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FORD CANS PLAN TO PRODUCE EURO-SPEC KUGA CROSSOVER IN AMERICA

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FORD CANS PLAN TO PRODUCE EURO-SPEC KUGA CROSSOVER IN AMERICA

By Drew Johnson

Ford has shelved its plan to produce a compact crossover in America for global export. The Dearborn-based automaker had planned to produce its Kuga crossover in Louisville, Kentucky for European markets, but has since reversed that plan.

Last November Ford revealed that it would produce up to 80,000 units of the Kuga per year in Kentucky for export to European markets. However, the euro’s value has dropped 14 percent since that announcement, forcing Ford to rethink the entire project.

Ford originally announced the plan as a cost savings measure. Due to the relative strength of the euro compared to the dollar at the time of the announcement, Ford determined it could produce the European-spec Kuga in America more cost effectively than at the CUV’s current Saarlouis, Germany plant. However, the cost savings are now a wash, prompting to keep Kuga production in Germany.

Despite the reversal, Ford is still expected to produce the Kuga in Kentucky, but only for the United States market. However, the news does come as a blow to the UAW as it will likely cost the union additional shifts at the Louisville plant. “This is a reminder to the UAW that Ford’s U.S. cars don’t have to be produced in the U.S.,” said Brian Johnson, an analyst at Barclays Capital in Chicago. “Ford’s global architecture allows them to build anywhere. That’s good news if the U.S. has competitive labor costs. It’s bad news if they don’t.”

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http://www.leftlanenews.com/ford-cans-plan-to-produce-euro-spec-kuga-crossover-in-america.html

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Ford reverses plans to make SUV in Kentucky for export, sources say

Automotive News -- September 9, 2010 - 11:21 am ET

DETROIT (Bloomberg) -- Ford Motor Co. has canceled plans to move production of a small sport-utility vehicle from Europe to Kentucky as currency exchange rates no longer favor U.S. production, according to two people familiar with the decision.

Ford had planned to shift the Kuga model next year to Louisville from Saarlouis, Germany, to take advantage of lower labor costs and the weaker dollar, according to the people, who asked not to be identified because the plan is private. With the euro falling, Ford plans to continue producing the Kuga in Germany, the people said.

The reversal demonstrates the difficulty of lowering Ford’s U.S. labor costs to globally competitive levels. The automaker intended to export as many as 80,000 Kugas a year to Europe, the people said. That plan was tied in part to exchange rates and labor concessions Ford sought last year that UAW members rejected.

“This raises issues of how the 2011 contract negotiations will go,” said Brian Johnson, an analyst at Barclays Capital in Chicago. He rates Ford “equal weight.”

“If the UAW is going to try to extract givebacks, Ford is showing that with its global production footprint, it can build wherever it wants.”

The euro has fallen 14 percent against the dollar since Ford reached a tentative deal with the UAW in October to build the Kuga in Louisville alongside its mechanical twin, the Escape. At the time, the dollar had declined against the euro, lowering the cost of U.S.-made goods. Since then, the euro has dropped amid concerns Europe’s debt crisis may trigger another recession.

Deal voided

The promise of Kuga production in Louisville began to fall apart in November when UAW members rejected Ford’s request to match givebacks it gave General Motors Co. and Chrysler Group LLC.

Ford’s U.S. rivals, which each reorganized in bankruptcy last year, were granted a six-year freeze on wages for new hires and a ban on some strikes until 2015. The UAW agreed to a first round of concessions in March 2009 that Ford said cut its annual labor costs by $500 million.

Ford still will build the Escape in Louisville, which will replace Explorer production the automaker is moving to Chicago, the people said. The Escape and Kuga models are code-named C520 and based on Ford’s chassis for compact cars.

“We are on track to begin production next year of a new vehicle from our global C-car platform at the Louisville assembly plant,” Mark Truby, a Ford spokesman, said in an interview. “Though we are not providing product details, we intend to fully utilize capacity at the transformed facility.”

Michele Martin, a UAW spokeswoman, didn’t immediately respond to a message seeking comment.

