Ford, which was under fire for much of 2016 for its plans to build the Focus in Mexico, said today it is shifting gears a second time and will instead import most of its next generation Focus cars from China in a move designed to improve the automaker's "operational fitness."
The move is the first major decision since Jim Hackett replaced Mark Fields as CEO of Ford last month. Hackett told the Free Press last week the company is working to figure out the best ways to spend its capital. Today, Ford said it will save a total of $1 billion in investment costs by building the Focus in China by canceling plans for an all-new manufacturing facility in San Luis Potosi, Mexico.
"Finding a more cost-effective way to deliver the next Focus program in North America is a better plan, allowing us to redeploy the money we save into areas of growth for the company - especially sport utilities, commercial vehicles, performance vehicles as well as mobility, autonomous vehicles and electrified vehicles," Joe Hinrichs, Ford executive vice president and president of global operations said in a statement.
The Dearborn automaker said production of the next-generation Focus will begin in the second half of 2019, with most new North American Focus models coming from China initially with with additional variants coming later from from Europe.
The decision comes as car sales continue to fall in the U.S. and as uncertainty grows over the automotive industry in Mexico with negotiations set be begin later this year on restructuring the North American Free Trade Agreement. While critics of NAFTA say it has led to job losses in the U.S. supporters say it has fostered a stronger North American auto industry.
Ford reiterated today that no U.S. jobs will be lost at Michigan Assembly in Wayne where the current version of the Focus is built -- a position it has taken since it first announced it would move Focus production to Mexico.
Ford said it will continue making the current Focus at Michigan Assembly Plant through mid-2018. After that, the plant will be converted to produce the Ranger midsize pickup truck in late 2018 and the Bronco midsize SUV in 2020.
Initially, Ford said it would build a new $1.6 billion plant in San Luis Potosi, Mexico and create 2,800 jobs. That decision came under intense political scrutiny from then presidential candidate Donald Trump, who has touted American jobs and has vowed to force automakers to bring more jobs back to the U.S.
At the start of this year, with industry sales of cars falling, Ford canceled the plan to build a new plant in Mexico and said, instead, it would build the next-generation Focus at its existing plant in Hermosillo, Mexico. Now, Ford says it will save a total of $1 billion in investment costs by building the Focus in China and cancelling plans to build the Focus in Mexico.
So far, the administration's response to Ford's decision to import the Focus from China instead of Mexico has been mild.
"The Ford decision shows how flexible multinational companies are in terms of geography," said Commerce Secretary Wilbur Ross. "I believe that as President Trump's policies and reforms take hold, more companies will begin to locate their facilities in the U.S. as several German and Japanese automakers already have."
George Galliers, an analyst for Evercore ISI, said in a report last week that the company is working to find ways to reduce losses from
"Setting aside the CEO change, for us a more subtle but interesting takeaway was Ford's continued work and focus on improving the less profitable parts of its business; namely, small cars, Lincoln and certain emerging markets," Galliers said.
Ford makes the Focus at two plants in China and has not announced which one will make the vehicles that will be imported into the U.S.
Michelle Krebs, director of automotive relations for AutoTrader.com, said Ford will save money by boosting production in China instead of starting from scratch at its plant in Mexico.
"They are already building the Focus in China and they have already planned the investment to upgrade to the new version of the Focus in China," Krebs said. "I think small car sales have fallen far more than anybody anticipated and it think this is just the first of a number of moves we have seen by manufactures to reduce the capacity that they have for small cars, verses sport utilities."
Ford said the decision is unrelated to the potential outcome of the renegotiation of NAFTA.
"We support NAFTA modernization. This is a business decision to improve profitability and deliver even better small cars to customers in a way that makes business sense," Ford said in a statement.
When asked about the potential political blowback from Tuesday's China announcement, Joe Hinrichs, the company's president for global operations, declined to answer directly.
Instead, he emphasized the $12 billion the company plowed into U.S. factories and 28,000 new U.S. jobs in the last five years.
"We remind people of our strong presence in the U.S., " Hinrichs said in a media briefing earlier today.
The automaker also said today it will invest $900 million in Louisville's Kentucky Truck Plant to build the revamped Expedition and Lincoln Expedition SUV., a move that is expected to secure 1,000 hourly jobs. The committment is $300 million than the amount promised in 2015 when it reached a new four-year contract with the UAW.
The investment at Ford's Kentucky Truck Plant also follows a $1.3 billion infusion to re-tool and upgrade the facility for the launch of the aluminum-body Super Duty pickup truck. That added 2,000 jobs starting in late 2015.
Ford said that the latest investment at Kentucky Truck Plant is going toward building a new body to rivet and bond parts of the new aluminum alloy body for the Expedition and Navigator. Ford has switched to aluminum for its F-series pickups and now its largest SUV's to cut weight and add tow capacity, which boost fuel efficiency.
Ford employs nearly 7,700 full-time hourly workers at Kentucky Truck Plant.
Read more on Free Press.