Ford Motor Co. plans to import its next-generation Focus sedan from China, abandoning plans to build the small car in Mexico.
Production will begin in the second half of 2019, Ford said Tuesday. Most of the initial models for North America will come from China, with additional variants coming from Europe.
Ford already builds the Focus for the Chinese market at its Changan Ford Assembly Plant 1 and 2 in Chongqing, China.
Ford currently makes the Focus at its Michigan Assembly Plant in Wayne, Mich., but production is scheduled to end there in 2018 as the automaker makes room for the Bronco SUV and Ranger midsize pickup. Ford originally planned to move Focus production to a new, $1.6 billion plant in San Luis Potosi, Mexico, but the company canceled those plans in January, less than a year after announcing them. Ford then planned to build the cars at its existing plant in Hermosillo.
Ford said at the time the move would save $500 million, and it now says building the car in China will save an additional $500 million, for a total savings of $1 billion in production costs.
“We’ve done a lot of research and consumers care a lot more about the quality and the value than they do about the sourcing location,” Joe Hinrichs, Ford’s president of global operations, said in a conference call with some reporters Tuesday. “iPhones are produced in China, for example, and people don’t really talk about it.”
General Motors last year became the first U.S. automaker to import a vehicle from China with the launch of the Buick Envision. It also makes the Cadillac CT6 plug-in hybrid there. Volvo, which is owned by China's Geely Automobile Holdings, also builds some cars in China for the U.S. market.
Although it is cheaper to build and ship cars to the U.S. from Mexico than China, "this was not a variable cost decision," Hinrichs said. "It allows us to free up a lot of capital" because Ford now has to retool only one plant -- the Chongqing plant -- rather than two to supply North America.
Given dwindling overall U.S. demand for small cars such as the Focus, "we thought this was the best balance of that cost/capital tradeoff," Hinrichs said. Focus sales have fallen 19.7 percent in the U.S. through the first five months of the year to 67,146, according to the Automotive News Data Center.
Hinrichs said Ford planned to inform the White House this morning. There was no immediate comment from the White House.
Asked if Ford was concerned about having to pay a border tax, as President Donald Trump has threatened on vehicle imports from Mexico, Hinrichs said "the capital saving outweighs the risk" of a potential tax on the Chinese-built Focus.
Ford also said Tuesday it will invest $900 million at its Kentucky Truck Plant for production of the new Expedition and Lincoln Navigator SUVs. The move will preserve 1,000 jobs at the plant, Ford said.
The investment goes beyond Ford’s pledge to invest $600 million there through 2019 as part of its 2015 contract with the UAW. Ford in late 2015 invested $1.3 billion for production of its aluminum-bodied Super Duty, although that money was tied to its 2011 UAW deal.
There was no comment from the UAW.
“Large SUVs are attracting a new generation around the world -- and we’re finding new ways to deliver the capability, versatility and technology that customers around the world really want with our all-new Ford Expedition and Lincoln Navigator,” Hinrichs said.
“At the same time, we also have looked at how we can be more successful in the small car segment and deliver even more choices for customers in a way that makes business sense.”
Reuters and Bloomberg contributed to this report.
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