Ford's Mexico Plan
Automaker seeks $1.8 billion in savings from expansion; Company delays announcement to avert uproar from union

June 15, 2006

The Detroit Free Press has obtained a 25-page presentation that summarizes Ford's plans to expand operations in Mexico, with the help of federal incentives.

Ford officials refused to authenticate the document.

But the presentation, which is dated April 3 and appears to have been prepared for senior Ford executives, such as Executive Vice Presidents Anne Stevens and Mark Fields, lays out Ford's secret strategy for accomplishing its Mexico objectives and announcing the sensitive project.

Any decision to expand Ford operations in Mexico is sure to rankle union leaders and government officials in the United States, who have been working to secure more jobs in America.

How the deal developed

The Ford-Mexico time line, according to the April 3 presentation materials obtained by the Free Press:

Feb. 23: Ford Motor Co. meets with outgoing Mexican President Vicente Fox for dinner.

March 24-29: Key stakeholders at Ford give endorsement to project.

April 3: Review for Mark Fields, Ford's executive vice president and president of the Americas.

April 4: Meeting with Mexican government.

April 6: Fields and Louise Goeser, chief executive of Ford of Mexico, review Way Forward plan with Mexican government.

April 21: Expected final approval from Mexican government.

May 3: Goeser and Fields review progress with Mexican government.

May 17: Final agreement with Mexico.

Sunday-today: UAW's 34th Constitutional Convention.

Saturday-July 1: Ideal time for announcement of Ford's Way Forward -- Mexico project.

July 2: Mexican presidential elections.

Ford of Mexico

Two assembly plants: in Cuautitlan, which builds the Ford Ikon small cars and Super Duty pickups, and in Hermosillo, which builds the Ford Fusion, Mercury Milan and Lincoln Zephyr.

One parts plant: Chihuahua Engine.

Ford employs fewer than 4,500 workers in Mexico.

Annual sales of $3.4 billion, up from $2.9 billion in 2004.
Ford Motor Co., working through the early stages of its Way Forward turnaround plan, has crafted a plan for a major expansion of its operations in Mexico, where labor and car parts are cheap -- an effort that could save the ailing automaker about $1.8 billion a year, internal Ford documents show.

Mexico's biggest gain would be a low-cost plant that Ford promised earlier this year to build in North America. The expansive plans are outlined in a PowerPoint-type document labeled as "Ford SECRET" and titled "Way Forward -- Mexico," that were obtained by the Free Press and WDIV-TV Local 4.

Ford and its suppliers would invest $9.2 billion in Mexico over the next six years. In return, Ford would get at least $500 million in government grants, the documents show.

Ford spokesman Oscar Suris refused to comment, except to note that the document, which bears a "JUST FOR FORD" stamp, is 2 months old.

"There haven't been any final decisions made on where that facility will be located," Suris said.

He also emphasized that 90% of Ford's annual investment in North America is in the United States, with less than 5% in Mexico.

"We basically expect it to be at the same levels going forward," Suris said.

With sales falling -- especially of high-profit pickups and SUVs -- and rising costs, for health care and energy, Ford Motor has been hustling to reshape the company to compete with Asian rivals, as well as other Detroit automakers, which have bigger investments in Mexico.

But news about the potential Mexican investment is sure to rankle union leaders who have been overseeing plant and job cutbacks in the United States in Canada.

The document has been leaking out to the media just as the UAW's 34th Constitutional Convention in Las Vegas comes to a close. It was initially reported Wednesday in the Oakland Press.

UAW Vice President Gerald Bantom said he had placed a few calls Wednesday to see whether Ford's plans to expand in Mexico were true.

"When you hear things like that," he said, "there's always something to the rumor."

Bantom said Ford is planning to build a car plant and he had been working to convince Ford to build it in one of the southern states, where the UAW has struggled to organize workers at foreign plants.

But if Ford puts the plant in Mexico, it would dilute UAW power, said Linda Pace, 50, of Taylor, a bargaining representative at Ford's Dearborn Truck Plant.

"I don't see the American innovation in it at all," Taylor said during the convention. "It's absolutely sad that they would build our products in Mexico. We have a good workforce here. We put out good products. We need our work here in the United States."

According to the richly detailed document about its Mexican project, Ford plans to:


Build a $1.4-billion, 280,000-square-foot assembly plant, which would make 280,000 vehicles annually.

Revitalize Ford's assembly plant in Cuautitlan, Mexico, which builds the Ford Ikon small cars and Super Duty pickups near Mexico City. About $900 million would be spent, and the plant would have the capacity to build 222,000 vehicles. Some analysts had previously said they thought that plant would be closed.

