HAPPY NEW YEAR! And welcome to "Ford Week" on Adam’s Autos! A
new year means new news, and this is big news. Especially for residents of
Michigan.
The auto industry is a global business, easily one of the
most global businesses in existence. Platform sharing between countries and
even automakers is becoming more common because of a need to decrease
production costs while maximizing efficiency, profits, and quality. Thus,
Ford’s announcement on January 3, 2017 that they will no longer invest $1.6
billion into a new Mexico production facility comes as major news to many advocates
for keeping jobs in America. Ford will instead invest $700 million into their
Flat Rock Assembly Plant in Michigan.
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| Ford's Mustang is one of the models produced at the Flat Rock assembly plant in Michigan, although this investment could allow for other models to be brought in or for production to be expanded. |
This expansion of the Flat Rock plant is expected to create
700 new jobs, a major plus for Michigan’s economy. Currently, the Ford Mustang
and all-new Lincoln Continental are made at this plant. Production there was
idled late last year in October after Mustang sales declined some. However, we
can expect that output of the factory will likely increase due to this upcoming
expansion. This announcement coincides with news that Ford will be producing
new hybrid vehicles as well, including a new fully-electric SUV that will be
made at the Flat Rock assembly plant by the 2020 model year. More on these
upcoming hybrids a little later.
Who Did It?
So who’s responsible for this sudden change in conscience? Many
might be quick to thank president-elect Donald Trump for stating that he will
heavily tax companies that choose to produce products outside of the United
States and then import them. However, if you examine the situation closer, you
will see that Ford still intends to move next-generation Focus production to
Mexico despite threats from Trump to keep production in the U.S. “or else”. The
president-elect has even taken aim recently at GM for their Cruze hatchback
being produced in Mexico. Yet, even after numerous Twitter warnings, this move
is necessary according to Ford since sales of small passenger cars have
declined due to consumers wanting more SUVs and crossovers. Because of this
transition, Ford expects to see increased economies of scale for the Focus
since their Hermosillo facility will be operating at near maximum capacity.
Additionally, Ford expects to save on labor costs. I’m willing to bet that some
of these saved costs, from both labor and construction of new facilities, will
be allocated to other domestic retooling efforts, such as the upcoming one at
Flat Rock.
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| Ford has stated that that intend to move small car production to Mexico, despite their recent decision to invest in their Flat Rock production facility or warnings from president-elect Donald Trump of potential consequences of doing so. |
Why Mexico?
Nearly all automakers produce in Mexico, due to the fact that
the country has more free trade agreements in place than any other place in the
world other than Israel. Additionally, Mexico has become one of the largest automotive
producers in the world. More on that later in the week. While producing
domestically and supporting our nation is certainly important, we should also
remember that trade and other business collaborations are just as necessary for
global sustainability and our economy as well.
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| Various locations of automakers in Mexico. As a part of my internship, I actually studied some of these facilities extensively. Mexico is one of the world's fastest expanding automotive producers with a stable economy. Just one of the many reasons why automakers are so attracted to this region. (Pardon the map quality) |
What is your opinion of this decision by Ford and on trade
agreements? I’ve got a feeling we’ll be seeing more decisions by manufacturers
to retool and keep production of certain models in the United States in the
coming years. I also expect we’ll see some rebellion by companies as well.
More Ford week coming up!
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