Ford to move all small car production to Mexico

Michael Martinez
The Detroit News

American-made small cars are becoming an endangered species for Detroit’s Big Three automakers.

Ford Motor Co. President and CEO Mark Fields on Wednesday confirmed Ford will end small-car production in the United States by shifting it all to Mexico in the next two to three years. That follows announcements from Fiat Chrysler Automobiles that it’s ending all American car production, and plans from General Motors Co. to phase out the Buick Verano in the U.S. The only small cars Ford still builds in the U.S. are the Focus and C-Max, made at Michigan Assembly in Wayne.

After 2018, the only American-built small cars from a domestic automaker will come from GM, which builds the Chevrolet Cruze, Sonic, Volt, Bolt EV and Cadillac ATS in America. Small cars from foreign automakers including the Hyundai Elantra, Toyota Corolla and Honda Civic are built here, too.

The exodus of small cars south of the border is a result of automakers managing costs for low-profit vehicles that consumers have turned their backs on in an era of $2-per-gallon gas. And if demand ever shifts back to small cars, analysts say U.S. workers who mostly build trucks and SUVs are safe because large vehicles today are more fuel-efficient than in years past.

“Every global manufacturer has to determine how it can best create revenue and limit expenses,” said Jack R. Nerad, executive editorial director and executive market analyst for Kelley Blue Book. “Small vehicles are the most price-sensitive, so any cost-savings that can be gained offer competitive advantages. Thus moving production to a lower-labor-cost country makes particular economic sense for small cars.”

Ford and other automakers save a significant amount of money in labor costs by building in Mexico. Autoworkers there make the U.S. equivalent of $8 to $10 an hour, according to the Center for Automotive Research. Top-tier workers in the U.S. make about $29 an hour. Plants in Mexico also don’t have to pay as much for the lucrative health care and pension plans U.S. workers receive.

In addition to labor-cost savings, Mexico has a number of favorable trade deals that make exporting to other countries more appealing.

“I don’t think it’s all doom and gloom,” said Dave Sullivan, manager of product analysis for research firm AutoPacific. “It’s a reflection of the shrinking market share for compact cars.”

The Mexico issue is in the spotlight in part because presidential candidate Donald Trump has vowed to impose a 35 percent tariff on any Ford cars built there. Trump on Wednesday decried Ford’s announcement.

“We shouldn’t allow it to happen,” he said at his appearance in Flint. “They’ll make their cars, they’ll employ thousands and thousands of people not from this country and they’ll sell the cars right through our border. No tax, no nothing and we’ll have nothing but more unemployment in Flint and in Michigan. It’s horrible.”

Ford does not build cars in Flint, and has been adamant that the move of the Focus and C-Max from Michigan Assembly will not result in job losses. The Detroit News first reported last year it wants to replace those products in Wayne with the Ranger midsize pickup, and Bloomberg has said it could also include the Bronco SUV.

Ford announced last year it would end production of those vehicles in the U.S. in 2018, but until now had not confirmed where they would go.

The Dearborn-based automaker plans to build a new $1.6 billion assembly plant in San Luis Potosi, Mexico, which would be a likely destination for the Focus and C-Max. It has said it will employ 2,800 at the new Mexican plant by 2020, but Ford has never said truck production would be moved to Mexico as Trump suggested at a Detroit visit in September. In fact, the automaker has recently moved some truck production from Mexico to the United States. Ford does not assemble its trucks in Mexican plants, but Big Three rivals GM and Fiat Chrysler do have truck assembly plants in Mexico.

Ford also is spending $1.1 billion to expand an engine plant in Chihuahua and another $1.2 billion to build a transmission plant in the Mexican state of Guanajuato that is projected to employ 2,000 by 2018.

The company says Mexico ranks fourth among countries where it makes its vehicles for global customers — behind the U.S., China and Germany. It already builds the Ford Fiesta, Ford Fusion and Lincoln MKZ in Mexico. It will continue to build larger cars in the U.S., including the Ford Taurus, Ford Mustang and Lincoln Continental.

GM builds the Chevrolet Cruze compact at its Lordstown Assembly Plant in Ohio (it also builds the Cruze in Mexico for other markets). The small Buick Verano, for now, is built at GM’s Orion Assembly Plant in Orion Township, as is the only subcompact built in the U.S., the Chevrolet Sonic. Orion also is home to the Chevy Bolt EV, an all-new small crossover it will begin building this year for sale. The compact Cadillac ATS is built at its Lansing Grand River Assembly Plant and the compact Chevy Volt plug-in hybrid is built at its Detroit-Hamtramck Assembly Plant.

In a scenario in which gas hit $4 per gallon, experts believe there wouldn’t be a dramatic swing toward small cars because buyers have more options with more fuel-efficient SUVs and trucks than in the past. U.S. workers would be fine in such a scenario, believes Kristin Dziczek, director of the industry, labor and economics group for the Ann Arbor-based Center for Automotive Research.

And AutoPacific’s Sullivan said automakers would “no doubt” be able to scale-up production in Mexico to easily meet small-car demand in the U.S.

Then there’s the wild card: Let’s say Trump is elected and imposes his 35 percent tariff.

“The ripple effects would be terrible and affect the bottom line of all three (Detroit) automakers,” Sullivan said. “But I think Ford is placing bets on something like that not happening.”

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Twitter: @MikeMartinez_DN

Staff writers Chad Livengood and Melissa Burden contributed.