They are where the profit is, and that shows no sign on abating.
If you’re worried about U.S. manufacturing jobs, pay no attention to Ford’s recent decision to move production of the Focus compact car to China.
Building Focuses in suburban Detroit, as Ford does today, is not good career planning, whether you’re a UAW assembly worker or newly named Ford president of global operations Joe Hinrichs.
Keep your eye on Ford’s upcoming Eco Sport subcompact SUV, and still-unnamed compact SUV Ford is expected to introduce in a couple of years.
In the game of industrial three-card monte automakers play as they shuffle production from one plant to another, SUVs are the winning card.
That’s no surprise to the workers who build the Focus in Wayne, just west of Ford global headquarters in Dearborn. Their jobs will probably be more secure when the Focus departs for China, taking with it the razor-thin profit margins of building a compact car in the U.S.
Focus production in Wayne will end about a year from now.
On the horizon
A few months later, the workers who built the Focus and an array of its slow-selling derivatives will begin producing an all-new Ranger midsize pickup, belatedly giving Ford a competitor for the popular Chevrolet Colorado, Honda Ridgeline and Toyota Tacoma. A year after that, Wayne will add a second truck for which Ford has high hopes, a new version of the Bronco off-roading SUV.
Ford took its sweet time deciding to build the Ranger, but if the company did its job, the midsize pickup and SUV will sell at much higher prices than the Focus, improving the company bottom line and workers’ job security. And if the Ranger and Bronco are a success there is a good chance that plant will eventually employ more workers than it does now.
“The Wayne plant will be more secure with the new vehicles than it ever was with the Focus,” Autotrader senior analyst Michelle Krebs says.
The initial fuss when Ford said it would move Focus production to China — like a lot of political and economic debate — was public figures fighting the last war. The conviction that Asian intruders will snatch American jobs with cheap imports belongs to another generation, not the era of global automaking.
“This is not a matter of closing a U.S. factory in favor of China,” IHS Markit senior analyst Stephanie Brinley says. “The factory in Michigan is getting a couple of new products that could be more popular. Ford is not closing a plant.”
Where automakers invest
Equally important, Ford is moving production of a low-profit vehicle in a declining market segment out of the U.S. The Ranger and Bronco will likely be more complicated than the Focus, with more model variations and more suppliers making parts nearby. All that is good for employment. If either vehicle is a hit, the plant could even need overtime or more workers.
That’s a remote possibility for pany U.S. plant building compact cars like the Focus.
General Motors’ plant in Lordstown, Ohio, builds the Chevy Cruze compact, a newer car than the Focus that’s been praised for its quality, technology and performance. Despite that, Lordstown has laid off one shift this year and will shut down for three weeks. Sales of all types of cars are falling as U.S. buyers switch to SUVs and trucks.
Focus sales are down 19.8 percent this year after falling 16.4 percent in 2016. That’s not a glide path, it’s a nosedive and Ford clearly doesn’t care.
The automaker won’t introduce an all-new Focus in the U.S. until the second half of 2019, after at least a yearlong hiatus in production and a shift to the new factory in China. It’s a safe bet that few buyers will notice the lack of new Focuses during the break. Demand for small cars is evaporating. That’s why Ford canceled ill-considered plans to build a new Focus plant in Mexico earlier this year.
Ford will save about $500 million by retooling just the Chinese plant for the new model rather than a second plant in the U.S.
“Every automaker is re-evaluating its investment in cars versus SUVS,” Krebs says. “If there’s a border tax, that’ll change the math, but Ford says they built that into the plan.”
That’s what it means to be a global automaker — building and selling vehicles around the world. Inevitably, a lot of vehicles aren’t built in the company’s home market, but the alternative is being a little fish in a big pond, prey that may be devoured at any time. (See: DaimlerChrysler’s troubled years and Fiat Chrysler Automobiles’ continued challenges.)
“Ford is not turning away from the U.S. It’s still a huge market and a key manufacturing base for them,” Brinley says.
If you’re looking for a harbinger of U.S. auto manufacturing, watch where Ford and GM build a couple of key upcoming SUVs.
The EcoSport subcompact that Ford will be importing from India to the U.S. beginning next year is a sideshow, but it leads to the main attraction. The current EcoSport was designed for developing markets; an examination of its design, features, materials and specifications reveals that it’s a stopgap vehicle because Ford underestimated U.S. desires for SUVs and didn’t develop one to sell here.
Even the next-generation EcoSport is a long shot for North American production, but another small SUV Ford is believed to have in the works for two or three years from now should be a candidate for U.S. production.
The big potential wins for U.S. automaking are that Ford SUV and the next generation of the Buick Envision, a compact luxury SUV that GM now imports from China.
The Envision was already a hit in China when U.S. sales began last summer. Buick sold 14,193 Envisions in the U.S. last year and 22,620 so far this year. That’s just 7,200 fewer than Cadillac sold of the U.S.-made XT5 SUV through June. If Envision sales continue to rise, they could reach the point where adding U.S. production to the Chinese plant makes sense.
Don’t be surprised if the next-generation Envision and new Ford SUV are carrots automakers dangle in front of unions during the next round of contract talks.