Ford Drops New N.A. Plant Plans

2009 Ford Fiesta

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Ford is shelving plans to build a new assembly plant in northernMexico. Instead, Ford has promised the United Auto Workers in its new labor pact to build a small car in the U.S.

Pushing both Ford and GM to build small and alternate fuel vehicles in plants staffed by union members was one of the top goals of UAW President Ron Gettelfinger in the recent contract negotiations. Gettelfinger had warned in speech to the Detroit Economic Club that small car production was in danger of leaving the U.S. altogether in the next few years.

Under the new agreement with the UAW, which was ratified last week by union members at Ford, the company has agreed to keep open five plants, including assembly plants in Louisville, Ky., and Wayne, Mich. The Wayne plant now builds the Ford Focus and will be retooled for the replacement for the Focus, which is now in the company's new product pipeline. Ford also agreed to extend for another year, until 2009, the life of the assembly plant in St. Paul, Minn., where Ford now builds its Ranger pickup.

Ford CEO Alan Mulally said overall the new UAW contract terms significantly improve Ford's competitiveness and will allow the company to be profitable at a lower sales volume and mix of vehicles that include fewer trucks and more passenger cars. The changes in healthcare included in the agreement will save the company almost $2 billion annually, Ford officials said.

Ford had first announced it might build a new, low-cost assembly line when it unveiled its "Way Forward" turnaround plan in January 2006. A key contingent of Ford officials wanted the plant in northern Mexico but the UAW lobbied against it, particularly since it would doom one of Ford's major assembly plants in the U.S.

The planning for the Mexican plant was well developed and as late as last June, Mark Fields, Ford president of the Americas, told TheCarConnection.com, the plans were still being actively reviewed.

Ford says it retains the right to shutter assembly if business conditions dictate cuts in production.

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