Ford’s Wayne plant cuts vault Mexico into union talks – The Detroit News
Ford Motor Co.’s decision to end production of two slow-selling models at its Michigan Assembly plant in Wayne, confirmed Thursday, signals the critical role Mexico is likely to play in high-stakes wrangling with the United Auto Workers.
The Dearborn automaker said it was reviewing “several possible options” for production of the slow-selling Focus compact and C-Max hybrids, which would end in Wayne in 2018. But in a bulletin handed out to UAW members at the plant, Local 900 Chairman Bill Johnson said production of the Focus would move “to a location outside of the United States,” most likely Mexico.
The move comes days before Ford, and its crosstown rivals, are set to begin national contract talks with the UAW. A key issue for Ford, as well as General Motors Co., will be closing their all-in labor cost gap, executives say, and one of the leverage points in bargaining and contract ratification is expected to be the real threat of moving some production to Mexico.
Ford and GM both are investing heavily in their Mexican operations, partly to exert pressure on the UAW to hold the line on labor costs and partly to take advantage of lower wages and more favorable trade agreements. In April, Ford said it would invest $2.5 billion in Mexico for two engine and transmission plants, creating 3,800 jobs.
“I think Ford has a trump card in their hand as they walk into negotiations,” said Dave Sullivan, manager of product analysis with AutoPacific Inc. “It sends a message that now the UAW has to negotiate for jobs and (Ford) can close a plant and move it to another, lower-cost facility.”
Ford said in an emailed statement it is “actively pursuing future vehicle alternatives to produce at Michigan Assembly and will discuss this issue with UAW leadership” as part of contract bargaining. The company declined to elaborate.
Jimmy Settles, vice president of the UAW-Ford Department, said in a statement that the union is “extremely confident that a new product commitment will be secured during the upcoming 2015 negotiations and that the Michigan Assembly Plant will maintain a full production schedule.”
The 5-million-square-foot plant employs about 4,700, according to Ford’s website. In April, Ford said it would cut a shift at Michigan Assembly amid slumping sales for small cars, electrics and hybrids. The Dearborn automaker started to indefinitely lay off 673 hourly employees and 27 salaried employees on the “C Crew” at the plant June 22.
Michigan Assembly got new life after the industry meltdown in 2008-09, a result of former CEO Alan Mulally’s pledge to the UAW to bring new production to Wayne in exchange for a competitive labor agreement.
Under terms of a $5.9 billion loan from the Energy Department, Michigan Assembly received a $550 million overhaul. Its 4,700-member workforce builds the Focus, Focus Electric, Focus ST, C-Max Hybrid and C-Max Energi.
As part of that investment, Ford was awarded a $123 million state tax credit for the facility, in addition to $15.3 million from the city of Wayne, a $30 million brownfield tax credit and a $6.4 million state and local tax capture. In 2010, Ford was awarded a $10 million brownfield tax credit to redevelop the Wayne Stamping Plant, which is part of the facility.
It worked, for a while. But comparatively low gas prices and booming demand for larger crossover vehicles are taking their toll. Sales of the Focus are down 3.2 percent so far this year; C-Max Hybrid sales are down 16.9 percent.
“That’s just the nature of the market right now,” said Michelle Krebs, senior analyst with Autotrader.com. “The American car buyer doesn’t really want cars, they want crossovers and sport utilities.”
A new model of the Focus is expected to come out in 2018, according to a recently published “Car Wars” report by Bank of America Merrill Lynch analyst John Murphy. He expects a new C-Max in 2019.
The Focus is also built in China, Argentina, Germany, Russia, Thailand, Vietnam and Taiwan for overseas markets. The C-Max is also built in Germany. Until 2005, the Focus hatchback was made at Ford’s assembly plant in Hermosillo, Mexico.
In January, President Barack Obama came to the plant to tout the resurgent American automotive industry, even as the plant was closed that week because of lagging demand for its small gasoline-powered and hybrid cars. Ford made the decision to close the plant to reduce the supply of small cars before the White House approached the company about holding the event.
Securing vehicles for specific plants will be among top goals for the UAW during upcoming talks, said Kristin Dziczek, director of the Industry & Labor Group for the Center for Automotive Research, during a CAR event last month in Detroit. She said Mexico is the biggest competitor now for UAW work.
“The job security is now product-based,” she said. “They’re going to want to see product commitments and investment commitments, business case dependent as they always are. I think we’ll be looking at some more product plans coming out in the negotiations this fall.”
In contrast to Ford’s Wayne announcement, GM has spent the past few months announcing plans to invest $5.4 billion in U.S. plants over three years, creating 650 new jobs. GM, which builds the only subcompact in the U.S., the Chevrolet Sonic, recently announced about $400 million in investment at its Orion Assembly Plant in Orion Township for two new products: the Chevrolet Bolt all-electric car and another new GM vehicle.
City officials from Wayne spoke with Ford on Thursday, said Peter J. McInerney, the city’s Community Development director. He said the city did not have an immediate comment, given the issue will be negotiated.
Ford’s Wayne plant is the largest employer in the city of more than 19,000. Other big employers include Wayne-Westland Community Schools and Oakwood Hospital Wayne. A closure of the plant would hurt the city’s tax revenue and employment base, among other issues.
U.S. Rep. Debbie Dingell, D-Dearborn, said she was upset by Ford’s decision to shift small-car production out of Michigan — and suggested it could be moving out of the country in part because of Congress’ failure to address currency manipulation.
She said until Congress acts on currency manipulation, “we’re going to start seeing more jobs going to Mexico.”
Profit margins on compact vehicles is small, and she said Ford told her “they’ve got to make decisions based on where the profit is. We can’t afford to have our small-car production and the jobs it creates going overseas.”
Melissa Burden and David Shepardson contributed.