German pay

A year ago, Ford paid its German workers about $62 an hour to build the Kuga, more than $10 an hour over U.S. workers’ wages and benefits, Johnson estimates. Ford’s hourly labor costs at Saarlouis now are $50 because of the weaker euro, about the same as in the U.S., Johnson said.

With U.S. and European labor costs converging and Mexico representing a lower-cost option, Ford has gained leverage in next year’s labor talks with the UAW, Johnson said. Ford’s four-year contract with the UAW expires in September 2011.

“This is a reminder to the UAW that Ford’s U.S. cars don’t have to be produced in the U.S.,” Johnson said. “Ford’s global architecture allows them to build anywhere. That’s good news if the U.S. has competitive labor costs. It’s bad news if they don’t.”

Rocky Comito, president of UAW Local 862, which represents Ford workers at the Louisville plant, didn’t respond to a telephone call seeking comment.

Ford is changing production plans for the Kuga one year before it is to begin manufacturing the model, which highlights how flexible the automaker has become, said Michael Robinet, an analyst for IHS Automotive in suburban Detroit.

“Ford’s production flexibility allows for these decisions to be made much closer to production than ever before,” Robinet said. “Decisions can be made now almost in real time.”

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100909/OEM01/100909887/1193#ixzz0z4btpt3R

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Ford ends plan for SUV in Kentucky

Falling euro means production of Kuga will stay in Germany

Keith Naughton and Jeff Green / Bloomberg News

Ford Motor Co. has canceled plans to move production of a small sport-utility vehicle from Europe to Kentucky because currency exchange rates no longer favor U.S. production, according to two people familiar with the decision.

Ford had planned to shift the Kuga model next year to Louisville from Saarlouis, Germany, to take advantage of lower labor costs and the weaker dollar, according to the people, who asked not to be identified because the plan is private. With the euro falling, Ford plans to continue producing the Kuga in Germany, the people said.

The reversal demonstrates the difficulty of lowering Ford's U.S. labor costs to globally competitive levels. The automaker intended to export as many as 80,000 Kugas a year to Europe, the people said. That plan was tied in part to exchange rates and labor concessions that the Dearborn-based automaker sought last year but were rejected by United Auto Workers members.

"This raises issues of how the 2011 contract negotiations will go," said Brian Johnson, an analyst at Barclays Capital in Chicago. He rates Ford equal weight. "If the UAW is going to try to extract givebacks, Ford is showing that with its global production footprint, it can build wherever it wants."

The euro has fallen 14 percent against the dollar since Ford reached a tentative deal with the UAW in October to build the Kuga in Louisville alongside its mechanical twin, the Escape. At the time, the dollar had declined against the euro, lowering the cost of U.S.-made goods. Since then, the euro has dropped amid concerns Europe's debt crisis may trigger another recession.

The promise of Kuga production in Louisville began to fall apart in November, when UAW members rejected Ford's request to match givebacks it gave General Motors Co. and Chrysler Group LLC. Ford's U.S. rivals, which each reorganized in bankruptcy last year, were granted a six-year freeze on wages for new hires and a ban on some strikes until 2015. The UAW agreed to a first round of concessions in March 2009 that Ford said cut its annual labor costs by $500 million.

Ford still will build the Escape in Louisville, which will replace Explorer production that the automaker is moving to Chicago, the people said. The Escape and Kuga models are code-named C520 and based on Ford's chassis for compact cars.

"We are on track to begin production next year of a new vehicle from our global C-car platform at the Louisville assembly plant," said Ford spokesman Mark Truby.

"Though we are not providing product details, we intend to fully utilize capacity at the transformed facility."

Michele Martin, a UAW spokeswoman, didn't immediately respond to a message seeking comment.

A year ago, Ford paid its German workers about $62 an hour to build the Kuga, more than $10 an hour over U.S. workers wages and benefits, Johnson estimates. Ford's hourly labor costs at Saarlouis now are $50 because of the weaker euro, about the same as in the U.S., Johnson said.

With U.S. and European labor costs converging and Mexico representing a lower-cost option, Ford has gained leverage in next year's labor talks with the UAW, Johnson said. Ford's four-year contract with the UAW expires in September 2011.

