Ford Moving Small Car Manufacturing to Mexico

09.29.16

Ford Increases Mexican Presence

During a recent investor conference in Detroit, Ford CEO, Mark Fields announced, “Over the next two to three years, we will have migrated all of our small car production to Mexico and out of the United States.”

Following a revised contract with the United Auto Workers union (UAW) signed in November of 2015, wages are scheduled to climb to nearly $30 an hour in coming years.  Labor rates in Mexico are approximately one-fifth that of the UAW.

With existing low profit margins industry wide on small car manufacturing, major automakers have been seeking lower cost areas to produce their vehicles.  Earlier this year Ford already announced plans to build a $1.6 billion dollar plant in the Mexican state of San Luis Potosi to produce small cars.

In explaining the latest move regarding small car manufacturing, Ford company executives expressed they have been looking for a cheaper manufacturing options on their lower profit vehicles such as the Focus and C-Max.  At the time of the UAW contract negotiation, the Focus was scheduled for manufacturing in Michigan, and UAW union officials speculated that production would likely go to Mexico.

Three major Detroit based U.S. car manufacturers, Ford, Fiat Chrysler and General Motors, all have multi-billion dollar production plants in Mexico.


Toyota Also Expands Mexican Presence

Recognizing a wide gain on margins, Toyota is also increasing its manufacturing capabilities in Mexico.   The automaker has gone all in with a 150 million investment to increase production at their existing Tijuana plant.  Company executives estimate the expansion will allow manufacturing to advance to 160,000 units annually, an increase from 100,000 it’s slated to turn out this year.

Mexico-U.S. relations have already been one of the most heated topics throughout the U.S. presidential campaign.   So, Ford’s announcement to move small car production to Mexico will undoubtedly have pundits of the U.S. 2016 Presidential campaign tongues wagging.  More than five months ago, one Mexican official stated that the announcement of the new plant in San Luis Potosí was being kept quite to avoid the firestorm it was sure to create as the U.S. Presidential campaign heated up.

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