On June 20, 2017, Keith Naughton writes on Bloomberg:
Ford Motor Co. is canceling controversial plans to build the Focus small car in Mexico, saving $1 billion by ending North American production of the model entirely and importing it mostly from China after next year.
The U.S. automaker will start making the next-generation Focus in China from the second half of 2019, a year after output ends at one of its plants in Michigan. Ford will trim about $500 million in costs by shifting production to China, adding to the $500 million already saved from canceling construction of a small-car factory in Mexico earlier this year.
The move is the first major decision Ford has announced under Chief Executive Officer Jim Hackett and marks a complete break from the strategy of his ousted predecessor, Mark Fields, to relocate small car production to Mexico. The company will be testing both consumer appetite for China-built cars and the tolerance of President Donald Trump, who has criticized automakers for importing vehicles from overseas.
“We’ve done a lot of research and consumers care a lot more about the quality and the value than they do about the sourcing location,” Joe Hinrichs, Ford’s president of global operations, said Tuesday in a conference call with reporters. “iPhones are produced in China, for example, and people don’t really talk about it.”
U.S. Investment
Ford announced the Focus production plans along with a separate, $900 million investment it’s making in a Kentucky truck factory to build Expedition and Lincoln Navigator sport utility vehicles. News of that spending will preserve 1,000 jobs and could help insulate Hackett, 62, from the attacks Trump levied against the automakerduring the tenure of ex-CEO Fields.
“China gets a lot of attention, we’ll see how this plays out,” Hinrichs said in response to a question about possible criticism of the move from Trump. “But we believe this is a much better plan for our business globally. And it frees up from the original plan about $1 billion of capital that we can reinvest in the business, including exciting things that we’re working on in autonomy and electrification, and a lot of that work is done right here in the U.S.”
Both Ford and General Motors Co. management have come under pressure this year to boost their flagging share prices. Executive Chairman Bill Ford replaced Fields, 56, with Hackett while GM CEO Mary Barra has engineered exits from Europe and India. Ford may follow suit in abandoning sizable markets where the manufacturer struggles to make money.
“We wouldn’t be surprised if Ford announces further moves in the coming months,” Joe Spak, an analyst at RBC Capital Markets, said in note to clients. “The next announcement could be an exit from the Indian market, something the company has alluded to.”
Ford slipped 0.8 percent to $11.15 as of 1:21 p.m. in New York trading. The shares have declined 8 percent this year, while GM’s have dropped 1.2 percent. Both have trailed the 9.2 percent gain for the benchmark S&P 500 Index.
SUV Boom
Hackett is shaking up Ford’s Focus production plans as American consumers increasingly shun small cars and opt for roomier crossovers and SUVs. Focus deliveries have slumped 20 percent this year and have been in decline annually since 2012, as more buyers opt for utilities like the Escape or Explorer models.
After importing initial production of the new Focus cars from China, Ford said it will later ship variants of the model from Europe. The Michigan Assembly Plant now making the Focus will be retooled to produce the Ranger midsize pickup in late 2018 and the Bronco midsize SUV in 2020.
The move doesn’t signal a broader shift of other Ford models to China, where workers are paid less than they are in Mexico, Hinrichs said.
“Labor costs are cheaper in China than they are in Mexico, but of course you have to take into account the shipping costs, which are significantly higher from China,” Hinrichs said. “So I wouldn’t say this is a variable cost decision. It’s still cheaper to build in Mexico than China for the North American market if you have the capacity.”
Net Exporter
Ford will remain a net exporter to China, even after it begins importing Focus models to the U.S., Hinrichs said. The automaker expects to export more than 80,000 vehicles to China this year, including Michigan-built Mustang sports cars and Lincoln Continentalluxury sedans.
That should help protect Ford should Congress implement a border tax on imported goods, Hinrichs said.
“We expect to continue to be a net exporter and have a trade surplus with China even after we start bringing the Focus in,” he said. “We think the significant capital savings outweigh any of the risks associated with any adjustments to the border.”
FORD’S NEW CEO SNUBS President Trump…Will Build Focus In China…Export To U.S.
http://www.huffingtonpost.com/entry/ford-focus-china_us_5949efbbe4b0177d0b8a556d
Also see previous story at http://www.foreconomicjustice.org/?p=14356
This is a depressing story about American manufacturing corporations eliminating jobs by shifting manufacturing to China and using the cost savings as retained earnings for investment in future productive capital investment, which further concentrates capital asset ownership among the already wealthy capital ownership class. This is yet another example of the further outsourcing of jobs and natural resources as the American auto manufacturing industry invests in new factories not only Mexico, under existing free trade agreements, but also China, driven by the business to lower production costs and maximize profits, no matter what the consequences for American communities and the American labor force.
