Ford small car production to move outside U.S.
07-10-15, 11:42 AM
#1
Lexus Champion
Thread Starter
Ford small car production to move outside U.S.
Very misleading headline......
Ford to the U.S.: See ya
http://finance.yahoo.com/news/ford-t...l?noRedirect=1
Ford (F) is reportedly taking its small car production and motoring out of the U.S.
The carmaker says it will stop building the Focus and C-Max wagon at its Wayne, Michigan plant outside Detroit in 2018. The company is not indicating where the vehicles will be built, but speculation is it will be Mexico.
Yahoo Finance Columnist and auto industry specialist Rick Newman says it’s really hard for Ford and other auto companies to make money building these kinds of cars in the U.S.A.
“They’re not as profitable and in some cases are actually loss-leaders for automakers,” he points out. “It might be nearly impossible to make a profit on small cars when you’re building them at unionized factories. I don’t think you can fault Ford for this, this is just a hard sell.”
But he notes Ford can’t just stop making them.
“All the domestic automakers learned the lesson in 2007-2008 when gas prices spiked that you can’t just offer big cars and ignore the smaller part of the market,” he says. “And they need to build high-mileage cars to comply with government standards. So they have to have these cars and they have to sell a reasonable amount of them.
Newman agrees with those who suggest Ford will now make its small cars below the Rio Grande.
“Automakers like to emphasize what they call ‘North American’ production, which includes Canada and Mexico rather than just American production,” he notes. “Ford does manufacturing in Mexico already. So I would not be surprised to find these cars moving south of the border.”
The move comes just days before Ford is set to begin new contract negotiations with the United Auto Workers Union, and Newman certainly isn’t surprised at the timing.
“Everybody tries to get every little bit of leverage when these negotiations come up,” he explains. “And Ford can say ‘Look, you’re impacting our profitability, and if we can’t have good labor rates here we might just move them down to Mexico, like we had to with the small cars.’”
But Newman feels the union still has a trump card to play at Ford.
“They will continue to make pickup trucks in the United States,” he notes. “And that’s where the action will be for the UAW.”*
Ford to the U.S.: See ya
http://finance.yahoo.com/news/ford-t...l?noRedirect=1
Ford (F) is reportedly taking its small car production and motoring out of the U.S.
The carmaker says it will stop building the Focus and C-Max wagon at its Wayne, Michigan plant outside Detroit in 2018. The company is not indicating where the vehicles will be built, but speculation is it will be Mexico.
Yahoo Finance Columnist and auto industry specialist Rick Newman says it’s really hard for Ford and other auto companies to make money building these kinds of cars in the U.S.A.
“They’re not as profitable and in some cases are actually loss-leaders for automakers,” he points out. “It might be nearly impossible to make a profit on small cars when you’re building them at unionized factories. I don’t think you can fault Ford for this, this is just a hard sell.”
But he notes Ford can’t just stop making them.
“All the domestic automakers learned the lesson in 2007-2008 when gas prices spiked that you can’t just offer big cars and ignore the smaller part of the market,” he says. “And they need to build high-mileage cars to comply with government standards. So they have to have these cars and they have to sell a reasonable amount of them.
Newman agrees with those who suggest Ford will now make its small cars below the Rio Grande.
“Automakers like to emphasize what they call ‘North American’ production, which includes Canada and Mexico rather than just American production,” he notes. “Ford does manufacturing in Mexico already. So I would not be surprised to find these cars moving south of the border.”
The move comes just days before Ford is set to begin new contract negotiations with the United Auto Workers Union, and Newman certainly isn’t surprised at the timing.
“Everybody tries to get every little bit of leverage when these negotiations come up,” he explains. “And Ford can say ‘Look, you’re impacting our profitability, and if we can’t have good labor rates here we might just move them down to Mexico, like we had to with the small cars.’”
But Newman feels the union still has a trump card to play at Ford.
