Ford Motor Co will export the next-generation Focus compact car from China to North America in 2019, rather than from Mexico as earlier planned, saving the company $500 million, a top executive said on Tuesday. It is the first major manufacturing investment decision made by new Chief Executive Officer 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, said Joe Hinrichs, president of global operations. The decision also signals a shift in strategy at Ford, which is responding to low fuel prices and to U.S. consumer demand by de-emphasizing small cars while boosting U.S. production of trucks and SUVs.
Ford on Tuesday said it would invest $900 million at its Kentucky truck plant to build the redesigned Ford Expedition and Lincoln Navigator full-size SUVs this fall. It plans to export the Navigator to China and has contingency plans to build more of the big SUVs at an Ohio plant if demand grows. In January, after U.S. President Donald Trump criticized Ford for shipping small-car manufacturing to Mexico, Ford said it would kill plans to build a $1.8-billion Focus plant in San Luis Potosi and instead produce the new Focus at an existing plant in Hermosillo. The White House had no immediate comment.
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 said in a Tuesday morning 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. The current Focus will be phased out of production in Wayne, Michigan in mid-2018, according to Hinrichs. The Wayne plant will begin building a new Ranger midsize truck in late 2018 and a Bronco midsize SUV in 2020. Ford executives told Trump last year that moving production to Michigan of bigger vehicles that were more profitable would secure the Wayne plant’s future – a decision later praised by Trump. No U.S. jobs will be affected by shifting Focus production to China, Ford said, adding that it employs more U.S. hourly workers and builds more vehicles in the United States than any other automaker.
The United Auto Workers declined to comment. Hinrichs said “the capital saving outweighs the risk” of having to pay a potential border tax on the Chinese-built Focus. Ford U.S. Focus sales have fallen 22 percent this year, as low gas prices have helped spur more buyers into larger vehicles. Ford’s full-size F-series pick-up remains the best-selling U.S. vehicle by a wide margin. Ford stock fell 0.4 percent at $11.19. Hinrichs said Ford remains a major exporter to China, shipping about 80,000 vehicles a year from North America. General Motors Co has been exporting Buick and Cadillac cars from China to the United States, as has Volvo Cars, a unit of Chinese automaker Geely.