Invest an additional $1 billion in the Hermosillo Stamping and Assembly plant, which builds the Ford Fusion, Mercury Milan and Lincoln Zephyr. Total capacity would be 305,000 vehicles annually.

Add 2,423 manufacturing, engineering and other professional jobs, plus 13,700 non-professional jobs and 21,297 supplier jobs.

Spend $2.3 billion to expand engine and transmission production in Mexico.

Additionally, Ford suppliers would invest $3.6 billion in the country.

To put the massive scope of this Mexico project in perspective, the document says that the estimated employment driven by this initiative "would represent about 15% of today's unemployment in Mexico" and it would represent nearly 9% of the total foreign investment in Mexico.

Ford posted a $1.2-billion loss in the first quarter and U.S. sales through May are down 3.5%.

While it makes economic sense for Ford to lower its costs by expanding in Mexico, where it's cheaper to hire workers and buy parts, the news could be highly contentious.

Ford has been beset with demoralizing sales declines, plant closures and perennial job cuts, especially of union workers.

In January, Ford announced it would idle seven of its 18 assembly plants in North America, mostly in the United States, and seven more parts plants by 2012.

About 34,000 jobs in all would be eliminated as the automaker tried to get its costs in line with its declining sales.

Meanwhile, the automaker has been boasting in advertisements about how it is "Driving American Innovation" -- a message that seems incongruous with a major investment in another country.

Still, Mark Fields, an executive vice president at Ford and president of the company's Americas division, called on the U.S. government to do more for U.S. automakers, warning that foreign automakers contributed less to the U.S. economy.

"When it comes to the economic benefits to American society, all cars are not created equal," Fields said Wednesday in a speech at the U.S. Chamber of Commerce. "If we think we can replace lost sales of domestic autos with rising sales of foreign imports or even domestically built foreign cars, and suffer no significant economic loss, we are badly mistaken."

Meanwhile, the internal document suggests the ink on the deal with the Mexican authorities had been dry for nearly a month after a series of high-level meetings between Fields and Mexican authorities.

The talks apparently kicked off with a dinner in February between outgoing Mexican President Vicente Fox and Ford.

Talks were expected to wrap up on May 17 when officials were to finalize an agreement with Ford, the document says.

The automaker has apparently been biding its time since then, waiting for an opportunity to make the announcement without creating excessive anguish for the UAW and CAW.

Because of the sensitivity, Ford hoped to announce the new investment after the UAW convention in Las Vegas, which ends today, and before the Mexico presidential elections on July 2, according to the document.

If the announcement were made before the union elections, the Ford-UAW relationship "could be jeopardized," the document says.

And if Ford waits until after the Mexican elections, the grants being offered to Ford, which are valued at between $500 million and $1.4 billion, could be threatened.

"Mexico is a key partner as we're targeting lower fixed costs, better quality and speed to deliver our Way Forward plans," the document says.

Ford also notes in the document that it is competing with other automakers, such as Nissan Motor Co., DaimlerChrysler AG and General Motors Corp., for incentive dollars.

"Mexico is ready," the document says.

Isnt NAFTA great!?!?! Pffffffffffffffffffffff

American labor building quality products on american soil with decent wages and working conditions. If the name on the door is Honda, it happens and turns a tidy profit. If the name on the door is Ford it's a pipe dream.

It's hard not to factor out the UAW as the major difference between the two.

American labor building quality products on american soil with decent wages and working conditions. If the name on the door is Honda, it happens and turns a tidy profit. If the name on the door is Ford it's a pipe dream.

It's hard not to factor out the UAW as the major difference between the two.


Its much harder not to factor out Ford v. Honda as the major difference. I'm always shocked at how quick everyone piles on the union when its the white shirts who've been turning out shitty cars for 35 years.

Seriously, why buy a focus when I can get a Hyundai for less money, longer warranty, and its a better car? How is that the fault of some dude who's job it is to spot weld an exhaust becasue he want to make $80,000?

American labor building quality products on american soil with decent wages and working conditions. If the name on the door is Honda, it happens and turns a tidy profit. If the name on the door is Ford it's a pipe dream.

It's hard not to factor out the UAW as the major difference between the two.


Its much harder not to factor out Ford v. Honda as the major difference. I'm always shocked at how quick everyone piles on the union when its the white shirts who've been turning out shitty cars for 35 years.

Seriously, why buy a focus when I can get a Hyundai for less money, longer warranty, and its a better car? How is that the fault of some dude who's job it is to spot weld an exhaust becasue he want to make $80,000?
very good points. But I wonder if his 80,000 is having an effect on how much is left in the profit margin, to have them put on a high quality exhaust vs the cheapest brand parts they could get.

i think that they are overpaying everyone and a better answer would be to improve the quality of the parts, engineering, and overall quality, while cutting jobs and pay back. Of course the union doesn't really accept the reality of that scenario it seems.

