Ford to the U.S.: See ya

Ford (F) is reportedly taking its small car production and motoring out of the U.S.

The carmaker says it will stop building the Focus and C-Max wagon at its Wayne, Michigan plant outside Detroit in 2018. The company is not indicating where the vehicles will be built, but speculation is it will be Mexico.

Yahoo Finance Columnist and auto industry specialist Rick Newman says it’s really hard for Ford and other auto companies to make money building these kinds of cars in the U.S.A.

“They’re not as profitable and in some cases are actually loss-leaders for automakers,” he points out. “It might be nearly impossible to make a profit on small cars when you’re building them at unionized factories. I don’t think you can fault Ford for this, this is just a hard sell.”

But he notes Ford can’t just stop making them.

“All the domestic automakers learned the lesson in 2007-2008 when gas prices spiked that you can’t just offer big cars and ignore the smaller part of the market,” he says. “And they need to build high-mileage cars to comply with government standards. So they have to have these cars and they have to sell a reasonable amount of them.”

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Newman agrees with those who suggest Ford will now make its small cars below the Rio Grande.

“Automakers like to emphasize what they call ‘North American’ production, which includes Canada and Mexico rather than just American production,” he notes. “Ford does manufacturing in Mexico already. So I would not be surprised to find these cars moving south of the border.”

The move comes just days before Ford is set to begin new contract negotiations with the United Auto Workers Union, and Newman certainly isn’t surprised at the timing.

“Everybody tries to get every little bit of leverage when these negotiations come up,” he explains. “And Ford can say ‘Look, you’re impacting our profitability, and if we can’t have good labor rates here we might just move them down to Mexico, like we had to with the small cars.’”

But Newman feels the union still has a trump card to play at Ford.

“They will continue to make pickup trucks in the United States,” he notes. “And that’s where the action will be for the UAW.” 

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