“They will continue to make pickup trucks in the United States,” he notes. “And that’s where the action will be for the UAW.”*
Last edited by bitkahuna; 07-11-15 at 11:18 AM.
07-10-15, 05:28 PM
#2
Lexus Fanatic
At least some of this sounds like B.S. to me on Ford's part. GM is notorious for high production costs, and they build the compact Chevy Cruze (the Ford Focus's arch-rival) in Lordstown, Ohio, and the subcompact Chevy Spark in Baltimore, Maryland. Chrysler builds the also-rival Dodge Dart at its Belvidere, Michigan plant. If GM and Chrysler can build smaller vehicles here in the U.S., marketing and selling them at a profit, I don't see why Ford can't...they are all dealing with the same UAW and same corporate taxes in America. Not only that, Ford was in a better position than GM or Chrysler to start with.....they never needed a buyout with tax dollars or a controlling interest by a foreign company.
Last edited by mmarshall; 07-10-15 at 05:47 PM.
07-10-15, 05:53 PM
#4
Lexus Fanatic
Even though the average UAW wage-and-benefit package is maybe half what it was years ago? I think that's being a little rough on them.
No arguments there...the Fusion is a good car; always has been. But it's a good car because of its engineering, design, and materials, not because it was made south of the border...though you obviously have to have quality control at the plant as well.
As I'm getting ready to go home from work in my Mexican built Fusion.
07-10-15, 07:21 PM
#5
If I remember right it was the new entry employees that took the brunt of wage cuts, not current employee's. Current employee's did give some concessions when this was going on but not as much as new employee's
Even though the average UAW wage-and-benefit package is maybe half what it was years ago? I think that's being a little rough on them.
No arguments there...the Fusion is a good car; always has been. But it's a good car because of its engineering, design, and materials, not because it was made south of the border...though you obviously have to have quality control at the plant as well.
No arguments there...the Fusion is a good car; always has been. But it's a good car because of its engineering, design, and materials, not because it was made south of the border...though you obviously have to have quality control at the plant as well.
Last edited by bitkahuna; 07-11-15 at 11:12 AM.
07-10-15, 09:04 PM
#6
Lexus Champion
It seems that the writer is anti-union. I would not blame the unions. It is not as simple as that.
Toyota (non-unionized) is moving production of the compact Corolla from Cambridge, Ontario, Canada to Mexico. GM is doing its best to close its unionized Oshawa, Ontario, Canada plants and move production to unionized Michigan plants, even with the lower-value Canadian dollar and state-paid medicare (which should make cars cheaper to produce in Canada). Why move production from a unionized plant to another unionized plant if unions are the problem?
The problem is not unionized plants. The problem is that in Canada and the USA, it is more difficult to make a healthy profit margin on compact cars (as healthy as profit margins on mid- or full-sized cars) because we have come to believe -- and demand -- that smaller cars cost less than larger cars; we are not willing to pay for the engineering costs to make small cars.
But by building in Mexico, where wages and regulations are low, and perhaps added with local subsidies to attract new auto plants, costs are lower so it is easier to make a healthy profit on small cars.
The problem is that, despite a North American Free Trade Agreement, production costs have not yet equalized across all three amigos. It is still much cheaper to build in Mexico, and now with their higher quality and open borders, it makes it much easier to close down production in high cost areas and move to low-cost Mexico.
Toyota (non-unionized) is moving production of the compact Corolla from Cambridge, Ontario, Canada to Mexico. GM is doing its best to close its unionized Oshawa, Ontario, Canada plants and move production to unionized Michigan plants, even with the lower-value Canadian dollar and state-paid medicare (which should make cars cheaper to produce in Canada). Why move production from a unionized plant to another unionized plant if unions are the problem?
The problem is not unionized plants. The problem is that in Canada and the USA, it is more difficult to make a healthy profit margin on compact cars (as healthy as profit margins on mid- or full-sized cars) because we have come to believe -- and demand -- that smaller cars cost less than larger cars; we are not willing to pay for the engineering costs to make small cars.