I don't fault them for having a union. but i kinda fault the union for not honestly looking out for their employees in the long run, rather than get them the highest pay checks possible short term. jobs are going to be lost either way, might as well work to cut down on the amount of lost jobs as a priority.

Costs are having quite an effect now Gutz, but they shouldn't because the big 3 shouldn't have pissed away all their market share. The "rising tide" theory should apply here, as Ford should be making a lot more money with which they could build better cars, pay better wages, and distribute bigger dividends. But management bum-fucked em for too long with mediocre ideas and response to customer desire and now its evidently the workers fault and they should just roll over.

Costs are having quite an effect now Gutz, but they shouldn't because the big 3 shouldn't have pissed away all their market share. The "rising tide" theory should apply here, as Ford should be making a lot more money with which they could build better cars, pay better wages, and distribute bigger dividends. But management bum-fucked em for too long with mediocre ideas and response to customer desire and now its evidently the workers fault and they should just roll over.
no, by no means am I laying blame on the workers. But i'm sure cutting any pay would be looked at as such.

The way it looks either you cut back on pay and a few jobs, or a ton of jobs to keep paying the workers you keep their dough. If theres a better option somwhere in there, then roll with that. Not really a right or wrong type of scenario as long as they do something to fix the set up as is. But I do agree that the companies screwed because of their own fat cow pissing away of their market share. Regardless its going to cost the employees too either way. i was just suggesting that everyone take a realistic approach to trying to keep more jobs there. Instead of such a stern stubborn stance of "pay workers in full or cut them to the side".

^agreed, they now have to take steps to save said jobs or watch the ship sink. Its the smart thing to do, but if I wre them I'd take some serious step to win the PR campaign they're getting burried in.

i think it should be pretty obvious at this point that "patriotism" and "corporation" have absolutely nothing in common anymore. or if they do, its a one way road.

it seems to me that america is heading towards a notion where we try to own everything but produce nothing (probably wont happen in absolute terms, but relatively). im not sure the rest of the world will just go along with it.

I think the most important aspect of this discussion hasn't been put forth yet - facts.

We are operating on the assumption that Honda pays american laborers less and provides less benefits than Ford, so the overall package is so cheap, Honda can make money with non-union laborers in the USA while Ford can't make money with union laborers in the USA.

Perhaps that's true, but I'd rather see some facts.

Does Honda pay less per hour or year than Ford?

Does Honda provide less benefits than Ford?

Is the overall package for Honda hiring non-union americans cheaper than the overall package of Ford hiring non-union americans?

Personally, I have no idea which company pays more and I'd rather not discuss it until I see some facts.

PS: FYI: Facts are not what Bill O'Reilly says on television (Pelosi is a hypocrite), Tahoe. I'd rather see statistics from reliable sources.

Ready... GO!!!

I don't have the facts that you are looking for, but on the surface it would appear that Honda building American-based plants and hiring American workers is just as much about marketing their products in the US as it is about logistics and quality workmanship.

If you are a foreign company, it's much easier to sell to Americans if you can throw them a little bone, i.e. "Made in the USA".

I'm willing to bet that Honda doesn't have the same kind of profit margins on autos made/sold in the US that they do with their foreign-made autos, but perhaps the difference is written off as a marketing expense.

The Big Three's plummet ties to the leasing industry, the average lifespan improving, and the "shrinking" middle class.

In looking around and reading more on it there were a few general things that jumped out at me.

A stated goal of the UAW is that labor can't be used for competitive advantage. They do this by effectively enforcing the exact same deal across all the companies. This seriously hamstrings US companies against competition that is free to tailor their benefits, wages and work rules to their own individual situation. One size doesn't fit all and the ones with a better fit have a competitive advantage.

The other thing is that most of the transplants are able to get best bang for the buck by focusing most of their labor expenses on the best, most productive workers. UAW shops are paying older "used up" workers with the most senority the highest wages to do the lightest work. They are paying out massive amounts in pensions to retirees that aren't an issue at new plants with young workforces. Healthcare costs for these retirees are skyrocketing. They are also paying laid off workers to do nothing for extended periods of time.

This all adds up to a boatload of cash funneled to a segment of the labor force doing the least work or no work at all while the foreign competition is paying most of their cash to the young studs and go-getters.

The last thing is the advantage of the foreign transplants in cherry-picking the nation for the best deal in the cheapest area the farthest from union strongholds where they build shiny new facilities incorporating the latest in technology and efficiency.

