Ford Announces Plan To Shift All Small-Car Production To Mexico

Tyler Durden's picture

Earlier today Ford announced that it expects operating income to decline in 2017 as the automaker increases investment in electric and autonomous vehicles, before rising again in 2018.  This news came after Ford had just lowered it's expectations for FY 2016 EBIT to $10.2BN from $10.8BN due to increasing costs associated with an expanded recall related to faulty door latches. 

So how do you offset rising costs and a top-line that executives recently admitted have "reached a plateau?"  Well you shift more production to low-cost countries, like Mexico of course.  According to Reuters, Ford CEO, Mark Fields, confirmed at the company's investor day today that all of Ford's small-car production would be shifted to Mexico over the next 2-3 years.

"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.

As we wrote about a month ago, Ford is scheduled to open a brand new $1.6 billion plant in Mexico in 2018.  The plant will employee roughly 2,800 workers who will be paid $1.15 - $2.30 per hour which is a mere 97% less that the $70 per hour all-in cost of an United Auto Worker employee performing the same labor in Detroit.  The move is expected to yield savings of $1,300 per vehicle relative to production costs in Detroit.  Per the Wall Street Journal:

Ford is scheduled to open a new $1.6 billion small-car assembly factory in San Luis Potosí in 2018 and hire 2,800 workers. People familiar with the matter say Ford will produce its Focus there, which is currently built in Michigan.

 

A contract reviewed by The Wall Street Journal puts factory wages at the facility at about $1.15 to $2.30 per hour, on par with what other auto-assembly plants currently pay in the region. The move to Mexico will yield cost savings of about $1,300 per vehicle, or about $300 million a year, according to manufacturing experts familiar with the Detroit car maker’s finances.

Wage Divide

 

As we've said before, supporters of minimum wage hikes could learn from the efforts of the United Auto Workers Union which did a masterful job negotiating off-market wage and benefits packages which have ultimately only served to provide their members with permanent job losses.

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balz's picture

Time for Trump.

salvadordaly's picture

Time to "Trump" labor unions , is more like it!

King Tut's picture
King Tut (not verified) salvadordaly Sep 14, 2016 9:30 PM

At this rate the only union employees left in the US will be the worthless government union cocksuckers

wee-weed up's picture

Hey, Obozo... how's your "wonderful" economy REALLY doing?

American Psycho's picture

Come on wee-weed up, stop peddling fiction.

/sarc

Took Red Pill's picture

Thank the guy who is still dicking bimbos at home and NAFTA for this situation.

Never One Roach's picture

So Mexicans are going to have to move back to Mexico to take jobs away from Americans?

 

Thank you Obama!

Shocker's picture

Its time to take back our jobs, Stop giving them away.

Layoff List: http://www.dailyjobcuts.com

ufos8mycow's picture

Obviously some of you people know little to nothing about unions. I have been a member of my TRADE union for over 20 years. An SEIU member is NOTHING like a union carpenter, plumber or truck driver.

Handful of Dust's picture

Sending thousands more jobs overseas is most likely part of Obama's grand plan probably called something like---- the "Protect and Grow American Jobs Act"

espirit's picture

Less US jobs, less US purchasers.

Not hard to see how this ends, in tears.

 

Take Back America. 

Déjà view's picture

Small vehicles low demand in U.S. export cars to high demand EU 10%/22% CAR/TRUCK import DUTY does not apply MEXICO-EU FREE TRADE AGREEMENT.

The tract of cleared woodland lies alongside a factory Volkswagen AG set out to build in 2008. VW took an option on the adjacent 800 acres as a place where its Audi unit might build a North American plant someday.

But four years later, when Audi decided to move global production of its Q5 SUV to North America, the prize went to Mexico. Audi now is finishing a $1.3 billion factory in a gritty south-central Mexico town called San Jose Chiapa. The plant’s massive buildings rise like supertankers from dun-colored fields where families scrape by raising corn and beans.

Mexico’s low wages and improved logistics were part of the draw. But for Audi, which plans to ship the factory’s output all over the world, what tipped the scales was Mexico’s unrivaled trade relationships.

“Mexico had more than 40 different free-trade agreements,” said Rupert Stadler, Audi’s chief executive. The pacts give exporters from Mexico duty-free access to markets that contain 60% of the world’s economic output.

http://www.wsj.com/articles/why-auto-makers-are-building-new-factories-i...

Stuck on Zero's picture

Another Bush/Obama "Mission Accomplished."

