Ford said its next-generation Focus for the US would be sourced primarily from a joint venture in China, instead of Mexico, saving an additional US$500m on top of the $500 million savings announced earlier this year by cancelling plans for a new factory in San Luis Potosi, Mexico, and moving production to the Hermosillo, Mexico, plant.
“Production begins in the second half of 2019, with models coming from the company’s existing Focus plants globally,” the automaker said in a statement.
“Most new North American Focus models initially will come from China, with additional variants coming from Europe later.”
It insisted no US hourly workers would will be out of a job due to the Chinese build.
“Production of the current North American Focus at the Michigan assembly plant continues through mid-2018. Following that, the plant will be converted to produce the Ranger midsize pickup truck in late 2018 and the Bronco midsize SUV in 2020.”
“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,” Ford’s global operations chief Joe Hinrichs said.
The automaker also said it was spending $900m at its Kentucky truck plant for upgrades to build the new Expedition and Lincoln Navigator, due in dealerships this autumn. Both full-size SUVs will be exported to more than 55 markets – including Navigator to China.
The automaker said that would secure 1,000 jobs for hourly workers at the Louisville plant and is on top of the $1.3bn spend and 2,000 jobs created at the plant late in 2015 to build the new Super Duty.
“Large SUVs are attracting a new generation around the world – and we’re finding new ways to deliver the capability, versatility and technology that customers around the world really want,” said Hinrichs. “At the same time, we also have looked at how we can be more successful in the small car segment and deliver even more choices for customers in a way that makes business sense.”
Reuters noted this was the first major manufacturing investment decision made by new Ford CEO Jim Hackett, who succeeded Mark Fields in late May. Discussion about the small car production shift from Mexico to China began “a couple months ago” under Fields, Hinrichs told the news agency.
Although it is cheaper to build and ship cars to the United States from Mexico than China, “this was not a variable cost decision,” Hinrichs told Reuters in a Tuesday morning media briefing. “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.
Given dwindling overall US demand for small cars such as the Focus, “we thought this was the best balance of that cost/capital tradeoff,” Hinrichs told Reuters.
Asked if Ford was concerned about having to pay a border tax, as Trump has threatened on vehicle imports from Mexico, Hinrichs said “the capital saving outweighs the risk” of a potential tax on the Chinese-built Focus.
The Focus for North America will be built at a joint venture plant operated with Chinese partner Changan Automobile.
Hinrichs told Reuters Ford remained a major exporter to China, shipping about 80,000 vehicles a year from North America.
General Motors has been exporting Buick and Cadillac cars from China to the United States as has Volvo Cars.