Betting on low oil prices, Ford moves Focus manufacture to China
Ford Motor Co said on Tuesday it will move some production of its Focus small car to China and send the vehicles to the US in a long-term bet on low oil prices and stable US-China trade relations.
The move suggests China could play a much larger role in future vehicle production for North America, perhaps eclipsing Mexico as a low-cost manufacturing source.
Ford painted the production shift from Mexico to China, slated for mid-2019, as a purely financial move that will save the company $500 million in reduced tooling costs.
But Ford also expects to ship about 80,000 vehicles to China this year, including the redesigned Lincoln Navigator luxury sport utility vehicle, which goes into production this fall at Ford’s Kentucky truck plant.
Ford’s decision to import its first vehicles from China to the US is also the first major manufacturing investment decision made by new Chief Executive Jim Hackett, who succeeded Mark Fields in May. Discussion about the small-car production shift from Mexico to China began “a couple months ago” under Fields, said Joe Hinrichs, president of global operations.
The decision also signals a shift in strategy at Ford, which is responding to dwindling US consumer demand for small cars in favor of more expensive and more profitable trucks and SUVs. Cars accounted for more than 50 percent of US auto sales as recently as 2012, but have fallen to just 37 percent of sales this year.
Ford on Tuesday said it would invest $900 million at the Kentucky truck plant to build the redesigned Navigator and Ford Expedition. It has contingency plans to build more of the big SUVs at an Ohio plant if demand grows.
Although it is cheaper to build and ship cars to the US from Mexico than China, “this was not a variable cost decision,” Hinrichs said in a briefing on Tuesday. “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.
The current Focus will be phased out of production in Wayne, Michigan, in mid2018, according to Hinrichs. The Wayne plant will begin building a new Ranger midsize truck in late 2018 and a Bronco midsize SUV in 2020.