Howes: Blue Oval upends ‘build where you sell’ mantra

Daniel Howes

In its bid to get back on track, Ford Motor Co. is breaking the rules.

The automaker’s decision to move North American production of a well-established model to China violates a widely accepted norm in the global auto business: build where you sell. There are exceptions, and this is a big one. More are likely to come — whatever the “America first” rhetoric from Donald Trump’s Washington or the United Auto Workers.

A longer-term decline in oil prices, rising investment demands for mobility and autonomy, and investor pressure to maximize returns on deployed capital are pushing the Blue Oval to make the kind of hard, politically dicey decisions it historically avoided. Building next-generation Focus compacts in China for sale back in the United States will not be the last of them.

CEO Jim Hackett has said as much, and this week’s moves add credibility to the claim. Ford’s presence in the growing Indian market could be up next, as his newly shuffled senior management team pushes to decide where to play and how to win a game whose stakes only seem to be growing as Silicon Valley heavies push into the tech-driven transportation space.

This is what a Ford on the move could look like: let business logic dictate decisions, not politics; demonstrate that management is working for shareholders and customers first, employees and politicians second; let action speak for itself, not rhetorical intention.

Ford’s third change of course on the fate of the next Focus, as well as the call to pump another $900 million into SUV production in Kentucky, show the Dearborn automaker is pressing to reshape its global production amid dramatic market changes and the quickening pace of change in mobility.

No U.S. jobs are expected to be lost from the Focus decamping to China from its American home in Wayne, which explains the relative silence from Solidarity House. That’s because Michigan Assembly is slated to return to truck and SUV production, building a repatriated Ranger pickup later next year and a revived edition of the Bronco in 2020.

The moves underscore just how strongly Ford is betting longer term oil prices will stay comparatively flat and demand will remain strong for a wide portfolio of SUVs. Those arguably are bold bets (shared by rivals) given the jockeying by Saudi Arabia and Iran for regional hegemony in the Middle East, one of the world’s largest — and most volatile — oil patches.

Resurgent U.S. energy production partially mitigates that risk. Still, there’s no denying the fact that regional conflict over any sustainable period of time could influence energy prices and consumer sentiment across major markets, meaning profit lost tomorrow would offset profit taken today.

If Ford — or crosstown rivals General Motors Co. and Fiat Chrysler Automobiles NV — prove to have called it wrong, Detroit will once again be lambasted for betting too heavily on profit-rich gas-guzzlers and not enough on the leaner, smaller vehicles that consumers are supposed to want ... but increasingly don’t, monthly sales figures show.

Things change, as Detroit witnessed during the global financial meltdown, the run-up in oil prices and consumer reaction to it all. That was just a year or two after introduction of the smartphone — a lifetime ago, technologically speaking, and a reminder of how quickly sentiment can shift.

It’s very early in the Hackett era atop Ford, but his first moves signal a break with the conservatism deeply embedded in Blue Oval tradition. As GM ended production in Australia, bolted Russia, sold out in Europe and demonstrated a willingness to make hard calls, Ford mostly chose to cling to its regions and “small, medium and large, cars, trucks and utilities” model bequeathed by superstar CEO Alan Mulally when he jetted back to the West Coast.

Now it’s Ford’s turn — to use the Mulally legacy to fashion a 21st-century future; to show it doesn’t need to be all things to all people, despite its mass-market tradition; to summon the courage to exit segments and countries where it can neither make money nor claim sizable market share. And if it doesn’t, the first constituency to make Ford pay will be investors.

They’re waiting for action. Not a Ford cowed by a president’s hectoring about jobs, irrespective of the economics underpinning what he says he wants. Not a Ford intimidated by the UAW, because as long as the American status quo remains unaffected, union leadership will not meaningfully contest efforts to reshape the company’s footprint to bolster the bottom line and benefit its members.

Not a Ford afraid to question the viability of models and segments that do not, and may never, deliver meaningful financial returns. Executive Chairman Bill Ford Jr. spends a lot of time and breath talking about how the world is changing, how the industry will change, how Ford will lead that change.

The time for Ford to stop talking, and start doing, is now. This week’s China-and-Kentucky gambit is a first step in that direction. But it is not the last.


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Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.