The United States auto industry’s plans to build small cars within the country seem to have hit a pothole.
Ford Motor Co. has said that by 2018, the production of the Ford Focus will be shifted outside the country and the Michigan factory which currently assembles these small cars will cease production.
This move could put a lot of pressure on the UAW (United Auto Workers) union to reduce demands for wage increases in the upcoming contract negotiations. Ford, Fiat Chrysler AutomobilesNV and General Motors are finding it hard to keep up with the cheaper Asian auto makers who had the added benefit of weaker currencies.
Small vehicles like the Ford Focus deliver lower profits as compared to pickup trucks or SUV’s. But they are very important as far as fuel economy mandates are concerned.
The Ford Fiesta vehicles sold in the United States are all manufactured in Mexico which is now a production hub for auto makers from around the world. Billions of dollars in production capacity is currently in or is being planned for Mexico.
Toyota is shifting the production of the Corolla to Mexico in the years to come as well after building then in Canada for 30 years. Honda began shipping the Fit to the United States from Mexico & Mazda has started building the Mazda 3 & Mazda 2 there.
It is the low gasoline prices in the country which have reduced demand for small vehicles and has forced a number of car manufacturers to run their small car factories at less than full capacity. And this burns a lot of cash.
Ford had earlier outlined plans for laying off seven hundred workers at their Wayne plant. GM & Fiat Chrysler have also reduced small car production at multiple plants with buyers leaning more towards compact SUV’s and crossovers instead.
Even though the $ 57 per hour wage & benefit cost that Ford spends today is lower than what it was spending 10 years ago, $ 75 per hour, it is still around $ 8-20 higher than Volkswagen AG or Honda.
