Why Ford will keep plants humming and Trump happy
Thu., Nov. 29, 2018
Ford and General Motors both need to overhaul their U.S. manufacturing base to cope with consumers’ drastic switch to SUVs from sedans. Only one is poised to make that adjustment without ticking off the president.
In a significant rework of its U.S. production plans, Ford will eliminate shifts at factories in Trump country. But it plans to retain all the 1,150 workers affected by shifting their jobs to Michigan and Kentucky plants making big SUVs or supplying transmissions to pickups. That’s fortunate not only for employees, but for Ford’s relations with a touchy White House.
GM, on the other hand, is caught with way too much capacity to make out-of-vogue sedans, so it has little choice but to go the more painful route of shuttering factories and firing workers. Inevitable or not, the decision has infuriated Donald Trump. He’s renewed a threat to slap auto imports with 25 percent tariffs and enlisted federal agencies to look for ways to cut the carmaker’s subsidies.
“Ford has been in Trump’s cross-hairs before, and this should help keep them out,” said Michelle Krebs, a senior analyst with researcher Autotrader. Ford “had their time in the barrel” in 2016, when Trump lambasted its plans to move small-car production to Mexico. The company abandoned that strategy last year and canceled a new car factory it was building there.
In the spring, Ford will get rid of the third shift at a factory in Louisville, Kentucky, that produces the slower-selling Escape and Lincoln MKC sport utility vehicles. The 500 workers affected will move to another Ford plant in the city to boost production of the red-hot Lincoln Navigator and Ford Expedition, spokeswoman Kelli Felker said in an interview. Expedition retail sales are up 36 percent this year, while Navigator has soared by more than 80 percent.
In Flat Rock, Michigan, Ford is moving down to one shift at the factory producing the Mustang muscle car and Lincoln Continental sedan. About 500 workers there will move to a plant in Livonia, Michigan, which produces transmissions for F-150 and Ranger pickups, Felker said. Another 150 will be offered jobs at other Ford facilities.
“There could be some downtime for some people, depending on where they are and where they’re going,” Felker said. But these transition periods will last just a few weeks, and workers will receive 75 percent of take-home pay during that time, she said.
This impact pales in comparison with GM, which announced earlier in the week that it would shut down plants in Michigan, Ohio, Maryland and Ontario next year. The company combined that news with salaried employee cuts, eliminating more than 14,000 jobs.
Ford moved earlier than GM to exit the slow-selling sedan business and convert factories to build trucks and SUVs, Autotrader’s Krebs said. Ford is starting production of the Ranger pickup at a factory in Wayne, Michigan, that used to build the Focus small car that’s been discontinued for North America. That same factory will also build the Bronco SUV in 2020.
Trump easily won Kentucky in 2016 and eked out a victory in Michigan. The state that’s home to the Motor City went blue this year, electing a Democratic governor, secretary of state, attorney general and U.S. senator. Two Congressional seats also flipped at the expense of the Republicans.
GM has been slower to rationalize its stable of sedans as consumers abandon that body style in favor of SUVs and trucks.
“GM has a boat load of cars and they still have too many that they don’t need,” Krebs said. “Ford’s situation looks very different. I’ve been saying all along that GM is going to have to deal with so much car capacity.”
Taking a plant down to one shift, as Ford will at Flat Rock, sends a signal that its future may be at risk. The three vehicle-assembly plants GM said earlier this week it plans to close are operating on this basis.
But Ford has said it’s investing $200 million in Flat Rock and will begin building its new self-driving car there in 2021.
“This is where the company is making its big bet on electrification and automation,” Kristin Dziczek, vice president for industry, labor and economics at the Center for Automotive Research, said of Flat Rock.
Ford doesn’t need to close plants because it has roughly half the excess factory capacity to build vehicles as GM, Dziczek said. Ford has nine assembly plants in the U.S. and six are running well over 80 percent of capacity. One in Chicago is running at about 150 percent of capacity.
“They have a smaller manufacturing footprint and more truck-heavy production,” Dziczek said.
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