When you add it all up, the domestics are screwed and will become more screwed every year until something gives. I see three possible outcomes...

A)Management and unions will have an epiphany and start doing what's in both side's best interests.

B) The unions will have a red sox miracle to rally from 3-0 down a best of seven to successfully organize the transplants, thus restoring the american vs foreign worker dichotomy they leveraged successfully in the past.

C) There will be a series of strikes and bankruptcies that shake out in busted unions and/or extinct american automakers.

Color me cynical but I wouldn't bet on the first two options.

How have you people lived in Michigan and not learned the more basic points of the history of the auto industry?

its easy to get down on the unions, but its an obvious conflict of interest problem. they should be trying to get the best deal possible for their members, but this is hurting the longterm health of themselves.

but so are the CEO's. ceo's in the 80's made something like 15x the average employee. now the differance is in the hundreds.

the fact of the matter is that everyone is just trying to get everything the can while they can. which pretty much affirms everything that i've ever believed: the baby boom generation is a failure. it probably wouldnt be too bad of an idea to systamtically terminate them, and let fresh blood get a chance to run things. viva la resistance!

How have you people lived in Michigan and not learned the more basic points of the history of the auto industry?

How many people actually -teach- the history of the auto industry?

How have you people lived in Michigan and not learned the more basic points of the history of the auto industry?

How many people actually -teach- the history of the auto industry?

If you don't work in the industry and didn't grow up in a household where anyone did, you don't spend a lot of time mulling over the finer points of why the auto industry is messed up.

I'm just surprised it's not the source of thing that'd be a semester course in local high schools. It took me working in the auto industry to get a feel for it.

A lot of folks here don't understand what the unions are and aren't about, how they do and don't factor into the problems the Big Three faces today.

Here's a key question to ask yourselves: Why hasn't the price of cars and transportation gone down, like the price of your computers has? Do cars do -that- much more today than they did 30 years ago?

Buying a new 4-door Gremlin in today's dollars would cost about $12-15k and get you 30-odd mpg and a reasonably safe reliable ride (if not the greatest aesthetics). It was a success for AMC. Why, with 30 years of technology improvement, is the price for an "entry level car" stayed the same, with the fundamental consumer difference being 8-track vs. a CD player and maybe power windows/locks? Most every large manufactured product available in 1970 cost more and did a LOT less than what you get now.

Think about it...

Some of the problems the auto manufacturers face are less external, and more of archaic ways of doing business.

The price of raw materials HAVE increased, but that runs along the line of every consumer product. Additionally, foreign automakers must also weigh the increases, as well.

What's hurt them are two things: Internal competition and 20th century thought.

What I mean by "internal competition" is "within this country". Japanese automakers may or may not like each other, but they frequently assist each other and, if the government says so, collaborate on a project. Same holds true with the German automakers. Porsche, Audi, and VW have had a partnership for some time. But here, it's cutthroat! The big three absolutely hate each other, and their lack of cooperative effort have led them astray.

In terms of 20th century thought, here's an example: The GMC Envoy is also the Chevy Trailblazer is also the Buick Rainer is also the Saab SUV used to be the Olsmobile Bravada and was sort of the Izuzu something. Back when there was less competition, you could get away with that shit. Today, consumers are as smart as ever, using the internet to gain info about autos and making intelligent decisions before they step foot into a showroom. Sure, it saves money to clad the same chassis in different skins (Epsilon and Sigma chassis for GM), but like it was mentioned in a prior post, those savings don't necessarily translate to lower prices.

Regarding GM, I'd like to see a throwback to a clear progression of their divisions. Pontiac used to be their performance division, Buick was a step below Caddy in luxury, Chevy was an everyman's car, GMC dealt with heavy duty trucks. Of course, the entire company would have to be re-organized. And, with a pig like GM, that's impossible without Chapter 9 protection.

Does anybody here work for GM?

The wife and I are looking at a new van and I'm hearing rumblings that GM is about to announce a huge promotion (0% for 72 mos. on all '06 models) but it's only going to last one week.

I can't find anything on the internets about it, though.

Anybody know the dilly-o?

I confirmed this GM special this afternoon, FWIW.

0% for 72 mos. on all 2006 GMs.

So if you are looking for a new ride, better act by July 5.

http://www.chevrolet.com/specialoffers/

(I am not affiliated with GM in any way other than being the son of a GM retiree)

Is this going to be a "mini" van, or a no windows "kidnap someone in broad daylight" van?

Uplander, just bought it about 10 minutes ago (over the phone while calculating the MLB Power Rankings, what can I say, I'm a multi-tasker).

That is a fucking sweet financing deal.