Auto companies have announced no new assembly plant plans in the United States since 2009. (The Tesla Motors factory in Fremont, California, is considered a reopening since it is on the site of a former joint Toyota-GM plant, though it does entail substantial job-elimination technological retooling and reconfiguration.) During that same time, six new auto factories were announced in Mexico, representing a combined investment of more than $8 billion, according to the Center for Automotive Research. And now Ford latest announcement to build in China.
Toyota, who is investing heavily in Mexico, said the cost of manufacturing a vehicle at the new factories will be approximately 40 percent less than what it spent to produce a car in 2008 due to a significant savings in labor costs ($2.47 to $5.64 an hour compared to $27.78 for their U.S. counterparts. Because of the nature of global competition, ALL American auto manufacturers must follow suit.
Still, according to Center for Automotive Research, even as the Mexican auto industry grows, automakers continue to invest in the United States. The car companies announced $10.5 billion in United States plant investment which includes retooling, reconfigurations and expansions of existing factories. That compares to $7 billion in Mexico and just $800 million in Canada. Of course, “retooling” and “reconfiguration” is really robotic super-automation employment housed in existing factories that will expand to accommodate technological efficiency – with the result that fewer workers will be required in the production.
Americans remain ASLEEP as the industrial prowess of the United States is sabotaged by a wealthy capital ownership class who seeks to further concentrate productive capital asset ownership while seeking the lowest possible wage and operational costs to maximize profitability.
But let’s not completely blame those American capital owners for not insisting on exclusive investment within the United States in the technological innovation that is exponentially shifting the technologies of production and negating the necessity for labor workers while devaluing the worth of labor. The blame also should be put on our so-call “political leaders” for not implementing economic policies that would facilitate the rapid technological growth of the United States economy, while simultaneously creating new capital owners and “customers with money” to buy the goods, products and services our economy is capable of producing. Such implementation MUST provide insured, interest-free capital credit to finance retooling, reconfigurations and expansions of existing factories as well as finance the building of new factories, owned by employees and citizens using Employee Stock Ownership Plans (ESOPs) and Capital Homestead Accounts or “CHAs” (a super-IRA or asset tax-shelter for citizens) extended to EVERY child, woman, and man by their local bank to purposely acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income.
The media and academia also are the blame for not educating Americans about why OWNING productive capital assets that build wealth and produce income is SO CRITICAL to their future. For example, no where in this article did the author, Keith Nauthton, even mention OWNERSHIP or question WHO WILL OWN these new productive capital assets or to explain how invested retained earnings further concentrates ownership. If he had, he would have had to come to the realization that the already wealthy ownership class will just get RICHER and RICHER by monopolizing ALL future economic growth.
Oh, but wait, Nauthton did mention that somehow we should be “cheering” because Ford announced the Focus production plans along with a separate, $900 million investment it’s making in a Kentucky truck factory to build Expedition and Lincoln Navigator sport utility vehicles. News of that spending will preserve 1,000 jobs. Of course, no mention, with respect to out-sourcing manufacturing using the web of free trade agreements, was given that such actions will enable the United States to feed the Mexican auto industry with billions of dollars of raw materials, such as plastics, steel and aluminum – in other words, depleting our natural resources without directly benefiting Americans owning the new productive capital manufacturing assets. Again, this bolsters the earnings and wealth building of an exclusive wealthy capital ownership class that is steadily acquiring ALL of AMERICA and creating tremendous economic inequality, both income and wealth ownership.
WAKE UP AMERICA!! WAKE UP Keith Naughton, WAKE UP Bloomberg and take responsibility for your lack of actionable responsibility. And let’s not leave out all the politicians who just play us with memes and slogans that really never delve into solutions other than coming up with ways to take from those who already own, instead of empowering EVERY child, woman, and man to contribute productively to the FUTURE economy through their OWNERSHIP of “tools,” as well as their labor when necessary. In this way, we can build a future America that can support general affluence for EVERY American by putting us on the path to inclusive prosperity, inclusive opportunity, and inclusive economic justice.
