Ford Confirms Mexican Plan

June 18, 2006

 


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As part of a sweeping effort to upgrade its Mexican operations, Ford Motor Company will refurbish its assembly plants in Cuautitlan and Hermosillo and an engine plant in Chihuahua. The company, however, withheld specific details of the overhaul, which will take place over the next few years.

“Ford has been doing business in Mexico since 1925, and we were the first automaker ever in the country. We are proud of our manufacturing capability in Mexico today, and we plan to upgrade our facilities for the future, just as we have been modernizing many of our facilities in the U.S. and Canada,” Mark Fields, Ford’s President of the Americas, said in statement that accompanied the announcement.

The investment does not include Ford’s plan to build a new low-cost manufacturing facility in North America, Fields also emphasized.
“We remain committed to a new low-cost manufacturing facility. But we have made no decisions on where it will be located,” Fields explains. “The key to success will be high quality and low cost, and that certainly can be in the U.S., Canada, or Mexico,” he said.

Ford inaugurated its first plant in Mexico City to build the Model T. Today, Ford builds the F-Series pickup and Ikon small car in Cuautitlan. Sources told TheCarConnection that under the reconstruction plan, a substantial part of the Cuautitlan plant could be torn down and then completely rebuilt. Engines for several vehicles sold globally are made in Chihuahua and the output of the plant could be nearly doubled under the plan. The Ford Fusion, Mercury Milan, and Lincoln Zephyr are built in Hermosillo.

“For more than eight decades, we have worked hand-in-hand with Mexico, its people and its government,” says Louise Goeser, Ford of Mexico President and CEO. “Mexico remains an excellent business environment for Ford, and it will remain a key manufacturing location for our global automotive operations as a result of these investments.”

Turnaround working?

 

Fields, the man in charge of Ford’s North American restructuring effort, said in a speech Wednesday in Washington that Ford’s turnaround is working.

Ford has slowed its market-share decline and is on pace to convert three-quarters of its North American assembly plants to flexible manufacturing by 2008, he noted.

“This will enable Ford to switch between models and deliver more products faster based on changing demand,” he said.

The Mexican move is likely to draw criticism from the United Auto Workers union, which stands to lose 25,000 to 30,000 jobs as a result of Ford’s Way Forward restructuring plan announced in January.

UAW President Ron Gettelfinger said earlier this week that the union had not had a chance to review Ford’s plans. Meanwhile, Gettelfinger has appointed a new top bargainer at Ford — Bob King, an experienced UAW vice president, who is considered likely to take a harder line with Ford over the expansion in Mexico.

According to a document circulating in Detroit, Ford’s $9.2 billion investment could create some 150,000 jobs, reducing unemployment in Mexico by about 15 percent.

It also would represent between seven percent and nine percent of the total annual foreign direct investment in Mexico and would also generate exports valued at $18 billion, the internal report noted.

The documents also indicated that Ford expects to increase its purchases of Mexican-made components by 300 percent, while suppliers could increase their investment by $3.6 billion.

Ford, which is hoping to attract incentives from the Mexican government, also said it was prepared to shift some professional engineering and purchasing jobs to Ford of Mexico as part of the expansion plan.

“We will leverage our global scale like never before and Mexico is a key partner as we’re targeting lower fixed costs, better quality, and speed to deliver our Way Forward plans,” the documents said.

“The Way Forward – Mexico (offers an) opportunity to further leverage Ford of Mexico cost advantage and location to reduce corporate fixed costs. Mexico is ready — fast and reliable solution and an established organization with proven capabilities to build from,” reads the internal report, prepared by Ford of Mexico.

Part of the document was prepared for a presentation in early April to Mexican government officials. The document notes the political sensitivities involved in making any announcement, which would have to come after this week’s United Auto Workers convention in Las Vegas.

However, according to one timeline included in the package, Ford officials were considering holding the announcement to before the July 2 Mexican presidential elections in hopes it would boost the candidacy of conservative Felipe Calderon, from President Vincente Fox’s ruling National Action Party (PAN). The documents also suggests that postponing any announcement would reduce the risk of confrontation with the new government should Calderon lose in July.

 

Other automakers are betting heavily on Mexico: DaimlerChrysler AG is preparing to invest up to $1 billion in its operations around Toluca, and General Motors Corp is investing $820 million in a plant near San Luis Potosi, according to the document. Nissan Motor Co. is investing $1.3 billion in Aguascalientes, and Toyota has recently expanded its operations in Mexico, the document adds.

Until now, Ford has been criticized for providing few details of its turnaround plan, and criticism mounted after the company disclosed it lost $1.2 billion in the first quarter. The company’s stock has languished, and both Standard and Poor’s and Moody’s are threatening to cut Ford’s credit rating again.

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