Ford to Import Focus From China, Instead of Mexico

BY CHRISTINA ROGERS AND MIKE COLIAS

Ford Motor Co. said it plans to start importing its Focus compact from China, reflecting an industry trend that gives car makers more flexibility but threatens the growth of automotive jobs in the U.S.

The move, announced Tuesday, is the latest change in Ford’s approach to production for its once-hot Focus, a small car the company started building in Michigan earlier in the decade. Ford said last year it would move the Focus to Mexico.

Building the next-generation Focus in China rather than in an existing plant in Hermosillo, Mexico, will save Ford $500 million, helping the No. 2 U.S. auto maker trim costs amid slowing U.S. volumes and rising expenses related to technology investments, both of which are pressuring profits.

The shift to Chinese factories, slated for mid-2019, has broad implications for the U.S. auto industry. Although Ford won’t be the first Detroit company to import cars into the U.S. from China, the Focus shipments would be by far the highest volume of vehicles to go from Chinese factories to American dealerships. In 2016, Ford sold 170,000 Focuses in the U.S.

The auto maker said relocating the Focus won’t result in any job losses at the Michigan plant. Ford plans to convert the factory to production of two new models—the Bronco sport-utility vehicle and Ranger pickup—starting in 2019, which will sustain the current workforce.

Companies producing in Mexico have been under pressure as the Trump administration renegotiates the North American Free Trade Agreement, a decades-old pact that led several auto makers to bulk up Mexican head count and production. Ford and rivals have already signaled changes in response to President Donald Trump’s repeated attacks on companies importing cars from Mexico to the U.S.

Mr. Trump had no immediate public reaction Tuesday, though other U.S. officials reacted coolly to the auto maker’s move.

“The Ford decision shows how flexible multinational companies are in terms of geography,” Commerce Secretary Wilbur Ross said in a statement. “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 auto makers already have.”

White House spokesman Sean Spicer linked the move to the American tax system, saying passing a tax overhaul would lead firms to move manufacturing back to the U.S.

Joe Hinrichs, Ford’s global operations president, said in an interview that Mr. Trump’s push to rewrite Nafta wasn’t influential in Ford’s decision.

Rather, with small-car sales slumping in the U.S., Mr. Hinrichs said it made more sense to add production in China, where it is already retooling its Focus plant for the next model, rather than spend additional money to convert an existing factory in Mexico.

“This is really about saving capital, which is cash to reinvest in the business elsewhere,” Mr. Hinrichs said.

Many auto makers are retrenching from a weak U.S. market for small cars, which are generally money losers. Sales of small cars and family sedans have taken a hit in recent years as low gasoline prices fueled a shift in consumer demand toward roomier SUVs and pickup trucks.

Mr. Trump criticized Ford’s decision to move Focus production to Mexico during the presidential campaign even though Ford’s plans to use the Michigan plant for pickup and SUV output would have preserved thousands of United Auto Workers jobs.

The turn to China may heighten the White House’s concerns because vehicles coming from Asia are typically far less dependent on U.S. parts than those coming from Mexico.

General Motors Co. last year became the first major auto maker to rely on China for significant volumes of vehicles to be sold in the U.S. Buick dealerships have sold more than 30,000 Envision SUVs, built in northeast China, since it went on sale in 2016.

Sourcing vehicles from China allows global auto makers to make better use of capacity in the world’s largest car market amid a slowdown in sales growth there. A combination of factors, including hefty tariffs and lower logistics costs, means U.S. workers have essentially no role in the construction of those vehicles.

Unlike cars built in Mexico, which often carry several components made by U.S. parts suppliers and shipped duty free, the Buick Envision relies on Chinese sources for 88% of its components, according to the National Highway Traffic Safety Administration.

Mr. Hinrichs said the decision to relocate the Focus should have limited impact on North American supplier jobs because the company has a slew of new models that will be built in the region.

Category: 

Add new comment

By submitting this form, you accept the Mollom privacy policy.