Ford Focus production is moving to China. The Chinese economy is improving, and it has just been given a boost. Ford has announced that the production of the new Ford Focus car is to be moved to China in 2019. Ford had been under pressure to keep production in Michigan, but has refused to do so. Why is Ford taking this step, and not keeping as much of the production in the US as possible? Let’s have a look!
Ford had planned to move product of its new Ford Focus to a new $1.6 billion plant in Mexico. However, this decision came under severe criticism from Donald Trump. Because of that criticism, the company scrapped this plan in January. Up till now, Ford had been manufacturing the Focus in Michigan, China and Germany. However, it was noted that sale of the Ford Focus had been falling off in the US in favor of larger cars.
Ford then planned to move the Focus from Michigan to a new plant in San Luis Potosi in Mexico. Donald Trump also complained about that. The president has a history of lambasting auto manufacturers for importing goods from other countries, particularly Germany and China. So Ford abandoned this plan and apparently acceded to president Trump’s criticism. The president believes that goods used by Americans should be made in America.
So the company decided to have the Ford Focus made in China! Obviously not what Trump wanted to happen as a result of his criticism of Ford. It is equally obviously that he can do nothing about it. His administration is being harmed by his controversies. While people were not happy that Ford was moving from Michigan to Mexico, they will be even less happy that Ford has been forced to China!
At the time Ford publicized its move to Mexico, it also stated that no American jobs would be lost. This was because Ford intended to use the money it would save by manufacturing in Mexico to invest in another Michigan plant. This new plant would focus on electric cars and existing employees would have a job.
Ford’s announcement on Tuesday means that the new Ford Focus will be made in China – not Mexico. This would save Ford $500 million. Ford stated that the Michigan plant would start truck manufacture next year, so jobs would be saved.
Sean Spicer, a White House spokesman, stated Tuesday that Ford’s plans underline the need for US tax reform. He stated that this may make domestic manufacture less expensive. This infers that tax cuts could enable American firms to compete better with foreign countries – and may have persuaded Ford to remain in Michigan.
The auto-manufacturing industry is very cut-throat at the moment, and domestic taxes do not help US firms to compete internationally. This is likely true of much US manufacturing, and rather than complaining, perhaps the current US administration should take some action. American companies should be able to manufacture in America competitively.
Up to the end of May, Ford Focus sales in the US have dropped by almost 20% over the same period last year. Something had to be done to cut costs, and enable Ford to continue with the development of SUVs and electric vehicles. This move has enabled that by moving Ford Focus production to a country where employment and production costs are less than in the US.
This is an issue that may never be resolved satisfactorily. Low cost labor will always be attractive, but manufacturing costs are gradually converging between the developed and developing countries. It may have been better if the Ford Focus production had been located in Mexico, but external intervention effectively forced Ford to China – perhaps!
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