free Trade Agreement has been a factor for automotive investment in Mexico there are other factors as well. Mexico has trade agreements with 44 other countries, a robust rail and shipping infrastructure, lower wages and now 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.
But Americans prefer larger vehicles, especially pickups and higher-riding SUVs and crossover vehicles for their personal use.
Fields' statement isn't much of a surprise. Ford said in April it would invest $1.6 billion to build a new plant in Mexico and create 2,800 jobs so it can build small cars there. Ford also said in 2015 that it planned to move production of its Ford Focus and C-Max hybrids cars from a plant in Wayne, to another country by 2018.
It's an ironic twist for Ford's plant in Wayne, Michigan. Ford spent $550 million in 2010 to convert from the aging plant from a big SUV factory to one that could build the efficient Focus compact car.
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.
Still, Ford is reassessing much of its business to prepare for a future where 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.
Ford's decision to build a new plant in Mexico has made it a target for Republican Presidential candidate Donald Trump who said in April "these ridiculous, job-crushing transactions will not happen when I am president."
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 automakers, also is struggling to hold onto its automotive industry. It is currently in contract negotiations with the Detroit Three on a contract that expires on Monday and 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.
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.
Along those lines, Fields and other Ford executives Wednesday outlined an aggressive plan to invest $4.5 billion over the next four years in new battery-powered models in such segments as commercial vehicles, trucks, SUVs and performance vehicles.
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.
Ford continues to present its corporate strategy to more than 100 analyst and investors throughout the day. The meeting comes as the U.S. auto industry's six-year recovery is cooling, while the U.K.'s exit from the European Union has presented a new challenge to Ford's rebound in Europe.
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.
"This is very different thinking for us," Fields said. "For most of our history we have thought about the thing and how many of the things we have sold."
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?"
"We see huge social economic and environmental benefits. We’re focused on usage where miles traveled are as important as the number of units sold," he said. "Autonomous vehicles will account for one of every 10 miles traveled by 2030, and will grow from 5% of all vehicles sold in U.S. in 2025 to 20% in 2030."
Contact Greg Gardner: 313-222-8762 or email@example.com.