The Ford Motor Company has sent shockwaves through the motor vehicle industry circles with a surprise decision to relocate the production of one of its latest electric vehicle factories from Michigan, US, to Mexico.
The company announced the big decision citing lower labor costs in Mexico. The decision would enable the world-leading automaker to produce a costly vehicle model without spending too much on labor. Additionally, the company chose to build a new self-driving car at its plant in Detroit, US.
What was the industry’s immediate reaction? Some analysts thought that the move risked raising U.S. President Donald Trump’s ire; the President has often expressed his displeasure with U.S. companies leaving for other destinations. Not too long ago, President Trump publicly criticized Ford’s intention to set up a small car factory in Mexico. In response, the company canceled the controversial plan.
“Ford Isn’t Taking Money and Jobs Out of the US,” Top Official Says
Most analysts backed Ford’s move in the latest twist, saying that the company has to act in their best financial and business interests. Moreover, the SUV electric model, which is at the center of Ford’s current action, was not expected to raise a significant sales buzz like most of Ford’s other well-known productions.
According to Michelle Krebs, the Autotrader car-shopping website analyst, “it wasn’t like Ford wanted to send all the money out of the US.” The analyst argued that Ford’s decision to move the SUV vehicle production to Mexico would allow the auto giant to increase the self-driving model’s production at the main assembly line in Michigan.
What did the company have to say about the seismic move that sent shivers in the international motor markets? In an interview, Ford’s executive Vice President of the Global Markets, Jim Farley, shed a little light.
While announcing the launch of the company’s pioneering driverless car scheduled for release in 2021, the official denied that the company was promoting a wave of divestiture from the U.S. and exporting money to other countries. Instead, he said: “As part of the shift, we’re increasing our investment by $200 million and introducing 150 new jobs to our plant in Michigan.”
Ford: “The Move to Mexico and the Expansion in Michigan is Good News for America”
Ford recently announced it would allocate $700 million to boost operations at its Michigan assembly line. The plant would serve as the primary production site for its various vehicle models. According to Ford spokesman Allan Hall, the government should consider Ford’s decision to commence extra production in Michigan as good news. He argued that “the net effect translates to hundreds of jobs for American workers.”
According to Jim Farley, Ford’s plans to produce autonomous cars means it has less capacity to assemble all kinds of vehicles at the Michigan factory. Thus, the company had to devise a different manufacturing plan for the EV model. Logically, this led the automaker to invest in Mexico.
Ford’s newest Michigan-made self-driving car will essentially be a commercial car specifically made to deliver services and ride-hailing. The new vehicle is an entirely new model. Some have described it as a hybrid-electric autonomous vehicle.
The automaker announced it would soon commence tests on the car in an undisclosed city. The company singled out 2020 and 2021 as a milestone when the company would start testing its self-driven and business models. To achieve its goals, Ford plans to collaborate with some leading auto dealers.
Remarkably, the SUV electric car, Ford’s new kid-on-the-bloc, is designed to travel 300 miles on a charge. It’s currently at the centerpiece of the company’s estimated $4.5 million production overhaul. In time, the automaker will have 13 other hybrid-electric models. Among these is the gas-electric F-150 model.
Pundits: “Ford‘s Move to Mexico An Attempt to Catch up with Rivals”
Ford also intends to create a full-scale assembly line at its Cuautitlan plant in Mexico. Operations at this factory were scheduled to start in late 2020.
The new CEO at Ford, Jim Hackett, has, notably, been fast-tracking the automaker’s shift towards electric and autonomous cars. Immediately after taking over at the leading vehicle manufacturer’s helm, Mr. Hackett swiftly moved the production of specific Ford models from Mexico to a Chinese plant. Soon, the CEO quickly announced the release of $14 billion to enhance what he referred to as “the company’s “fitness.” Was this Ford’s answer to the President’s skepticism with its expansionist plans? Perhaps.
Some Wall Street observers strongly feel that Ford’s latest move represents a determined attempt to catch up with rivals in the mold of General Motors and Tesla Inc. Interestingly, in 2019, General Motors announced a plan to launch its robot taxis. Ford executives, however, maintained that the company’s ambition to shift gears to electrification was not just modest- instead, the automaker believes “electrification represents a meaningful shift in the motor industry’s modern propulsion.”
Ford Motor Company’s recent historic move to transfer the production of its electric vehicles to Mexico took pundits by surprise. Even so, many analysts expect this move to improve the company’s business case for its new battery-electric vehicle brands. The analysts expect Ford to achieve these milestones by producing vehicles in a lower-cost country.
Ultimately, Ford’s latest action is likely to transform its Flat Rock Michigan factory into a new center of excellence for its more famous brands.