Ford chooses China over Mexico to save billion

Updated 2017-06-22 14:55:21

Ford Motor Co's choosing China over Mexico to produce the next generation of its Focus small car comes down to one thing: saving an estimated billion.

"We've made the decision because it allows us to reduce global Focus production by one plant, improve the health of our Focus business, save billion in investment costs and further improve our scale in China," said Sinead Phipps, a Ford spokeswoman.

Dearborn, Michigan-based Ford said on Tuesday that in the second half of 2019 production of the new model will start at its Changan facility in Chongqing, China. The company already makes the Focus in China for buyers there.

For Ford, it will mark the first time that the automaker will import vehicles from China to the U.S.. And for China, the move could mean that the world's largest auto market might play a much larger role in future auto production for North America, perhaps surpassing Mexico as a low-cost manufacturing source.

Last year, General Motors started importing its China-made Buick Envision, a mid-size luxury SUV, and this spring its Shanghai-made Cadillac plug-in hybrid went on sale in the U.S..

The China decision is the first major one by Ford CEO Jim Hackett since he replaced Mark Fields last month. Ford is making its decision as car sales in the U.S. continue to fall. Focus sales were down 20 percent through May, hurt by low gas prices and consumer preference for SUVs.

In January, then-Ford CEO Fields canceled plans to build a .8 billion Focus plant in San Luis Potosi and instead said it would build it an existing plant in Hermosillo, Mexico. That decision drew praise from U.S. President-elect Donald Trump, who campaigned on keeping U.S. manufacturers' plants and their investments in the U.S. to avoid job losses.

Ford's announcement didn't draw any reaction from Trump. It did from Commerce Secretary Wilbur Ross.

"The Ford decision shows how flexible multinational companies are in terms of geography," he said. "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."

And asked on Tuesday whether Trump plans to get tougher on China or on automakers who leave the U.S., White House Press Secretary Sean Spicer said the president wants to lower business taxes and reform the tax code so businesses will want to "come back to the United States, grow in the United States, manufacture more in the United States."

Joe Hinrichs, president of Ford's global operations, said on Tuesday that although it's cheaper to build and ship cars to the U.S. from Mexico than China, "this was not a variable cost decision".

"It allows us to free up a lot of capital" because Ford now has to retool only one plant — the existing Focus factory in Chongqing — rather than two to supply North America, he said.

Ford also said the move to China won't mean a loss of U.S. jobs. The Michigan plant that makes the Focus will be converted late next year to produce the Ford Ranger pickup and Ford Bronco SUV.

The automaker said that it plans to invest 0 million in its Louisville, Kentucky, truck plant to make the new, aluminum-sided Ford Expedition and Lincoln Navigator SUV. That investment will secure 1,000 jobs at the plant, Ford said.

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