But by building in Mexico, where wages and regulations are low, and perhaps added with local subsidies to attract new auto plants, costs are lower so it is easier to make a healthy profit on small cars.
The problem is that, despite a North American Free Trade Agreement, production costs have not yet equalized across all three amigos. It is still much cheaper to build in Mexico, and now with their higher quality and open borders, it makes it much easier to close down production in high cost areas and move to low-cost Mexico.
07-10-15, 11:09 PM
#7
Lexus Fanatic
This is not surprising and good for Ford to do it. The profit margins on small cars is not as large as bigger vehicles or even better, luxury vehicles. Move the smaller cars to Mexico and the profits get larger as the cost becomes cheaper to produce. Fill the void with larger cars that have a wider profit margin
Toyota is moving the Corolla to Mexico soon.
I fully expect GM to move the Cruze/Verano twins to Mexico soon.
Toyota is moving the Corolla to Mexico soon.
I fully expect GM to move the Cruze/Verano twins to Mexico soon.
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07-11-15, 05:51 AM
#9
If Ford goes to Mexico, you can bet the others will follow over time. If I remember correctly GM and Chrysler were able to carry over a huge amount of losses from the last recession which goes against current earnings so it looks like on paper they are doing great financially. When these losses dry up, at tax time profits will drop and then look for the move to cheaper labor.
At least some of this sounds like B.S. to me on Ford's part. GM is notorious for high production costs, and they build the compact Chevy Cruze (the Ford Focus's arch-rival) in Lordstown, Ohio, and the subcompact Chevy Spark in Baltimore, Maryland. Chrysler builds the also-rival Dodge Dart at its Belvidere, Michigan plant. If GM and Chrysler can build smaller vehicles here in the U.S., marketing and selling them at a profit, I don't see why Ford can't...they are all dealing with the same UAW and same corporate taxes in America. Not only that, Ford was in a better position than GM or Chrysler to start with.....they never needed a buyout with tax dollars or a controlling interest by a foreign company.
07-11-15, 08:07 AM
#11
Lexus Fanatic
This is not surprising and good for Ford to do it. The profit margins on small cars is not as large as bigger vehicles or even better, luxury vehicles. Move the smaller cars to Mexico and the profits get larger as the cost becomes cheaper to produce. Fill the void with larger cars that have a wider profit margin
I fully expect GM to move the Cruze/Verano twins to Mexico soon.
the Verano is not even built in the same plant as the Cruze. The Verano is built in Wixom, MI......the Cruze at Lordstown, OH (I've been to the Lordstown plant). The Lordstown plant has built GM small cars since the days of the Chevrolet Vega (early 1970s). If GM was going to move production to Mexico (same with Chrysler and the Dodge Dart) they probably would have done it long ago...or at least by now.
Last edited by mmarshall; 07-11-15 at 08:34 AM.
07-11-15, 08:22 AM
#12
Lexus Fanatic
It seems that the writer is anti-union. I would not blame the unions. It is not as simple as that.
Toyota (non-unionized) is moving production of the compact Corolla from Cambridge, Ontario, Canada to Mexico. GM is doing its best to close its unionized Oshawa, Ontario, Canada plants and move production to unionized Michigan plants, even with the lower-value Canadian dollar and state-paid medicare (which should make cars cheaper to produce in Canada). Why move production from a unionized plant to another unionized plant if unions are the problem?
The problem is not unionized plants. The problem is that in Canada and the USA, it is more difficult to make a healthy profit margin on compact cars (as healthy as profit margins on mid- or full-sized cars) because we have come to believe -- and demand -- that smaller cars cost less than larger cars; we are not willing to pay for the engineering costs to make small cars.
But by building in Mexico, where wages and regulations are low, and perhaps added with local subsidies to attract new auto plants, costs are lower so it is easier to make a healthy profit on small cars.
