DETROIT (April 12, 2016) — The United Autoworkers' (UAW) president called Ford Motor Co.'s plan to make small cars in Mexico instead of the U.S. “very troubling,” while Republican presidential candidate Donald Trump labeled it “an absolute disgrace.”
But executives say it's the reality of the shrinking market for low-margin cars — even if it puts Ford in the crosshairs of a presidential election in which globalization and its effect on working-class American jobs has become a central issue. Weak car sales also compelled Fiat Chrysler Automobiles (FCA) to announce 1,300 job cuts in Michigan last week.
Dearborn, Mich.-based Ford plans to start building a $1.6 billion plant in Mexico this summer, without waiting to see if Mr. Trump gets a chance to follow through on threats to tax vehicles crossing the border.
“We're a proud American company,” Joe Hinrichs, Ford's president of the Americas, told Automotive News. “We set up our global manufacturing footprint and our facilities where we think it makes the most sense for our business.”
Ford said the plant, scheduled to open in 2018 and create 2,800 direct jobs by 2020, is necessary to make its small cars more profitable and that no jobs will be cut in the U.S. as a result. It plans to halt U.S. production of its Focus and C-Max compacts in 2018, dedicating its Michigan Assembly Plant to lucrative pickups and SUVs instead, sources have said.
That means the 3,700 people who work there should have better job security building the bigger, costlier vehicles consumers can't get enough of than continuing to make slow-selling compacts, many of which now end up in rental fleets. But UAW President Dennis Williams — who has known of Ford's plan for nearly a year but didn't block it during last fall's contract talks — still blasted the auto maker for shifting production south of the border and criticized the trade agreements that allow it.
“For every investment in Mexico, it means jobs that could have and should have been available right here in the USA,” Mr. Williams said in a statement. “Companies continue to run to low-wage countries and import back into the United States. This is a broken system that needs to be fixed.”
Also last week, FCA announced it would lay off 1,300 workers over feeble demand for the Chrysler 200 sedan. Production of that car ultimately may be outsourced to Mexico or another country, with trucks or SUVs replacing it at the Sterling Heights Assembly Plant — which another UAW leader framed as good news for workers there.
“FCA is not the only company experiencing a slow market for small cars. On a bright note, there is a strong demand for larger-sized vehicles,” Norwood Jewell, the vice president in charge of FCA negotiations, said in a statement. “I believe that in the long term this move will be a positive one for our members and the company.”
The UAW paved the way for Ford and FCA to build cars in lower-wage countries last fall, when it signed deals that largely eliminate the two-tier wage structure its members despised. Ford told the UAW it also planned to consolidate production of its Fusion sedan in Mexico and stop making them in Michigan, which it did in March.