Ford Brings a European Car to America By Way of Mexico
Ford Motor Co. likely will build its European-designed Verve subcompact in Mexico, a decision that says as much about the auto industry's future as it does about Ford's.
The company has all but staked its survival on the Verve, a car one top exec called a 'window into our future' when it was unveiled at the Detroit auto show last month. Ford is counting on smaller, more efficient cars to meet tightening fuel economy standards and says the Verve is the foundation for 'a global family of small cars' it will begin selling in America by 2010.
But building small, inexpensive cars in America isn't profitable and Ford - which lost $2.75 billion during the last quarter and is eliminating jobs - is doing everything it can to cut costs.
That, according to the Detroit Free Press, is why Ford will more than likely build the Verve in Mexico. Mexico has become the auto industry's India - a source of cheap, skilled labor that can crank out cars in big numbers. That is exactly what Ford needs right now, which is why the Verve - and many more American cars - may be labeled 'Hecho en Mexico.'
Ford has plenty of room at its plant in Cuautitlan. The 1.2 million-square-foot plant has two assembly lines, and one has been idle since Ford halted production of a subcompact called the Ikon in September. The Free Press says Ford brass would not comment on where the Verve will be built, but the paper makes a compelling case for Mexico.
Even with a new labor contract that allows Ford to pay starting workers a starting wage of $14.20 an hour - about half the salary of top-tier union workers - labor costs and overhead expenses are cheaper south of the border. That's why Mexico's auto industry is booming. Each of the Big Three has assembly lines rolling in Mexico, building cars like the Lincoln MKZ, PT Cruiser and Saturn Vue. General Motors is about to open a $600 million plant in San Luis De Potosi that will employ 2,000 people and build 130,000 Chevrolet Aveos a year.
Auto production in Mexico topped 2 million units last year, according to the Latin Business Chronicle. Automakers invested more than $4 billion in production capacity last year, and another $4.4 billion is slated this year as American, European and even Chinese firms open 14 new production lines. Mexico also has a well-established network of suppliers that produce $24 billion worth of parts each year.
As the Free Press notes, Ford's got a lot riding on its decision. Although the company has been slowly cutting its losses, it doesn't expect to turn a profit until 2009. Ford's turnaround depends heavily on breaking into the burgeoning subcompact market, which it abandoned in 1997 after killing the Aspire. Sales of subcompacts rose 40 percent in December, even as overall passenger car sales fell 2 percent. Small cars are the sunny spot in an otherwise gloomy domestic auto industry forecast.
(Via Autopia.)