Déjà view's picture

FREE Market At Work For Detroit Copper Thieves...

https://youtu.be/Il08ezF-oeY

auricle's picture

Lots of corporations giving Tump's plans the finger. Daring so close to the election. One would think they would wait till 2017 to make any big announcements like this. Somthings up. 

photonsoflight's picture

If Trump re-installed the tariffs once used to fund the federal government, many big corporations would be hit hard and often. Perhaps that is their true fear of the Donald. Perhaps instead of bimbos these big corporations will get dicked.

scsherman's picture
scsherman (not verified) ufos8mycow Sep 15, 2016 12:15 AM

You are right, trade unions are worse. What makes you think a union carpenter is worth $70/hour? Hammering nails and cutting wood is not hard or particularly skilled work on most jobs. Worse still, they all smoke and look like slobs. My uncle and cousin are both union carpenters. They spend two months of the year paying their union dues then usually about 8 out of 12 actually working because they can't win bids with competition in place. They usually only get government contracts and big city building jobs because they use their political lobbying and thuggery to influence the process. I will gladly pick up a half dozen Mexicans at Home Depot for the same price. They work harder and I don't have to worry about them suing me for fake injuries on the job.

cowdiddly's picture

and get exactly what you paid for.

roddy6667's picture

A couple of years ago I picked up a flyer where union carpenters were picketing a non-union job in NYC. The paper showed that if you were a carpenter's union member you could work 6 months, collect unemployment 6 months, and gross $75,000 a year. I was disgusted.

photonsoflight's picture

I was a teamster. They took my dues and sent me fancy magazines telling to vote for obama. They should be held in contempt.

roddy6667's picture

Copmplain to the Mafia. They own and run the Teamsters.

JackT's picture

And now Toyota:
Toyota to spend $150 million to ramp up production capacity of Tacoma pickup trucks at Mexico factory - Reuters

King Tut's picture
King Tut (not verified) ufos8mycow Sep 14, 2016 9:58 PM

I don't think anyone said anything negative about trade unionists but everyone is in agreement on the AFSCME and SEIU leeches

Heavy's picture

America down south, sellin out for the money, harder III!

Déjà view's picture

Trade Unions...

Hmmmm...Canada, Germany, Japan and Korea unionized auto workers. 

These are 3 reasons-AGAIN...

1. Highest corp. tax rate in OECD

2. Healthcare 'Taxing' GDP @ 19% p.a.

3. Lack of tort reform

4. IN THIS CASE LACK OF FREE TRADE AGREEMENTS AS MEXICO. If American workers are the most productive in the world what is there to fear...fear itself? LET ME GUESS...3 reason above. 

Take your eye off the BALL...missed a chance for a TRIPLE PLAY!

Bobbyrib's picture

German auto manufacturers are willing to pay their workers more because they produce "luxury" cars, or as I like to call them quality automobiles. US auto producers are like the Walmart of the world producing cheap, disposable crap. The car I have now is my last car by an American car company.

I had to replace gaskets on my car three years ago, which costed me a pretty penny. The mechanic explained that the engineers came up with a new design, then to save money Ford scrapped the new design plan and manufactured it the same way they had been in the past. They essentially built the car with this defect knowing people would have a problem down the line and they did not care. American cars are also known to be not as reliant as foreign cars as well. If it is not the project managers for Ford, it is their engineers and lack of skills to produce better quality cars.

NoPension's picture

I just finished a job, construction.....where the new tenants were union....construction.

Not a one could wipe my ass. But, they had safety shoes, bright green safety vests, safety glasses and hard hats. Which were mandated to be worn 100% of the work day. Inside, doing bullshit...before their "real" project started. I wont mention it. It would scare the fuck out of you. Then again, it's a 35 million contract, that can be done for 10-15 million.....so, eventually.

The kicker was watching one of these "super fucking heroes " , harness up and tie off, while working 4 feet up on a stairway. Really.

Union carpenter. Haha.

ufos8mycow's picture

So what you're saying is you could hire a bunch of illegals from Mexico and do the same job for half the price? Would you also tell any tenants that there's a good chance the ceiling will collapse in a few months after their check clears?

NoPension's picture

Nothing will collapse. I did the work, upgraded the fit out, in a building I bu it about 12 years ago.

I'm only ripping because;
They were, to a man, arrogant assholes who though their shit didn't stink.

The 50 bullshit faggoty posters they hung everywhere. Union this and that. Safety this and that. Quality this and that. Ad nauseum.

The work they did inside ( racks, shelving, lockers and benches) were built with the BEST tools and materials money could buy. And we're little more than firewood after these hacks finished butchering it. And they knew. And joked and laughed about it. ( but didn't fix it, or even seem embarrassed)

It took 4 of them, a full day, to equal what I would do alone, in the same time. And mine would be of a level of quality they could only dream of.

These motherfuckers are going to rebuild a bridge that carries over 50,000 cars a day. But, when the sun goes down, they morph into Chip Foose, I suppose.

And lastly....blow me.

ufos8mycow's picture

LOL!

I'm a Stagehand myself. I work Broadway and such. Sometimes when a tour comes into town we meet someone like you. He who knows better. One of the 'I'm better than you' crowd. We have a t-shirt designed by some oddball stagehand somewhere.

Says "Remember when you were an dick during the load-in?". Basically that means 'you're paying us $50.50/hr and because you treated us like shit when you first met us, you're about to have a VERY long night.'

