Ford Motor Co. Chief Executive Officer Mark Fields said on Wednesday that all of the company’s small-car production will be leaving U.S. plants and heading to lower-cost Mexico. That comes as no surprise, given that earlier this year, the company announced it’s building a $1.6-billion assembly plant in San Luis Potosi, Mexico, and plans to begin small car production there in 2018.
“We will have migrated all of our small-car production to Mexico and out of the United States,” over the next two to three years, Fields told Wall Street analysts at an investor conference hosted by the automaker.
During contract talks in 2015, Ford confirmed that it would move Focus and C-Max production out of its Wayne, Michigan, plant in 2018. That plant instead will produce new vehicles under a contract signed last year with the United Auto Workers union, the LA Times reports. Some analysts believe those vehicles will probably be larger, more profitable vehicles such as the Ford Ranger pickup and a new Bronco SUV.
The industry has known for decades that it is a challenge for domestic automakers to make a profit on small cars, which likewise, have small profit margins. It makes sense then, for automakers to shift small car production to Mexico. Fields at Ford has previously noted that the company’s labor costs in Mexico are roughly 40 percent less than they are at U.S. plants, which are all unionized.
Ford isn’t alone in that production shift either. Indeed, last fall, AutoForecast Solutions estimated that GM, Ford and Fiat Chrysler will collectively produce 45 percent of their small cars for the North American market in Mexico by 2020, up from 18 percent in 2014. Researchers at IHS Automotive projected the Mexican percentage of U.S. companies’ small car production to reach 42 percent in 2020.
What was unexpected about the announcement, however, is that as an ABC News story reports, presidential candidate Donald Trump jumped right in yesterday, calling Ford’s plan to relocate a small car assembly plant to Mexico “disgraceful.” Maybe, on reflection, that shouldn’t be a surprise either since—for whatever reason—Trump has targeted Ford before.
“Ford has announced … that they’re moving their small car production facilities to Mexico,” Trump said. “To think that Ford is moving its small car division is a disgrace. It’s disgraceful. It’s disgraceful that our politicians allow them get away with it. It really is.”
In an interview on Fox News, Trump went further, saying that Ford plans to “fire all their employees in the U.S. and move to Mexico.” He added that Ford would have to pay a 35 percent tax on any car that comes back to the U.S. if he becomes president. “And you know what’s gonna happen, they’re never going to leave.”
Ford CEO Fields wasted no time in replying that Donald Trump is completely wrong when he says that Ford plans to move its U.S. operations to Mexico, or even shift future investment outside the country. Asked in a CNN interview if Ford would cut any U.S. jobs as part of its plans to build a new plant in Mexico, Fields responded; “Absolutely not. Zero. Not one job will be lost. Most of our investment is here in the U.S. And that’s the way it will continue to be.”
During the interview, Fields also said, “It’s really unfortunate when politics get in the way of the facts.”
What are your thoughts on shifting small car production to Mexico? Is it even possible anymore for automakers to remain competitive if they do not shift small car production to Mexico and, instead, focus U.S. production on larger vehicles with higher profit margins?