Ford Motor Co. (NYSE:F) has announced that will be moving some production of its Focus small car to China. The Focus has been built at the Michigan Assembly plant in Wayne, Michigan for years. The current Focus will be phased out of production in Wayne in mid-2018. The company will then import the vehicles to the United States.
Ford described the production shift from Mexico to China as a purely financial move. The company says that the move, slated for mid-2019, will save $500 million in reduced tooling costs. Ford now has to retool only one plant, the existing Focus factory in Chongqing, rather than two to supply North America. Ford said no U.S. jobs will be affected by shifting Focus production to China.
The company’s decision to shift production of small cars to Mexico became a hot-button issue during last year’s presidential campaign. U.S. President Donald Trump also criticized Ford in January for shipping small-car manufacturing to Mexico. Shortly thereafter, Ford announced that it was canceling plans to build a $1.8-billion Focus plant in San Luis Potosi and would produce the new Focus at an existing plant in Hermosillo instead.
Ford’s decision is the first major manufacturing investment decision made by new Chief Executive Jim Hackett. Hackett succeeded Mark Fields in May.
Ford is responding to dwindling U.S. consumer demand for small cars. Low gas prices have helped spur more buyers into larger vehicles. Sales of the Ford Focus have fallen 22 percent this year in the U.S. China could be playing a much larger role in vehicle production for North America in the future as the country is a very inexpensive place to make cars. In time, the country may eclipse Mexico as a low-cost manufacturing source for vehicles.
In the U.S., the company plans to focus on more expensive and more profitable trucks and SUVs. Ford’s full-size F-series pick-up remains the best-selling U.S. vehicle by a wide margin. Ford executives said last year that moving production of bigger, more profitable vehicles to Michigan would secure the Wayne plant’s future. The Wayne plant will begin building a new Ranger midsize truck in late 2018 and a Bronco midsize SUV in 2020.
The redesigned Lincoln Navigator goes into production at Ford’s Kentucky truck plant this fall. The Ford Expedition is also being built at the Kentucky plant. Ford said it has contingency plans to build more of the big SUVs at an Ohio plant if demand for the vehicles increases.