Ford to More Than Double Mexico Production Capacity in 2018
February 07 2016 - 8:30PM
Dow Jones News
Ford Motor Co. will build a new assembly plant in Mexico and
sharply increase factory output from that country, representing the
latest shift of investment abroad by a Detroit auto maker following
the signing of a costly new labor deal.
The No. 2 light-vehicle seller in the U.S. plans to add 500,000
units of annual Mexican capacity starting in 2018, more than double
what it built in 2015, according to people briefed on the plan. The
plan mirrors General Motors Co.'s $5 billion investment to double
Mexican capacity by 2018.
Ford will build a new assembly complex in San Luis Potosí , and
expand an existing factory near Mexico City. The moves will make
room for several models, including a yet-to-be-disclosed hybrid
vehicle that is described as a Toyota "Prius fighter," and will
allow Ford to focus its U.S. factories on higher-profit trucks and
sport-utility vehicles.
A company spokeswoman declined to comment on the plans. Ford
last year built 433,000 vehicles in Mexico, or 14% of its North
American production.
Costs for the project likely will exceed $1 billion, people
familiar with the details said, with factory construction beginning
later this year. It follows a $2.5 billion investment Ford
announced last spring to build an engine and a transmission plant
in Mexico.
Mexico has lured tens of billions of dollars in automotive
investment commitments in recent years, wooing car companies with
low wages, improved logistics and an arsenal of free-trade deals.
Most global auto makers have in recent years opened new assembly
plants in Mexico or announced plans for one, including BMW AG,
Volkswagen AG and Toyota Motor Corp. Honda Motor Co. recently began
making its subcompact Fit in the country, investing $800 million in
a new assembly factory. Kia Motors Co. also will open a new
small-car plant in Mexico this year, the South Korean auto maker's
first in the country.
Detroit auto makers have long built cars and trucks in Mexico,
but the country is looking more attractive following a new labor
deal struck in November with the United Auto Workers that raises
wages for U.S. factory workers. Labor rates in Mexico are roughly
one-fifth of those earned by unionized workers in the U.S., a gap
that is only expected to widen as UAW wages approach nearly $30 an
hour in coming years, representing as much as a $10 increase for
some newer hires.
Auto factories in Mexico produced 3.4 million vehicles last
year, or about one-fifth of North American production, according to
LMC Automotive.
Still, roughly three-quarters of Ford's North America production
is in the U.S., according to WardsAuto, and the company committed
to invest $9 billion in U.S. assembly and parts factories through
2019.
Mexico auto output is poised to thrive during that time. LMC
expects the industry's Mexican production to grow 53% to 5.2
million vehicles by 2019 as the share of production in the U.S. and
Canada falls. Mexico's Economy Minister Ildefonso Guajardo said
last month there would be several significant auto investments
announced in the first quarter involving plants and new models but
declined to elaborate on specific deals.
UAW President Dennis Williams, speaking to reporters on Friday,
said he doesn't buy the argument that car makers can't absorb
higher labor costs. GM late last year laid out plans to start
shipping Buick SUVs from China to the U.S., and one of Fiat
Chrysler Automobiles NV's new Jeep is built in Italy.Ford is
planning to build as many as three models at the San Luis Potosí
plant, with capacity to churn out as many as 350,000 vehicles a
year.
A separate expansion at its existing plant in Cuautitlá n will
boost output there by an additional 150,000 automobiles. "They're
making huge amounts of profits," Mr. Williams said. "There is no
reason mathematically to go ahead and run to countries like Mexico,
Taiwan, Thailand and Vietnam."
Mexico isn't the only market winning new investments as Detroit
looks abroad.
Marí a Antonieta Valdez, director of industrial promotion for
San Luis Potosí , said "we don't have any official information from
the company."
One of Ford's new facilities in Mexico will get the Focus
compact car, now built by unionized workers in the Michigan. The
Michigan factory will shift gears in the next two years, building a
new Bronco sport-utility vehicle and Ranger pickup truck—two models
with fatter profit margins—according to people familiar with the
plans.
Ford also plans to build two other models at the new factory,
including an all-new hybrid car designed to combat Toyota's Prius,
which can run on battery power at low speeds for short
distances.
At its plant in Hermosillo—opened in 1986—Ford produces two
midsize sedans. The company also builds the Fiesta subcompact car
in Cuautitlá n in a factory more than 50 years old.
Dudley Althaus and Anthony Harrup contributed to this
article.
Write to Christina Rogers at christina.rogers@wsj.com
(END) Dow Jones Newswires
February 07, 2016 20:15 ET (01:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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