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Originally Posted by Free Press
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.
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