"This is a reminder to the UAW that Ford's U.S. cars don't have to be produced in the U.S.," Johnson said. "Ford's global architecture allows them to build anywhere. That's good news if the U.S. has competitive labor costs. It's bad news if they don't."

From The Detroit News: http://detnews.com/article/20100910/AUTO01/9100331/1148/auto01/Ford-ends-plan-for-SUV-in-Kentucky#ixzz0z8FLpggX

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Ford drops plan to shift Kuga output from Germany to U.S., sources say

September 10, 2010 06:01 CET

DETROIT (Bloomberg) -- Ford Motor Co. has canceled plans to move production of its Kuga SUV from Germany to the United States as currency exchange rates no longer favor U.S. production, according to two people familiar with the decision.

Ford had planned to shift the Kuga next year to Louisville, Kentucky, from Saarlouis, Germany, to take advantage of lower labor costs and the weaker dollar, according to the people, who asked not to be identified because the plan is private.

With the euro falling, Ford plans to continue producing the Kuga in Germany, the people said.

The euro has fallen 14 percent against the dollar since Ford reached a tentative deal with the United Auto Workers in October to build the Kuga in Louisville alongside its mechanical twin, the Escape.

At the time, the dollar had declined against the euro, lowering the cost of U.S.-made goods. Since then, the euro has dropped amid concerns Europe's debt crisis may trigger another recession.

The reversal demonstrates the difficulty of lowering Ford's U.S. labor costs to globally competitive levels. The automaker intended to export as many as 80,000 Kugas a year to Europe, the people said. That plan was tied in part to exchange rates and labor concessions Ford sought last year that UAW members rejected.

“This raises issues of how the 2011 contract negotiations will go,” said Brian Johnson, an analyst at Barclays Capital in Chicago. He rates Ford “equal weight.”

“If the UAW is going to try to extract givebacks, Ford is showing that with its global production footprint, it can build wherever it wants.”

Deal voided

The promise of Kuga production in Louisville began to fall apart in November when UAW members rejected Ford's request to match givebacks it gave General Motors Co. and Chrysler Group.

Ford's U.S. rivals, which each reorganized in bankruptcy last year, were granted a six-year freeze on wages for new hires and a ban on some strikes until 2015. The UAW agreed to a first round of concessions in March 2009 that Ford said cut its annual labor costs by $500 million.

Ford still will build the Escape in Louisville, which will replace Explorer production the automaker is moving to Chicago, the people said. The Escape and Kuga models are code-named C520 and based on Ford's chassis for compact cars.

“We are on track to begin production next year of a new vehicle from our global C-car platform at the Louisville assembly plant,” Mark Truby, a Ford spokesman, said in an interview. “Though we are not providing product details, we intend to fully utilize capacity at the transformed facility.”

Michele Martin, a UAW spokeswoman, didn't immediately respond to a message seeking comment.

German pay

A year ago, Ford paid its German workers about $62 an hour to build the Kuga, more than $10 an hour over U.S. workers' wages and benefits, Johnson estimates. Ford's hourly labor costs at Saarlouis now are $50 because of the weaker euro, about the same as in the U.S., Johnson said.

With U.S. and European labor costs converging and Mexico representing a lower-cost option, Ford has gained leverage in next year's labor talks with the UAW, Johnson said.

Ford's four-year contract with the UAW expires in September 2011.

“This is a reminder to the UAW that Ford's U.S. cars don't have to be produced in the U.S.,” Johnson said. “Ford's global architecture allows them to build anywhere. That's good news if the U.S. has competitive labor costs. It's bad news if they don't.”

Rocky Comito, president of UAW Local 862, which represents Ford workers at the Louisville plant, didn't respond to a telephone call seeking comment.

Ford is changing production plans for the Kuga one year before it is to begin manufacturing the model, which highlights how flexible the automaker has become, said Michael Robinet, an analyst for IHS Automotive in suburban Detroit.

“Ford's production flexibility allows for these decisions to be made much closer to production than ever before,” Robinet said. “Decisions can be made now almost in real time.”

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100910/COPY/309099971/1193#ixzz0z8Zesw8K

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