Tuesday, 16 February 2016
Ford set to build more cars in Mexico
By 2018 Ford will have shifted production of its next-generation compact cars from its Wayne sited assembly plant in Michigan to Mexico in the next couple of years.
And the United Auto Workers (UAW) union is also set to begin negotiations over jobs and wage rates in the Wayne plant that currently builds the Focus passenger car and hatchback; as well as C-Max hybrids for North America.
Ford has said it
Ford has two assembly plants in Mexico, currently building the Fiesta at a Cuautitlán plant and the Fusion and Lincoln MKZ in Hermosillo.
The next-generation Fiesta could be sourced from Thailand, implying perhaps that the Focus and C-Max could be moved to Cuautitlán.
The UAW said it was “confident” Ford would find a use for the Wayne plant when Focus and C-Max production ends in 2017. Without a shadow of doubt, Ford will find a use for MAP – it will not permanently shutter such an important facility at this time, even though Ford is confining production there in a bid to reduce small car inventories.
In April, the company announced a $2.5-billion investment as well as a new Mexican plant to build engines and transmissions.
Ford's sales of compact cars (like Fiesta and Focus) have been falling in recent months and the move to Mexico could be a way to keep profits stable as sales of SUVs and crossovers have, at the same time, been seen to blossom.
According to the Wall Street Journal (WSJ) Ford is planning around $1 billion to build a new vehicle-assembly complex in the Mexican state of San Luis Potosi, and will expand an existing factory near Mexico City. The plants are expected to be up and running in time to add about 500,000 units of production starting in 2018.
These moves will more than double the company's existing production capacity in Mexico. Ford built about 433,000 vehicles in Mexico in 2015, representing 14% of its North American production.
In the US, demand for SUVs and pickup trucks is high, with buyers migrating from traditional sedan choices to car-based "crossover" SUVs. Ford is struggling to maintain keep up demand and there is talk the Dearborn-based company could sell even more Explorers, Edges, and Escapes.
At the same time, faced with falling sales of smaller cars and the financial issue of the US being a more costly place to make cars (a new four-year labour wage agreement has made the US relatively more expensive) so moving less profitable product to lower-cost centre Mexico appears to make sense. According to Transport Topics this week, labour rates paid in US are now $37.62/hour compared with $8.24/hour in Mexico!
One solution could be for Ford to shift most of its sedan production to Mexico, allowing it to use existing US facilities to make more expensive (and profitable) SUVs and trucks.
The WSJ sees Ford using its expanded Mexican production capacity to build a new hybrid vehicle intended to rival Toyota's Prius and other unnamed models.
Ford already makes the Fiesta and some Fusions in Mexico, and as Ford suggests it will move the next-generation Focus and C-Max, currently made in Michigan, to Mexico in 2018, so that it can use the Michigan plant to make a new Ranger pickup, and an SUV.
Ford is also expected to halt US production of Fusion and use that car's capacity in Michigan to manufacture the new Lincoln Continental.