Ford said in April it would invest $1.6 billion to build a small-car plant in Mexico, creating 2,800 jobs.
Ford announced this past week that it will shift all North American small-car production from the U.S. to Mexico.
"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," Ford CEO Mark Fields said Wednesday.
Ford isn't the first automaker to make such a move. Mexico has become a mecca for new automotive industry investment and has surpassed Canada in annual automotive production.
Fiat Chrysler, discontinuing production of the Dodge Dart in Belvidere, Ill., and the Chrysler 200 in Sterling Heights, Mich., plan to stop producing cars in the U.S. by year's end.
The auto industry has known for decades that domestic manufacturers struggle to make a profit on small cars.
In recent years, automakers including General Motors, Honda, Hyundai, Nissan, Mazda, Toyota and Volkswagen have all announced plans to either expand existing plants or build new ones in Mexico. Fiat Chrysler also has said it is considering an expansion of its production there.
Mexico has seen a 40 per cent increase in auto jobs since 2008, while the U.S. has seen a 15 per cent increase in the same period, according to the Center for Automotive Research in Ann Arbor, Mich.
While the North American Free Trade Agreement has been a factor driving automotive investment in Mexico, other factors have played a role as well. Mexico has trade agreements with 44 other countries, a robust rail and shipping infrastructure, lower wages than the U.S. and Canada, and a workforce that has proven it can make high-quality cars.
Shifting assembly to Mexico can reduce costs to a point. But some small cars are simply overengineered, experts have said.
For example, Fields said the Ford Focus can be ordered in 300 configurations of options and colours. Ford wants to reduce that number to 30, which will make the production process simpler and less expensive.
Americans increasingly prefer larger vehicles, especially pickups and higher-riding SUVs and crossover vehicles for their personal use.
Ford's announcement didn't come as much of a surprise. Ford said in April it would invest $1.6 billion to build a small-car plant in Mexico, creating 2,800 jobs. Ford also said in 2015 that it planned to move production of its Ford Focus and C-Max hybrids from a plant in the Detroit suburb of Wayne to another country by 2018.
Ford is reassessing much of its business to prepare for a future in which it needs to make cars for new modes of transport, to generate money from shared use, all without jeopardizing profits still generated by many of its cars and trucks.
Ford has said it continues to invest heavily in its U.S. plants and isn't cutting jobs. Last fall, the automaker made a commitment to invest $9 billion in U.S. plants and create or retain more than 8,500 jobs as part of a new four-year contract with the UAW. Of that, $4.8 billion is going to 11 facilities in Michigan.
The future of smaller cars in the U.S. may depend on the ability to electrify their powertrains and introduce them to ride-sharing fleets where they can generate revenue from fares paid by multiple riders.
Along those lines, Fields and other Ford executives on Wednesday outlined an aggressive $4.5-billion investment plan that will unfold over the next four years. The investment will result in new models in segments such as commercial vehicles, trucks, SUVs and performance vehicles, the execs said.
Ford also reiterated its commitment to developing an autonomous vehicle by 2021. The company believes that autonomous vehicles could account for up to 20 per cent of vehicle sales by 2030.
You might also be interested in:
Expert panellists at IRC Global Executive Search Partners Global Conference “Innovation & Agility: The New World” in Shanghai tell us how Chinese companies square a top-down or bottom-up approaches with innovation in the workplace.
IRC Global Executive Search Partners Global Conference in Shanghai saw an expert panel weigh in on issues pertaining to “Innovation & Agility: The New World”.