The problem is that, despite a North American Free Trade Agreement, production costs have not yet equalized across all three amigos. It is still much cheaper to build in Mexico, and now with their higher quality and open borders, it makes it much easier to close down production in high cost areas and move to low-cost Mexico.
Toyota (non-unionized) is moving production of the compact Corolla from Cambridge, Ontario, Canada to Mexico. GM is doing its best to close its unionized Oshawa, Ontario, Canada plants and move production to unionized Michigan plants, even with the lower-value Canadian dollar and state-paid medicare (which should make cars cheaper to produce in Canada). Why move production from a unionized plant to another unionized plant if unions are the problem?
The problem is not unionized plants. The problem is that in Canada and the USA, it is more difficult to make a healthy profit margin on compact cars (as healthy as profit margins on mid- or full-sized cars) because we have come to believe -- and demand -- that smaller cars cost less than larger cars; we are not willing to pay for the engineering costs to make small cars.
But by building in Mexico, where wages and regulations are low, and perhaps added with local subsidies to attract new auto plants, costs are lower so it is easier to make a healthy profit on small cars.
The problem is that, despite a North American Free Trade Agreement, production costs have not yet equalized across all three amigos. It is still much cheaper to build in Mexico, and now with their higher quality and open borders, it makes it much easier to close down production in high cost areas and move to low-cost Mexico.
Can't blame the UAW for everything. I ask suspect that, sooner or later, we could see efforts to unionize the plants in Mexico....though probably not to the same scale as U.S./Canadian plants. In the meantime, though, there may still be some issues to work out in those plants. Honda, for example, had some serious problems at the Celaya, MX plant, where the HR-V is assembled, with parts-theft, transporter hijacking, and sabotage. That won't necessarily happen at other Mexican plants, but is certainly a caution flag.
MY brother, BTW, was recently very interested in a new HR-V (and almost bought one), but that plant-sabotage was one of several factors that got him into a new Kia Sportage instead.
http://blog.caranddriver.com/honda-f...mexican-plant/
Last edited by mmarshall; 07-11-15 at 08:30 AM.
07-11-15, 09:05 AM
#14
Lexus Fanatic
If Ford goes to Mexico, you can bet the others will follow over time. If I remember correctly GM and Chrysler were able to carry over a huge amount of losses from the last recession which goes against current earnings so it looks like on paper they are doing great financially. When these losses dry up, at tax time profits will drop and then look for the move to cheaper labor.
07-11-15, 10:02 AM
#15
Lexus Test Driver
I'll call b.s. on Ford. Let me give an example on a retail scale. Back before NAFTA I remember shopping around for Polo shirts it was $50 made in USA. Then production went to China, Vietnam, Cambodia etc. Fast forward to today the shirts are $70( some inflation added I understand that). Basically they took the cheaper labor profits and kept the prices the same. Wohoo. The race to the bottom created a new normal and now they can't find cheaper labor their earnings have stagnated. Then the conditions of the plants and suicides (Apple) plants started due to pressure from executives. Suddenly they backtracked "we didn't mean for this to happen. We'll back off and improve the conditions"
Luckily for the PEOPLE auto plants are not textile plants and have greater scrutiny.
So Ford moves the plant to Mexico saves a dime one time and is able to temporarily bump it's profits making shareholders happy for one quarter. In the process wipes out a ton of families. I don't know, I'd keep the plant there even if the profit margin isn't AS much as it would be down south. I'd rather employ Americans. But by all means take a hard line in negotiations but keep the plant here employing locals.
Luckily for the PEOPLE auto plants are not textile plants and have greater scrutiny.
So Ford moves the plant to Mexico saves a dime one time and is able to temporarily bump it's profits making shareholders happy for one quarter. In the process wipes out a ton of families. I don't know, I'd keep the plant there even if the profit margin isn't AS much as it would be down south. I'd rather employ Americans. But by all means take a hard line in negotiations but keep the plant here employing locals.
