Ford Motor Co. will export the next-generation Focus compact car from China to North America in 2019, rather than from Mexico as earlier planned, saving the company $500 million, a top executive said on Tuesday.
It’s the first major manufacturing investment decision made by new Chief Executive Officer Jim Hackett, who succeeded Mark Fields in late May. Discussion about the small-car production shift from Mexico to China began “a couple months ago” under Fields, said Joe Hinrichs, president of global operations.
In January, after U.S. President Donald Trump criticized Ford for shipping small-car manufacturing to Mexico, Ford said it would kill plans to build a $1.8-billion Focus plant in San Luis Potosi and instead produce the new Focus at an existing plant in Hermosillo.
Although it is cheaper to build and ship cars to the United States from Mexico than China, “this was not a variable cost decision,” Hinrichs said in a Tuesday morning briefing. “It allows us to free up a lot of capital” because Ford now has to retool only one plant – the existing Focus factory in Chongqing – rather than two to supply North America.
Given dwindling overall U.S. demand for small cars such as the Focus, “we thought this was the best balance of that cost/capital tradeoff,” Hinrichs said.
He said Ford planned to inform the White House this morning.
Asked if Ford was concerned about having to pay a border tax, as Trump has threatened on vehicle imports from Mexico, Hinrichs said “the capital saving outweighs the risk” of a potential tax on the Chinese-built Focus.
Ford stock fell 0.8 percent at $11.15.
The current Focus will be phased out of production in Wayne, Michigan in mid-2018, according to Hinrichs. The Wayne plant will begin building a new Ranger compact truck in late 2018.
No U.S. jobs will be affected, Ford said, adding that it employs more U.S. hourly workers and builds more vehicles in the United States than any other automaker.
The White House and the United Auto Workers union were not immediately available to comment.
The redesigned Focus for North America will be built at a joint-venture plant operated with Chinese partner Changan Automobile, beginning in mid-2019. Ford also said some future variants of the new Focus will be shipped later from Europe.
Hinrichs said Ford remains a major exporter to China, shipping about 80,000 vehicles a year from North America.
General Motors Co has been exporting Buick and Cadillac cars from China to the United States, as has Volvo Cars, a unit of Chinese automaker Geely.