Wednesday, 19 April 2017

Ford Moving Some US Production


The North American Free Trade Agreement (NAFTA) was created in 1994, adding Mexico to the previous agreement between the USA and Canada. It was feared that lower wages in Mexico would adversely affect manufacturing north of the Rio Grande with Canadians especially concerned. However, residents north of the 49th parallel need not have worried as the free trade has worked quite well for all concerned.

One industry that the public is sensitive to any movement of production is car manufacturing. Ford has announced small car production is heading south to Mexico, which is not a popular decision. How will that shift impact on Ford branded car making in North America?

Cars:

In 2015, Ford made 940,000 cars in the NAFTA region. 540,000 were made in the USA and 400,000 in Mexico. Small cars make up nearly half the US figure of 540k, comprised of the Focus (238,000) and C-Max (24,000) for 262,000 units.

Trucks:

Ford made 2,060,000 trucks in the NAFTA area. 165,000 in Canada, 5,000 in Mexico and 1,890,000 in the USA.

Conclusion:

Based on 2015 numbers, 2,830,000 Ford vehicles were made in the US and the 262,000 that seems to be what is heading down south represents just 9.2% of the US volume and somewhat less than that in dollar value. I don't think the move is that big a deal for car plants in the US and the improved margins to be had producing them in Mexico are important to Ford in segments where profit can be elusive.

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