Seems to me those union carpenters you speak so fondly of decided to teach your spoiled ass a lesson.

 

p.s. You should have just smiled and bought them some doughnuts. Union guys LOVE doughnuts. Or beer is even better! Kenny Chesney came out once after his concert and thanked all of us personally for the show. He then said he had a bunch of Coors (the tour sponsor) for us when the last door closed. We had the trucks loaded high and tight in record time.

p.s.s. And lastly...how much $ are you offering? I'm union so if I do this I'll have to be safely harnessed and I'll probably hang a bunch of posters in your bedroom.

NoPension's picture

I've done my share of stage work.
From concerts, made for tv, live tv and Big screen production.

Stage work is mostly exempt from the safety rules that apply to most construction. The codes are very liberal in their application also. Or nothing would ever get done.
Grips and stage hands are some of the hardest working people ( men and women) I've ever worked with. And the pay is not super, nor is the working conditions.
But it is " show biz".

Two totally different worlds. Even you would lose your shit if you had to see what goes on in union construction. That being said, it's the only way to pull labor to a big project. No one company can keep those large amounts of labor on staff, waiting for a big job to start.

And, btw, when I did show biz...nobody fucked with me. I was the one guy who could, in an instant.....stop your party in its tracks.

Who was I? Haha!

ufos8mycow's picture

I really respect stage managers. They have to deal with us and the road crews. My guess is that was what you were. Even if we are 'stopped in our tracks' we still get our 4 hour mini. :) Anyways I agree about the differences you point out. My point (if I can call it that) was an SEIU maid is a far cry from someone who has spent their entire lives learning a trade.

 

https://www.pinterest.com/pin/31103053654093583/

Bastille Day's picture

You can probably thank the legal industry complex for that.  One slip and fall off those stairs and the losses are in the millions.

LetThemEatRand's picture

In my mind, you're all correct.   Unions helped create laws that kept workers safe, but that turned into ridiculous extremes that were abused.  As for the legal industry, if a worker falls and becomes paralyzed, his family is facing huge bills that can run into the millions (it costs six figures to spend a week in the hospital with a major injury).  If an employer was at fault, he/it should take personal responsibility.

It's not a binary equation.  Unions served legitimate purposes, and they also became corrupted and fucked their own people.  Doesn't mean we want to go to a Mexico/China model.

piliage's picture

Not sure if you've ever seen or heard of Fred Dibnah, he's something of a folk hero in the UK.

Harness at 4 feet? ROFL

https://www.youtube.com/watch?v=6W_7uIapoHc

 

KickIce's picture

I have no problem with most unions, it's the outright bailouts and contracts through graft that reward bloated payrolls that are the problem.

Allen_H's picture

Like seeing people wearing helmets while walking around outside, or riding a bike, since when did they need to do that? Is it so fucking dangerous now to walk? And also using fucking walking sticks, in the 70-80's you would never see such bullshit. We were fucking wild, and still are, they fucking show they are mind controlled sheep.

Oh yeah, Fuck Ford and all other corporations.

FX223's picture

Easy way to fix all this...let the Mexicans move here and we all move down there and get our jobs back...oh wait...that's a stupid idea.

Creative_Destruct's picture

Yup, but not as stupid as NIRP.

Golden Phoenix's picture

.

^ I just wanted to make a point.

Ha ha, that's my favorite line.

ACES FULL's picture

Ford sells out American workers for 1300.00 per car,probably about 3% of the retail price of the car. Talk about being shortsighted. Who do they expect to sell these cars to in a few short years.

Heavy's picture

not after the japanese monetary event

Supafly's picture

Well, you know Ford and their desire to keep production costs low.  Two words:  Ford Pinto

Bastille Day's picture

I test drove a Ford once in 1992.  My gf wanted was looking for a new car, and a Ford Probe was on the list to test drive.  What a POS.  I couldn't believe the difference in quality between it and the Dodge Stealth(Mitsubishi 3000gt) she ended up buying.  I didn't think any Probe's would make it more than 5 years but yet I still see one on the road once in a blue moon.  Completely shocked to see it.

The quality of that Ford was soo poor I never considered a Ford again.

SantaClaws's picture

The Ford Probe was built by Mazda.  My neighbor bought one used in 2003 or 2004.  Weird security lock on ignition; specialty tires.  Otherwise seemed okay.

Abbie Normal's picture

The Probe was initially designed as a Mustang replacement but focus groups told Ford that a front-wheel-drive vehicle built on a Mazda 626 drivetrain is no Mustang.   So it became a whole new model called the Probe (and lasted only 2 generatons.)  It was built in the Ford plant at Flat Rock, Michigan by union labor so reliability was not a positive.

Speaking of which, the Ford plant in Mexico almost always ranks highest for build quality of all Ford plants in North America.  Take that, Detroit and Windsor.