Ford has finally confirmed that it will be moving small car production in the U.S. to Mexico in the next two to three years. This information isn't new as we knew about it a year ago thanks to a new contract with the UAW. We learned that in 2018, the Ranger would be taking up residence at the Michigan Assembly plant, home currently home to the Focus and C-Max.
Why is Ford moving small car production to Mexico? It comes down to costs. With low gas prices, consumers are buying up crossovers and trucks at a rapid rate. This means small cars are sitting on dealer lots, costing automakers money.
“Every global manufacturer has to determine how it can best create revenue and limit expenses. Small vehicles are the most price-sensitive, so any cost-savings that can be gained offer competitive advantages. Thus moving production to a lower-labor-cost country makes particular economic sense for small cars,” said Jack R. Nerad, executive editorial director and executive market analyst for Kelley Blue Book.
It doesn't hurt that labor costs in Mexico are significantly less than those in the U.S. The Detroit News reports that workers earn the equivalent of $8 to $10 an hour, compared to the $29 an hour top-tier workers in the U.S earn.
“I don’t think it’s all doom and gloom. It’s a reflection of the shrinking market share for compact cars,” said Dave Sullivan, manager of product analysis for research firm AutoPacific.
But you have to wonder if Ford could have handled this better. Especially when Presidental candidate Donald Trump ripped into Ford for this decision, vowing to put a 35 percent tariff on Ford vehicles if elected.
Source: The Detroit News