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Nov 20, 2016

NYT | Business Day - November 18, 2016: Ford Move Cited as Victory by Trump, Has No Effect on U.S. Jobes


www.nytimes.com

 nytimes.com

Business Day

Neal E. Boudette
A worker inspecting a Ford Escape frame in April at a Ford plant in Louisville, Ky. The plant employs about 4,500 hourly workers. Luke Sharrett/Bloomberg
Judging from a couple of Twitter messages by President-elect Donald J. Trump, he had scored a hard-won victory for American autoworkers by persuading Ford Motor to keep a Lincoln plant in Louisville, Ky., rather than move it to Mexico.

The reality proved less straightforward.
Ford had never said it was moving a plant to Mexico, only that it was transferring the production of a small Lincoln sport utility vehicle there so it could fully dedicate a Louisville plant to a larger-selling model.
That decision has now been reversed — but either way, it will have no impact on jobs at the factory. The plant is already operating virtually around the clock at full capacity.
The decision, which Ford Motor said it made before Mr. Trump spoke by phone on Thursday with William Clay Ford Jr., the company’s executive chairman, will simply keep the current product mix in place at the factory.
The Louisville plant will continue making a far larger number of Ford Escapes, a small S.U.V. that is a less luxurious vehicle than the Lincoln model, the MKC.
Ford, which during the election campaign was a frequent target of Mr. Trump’s criticism for moving jobs to Mexico, was no doubt waving a political olive branch by deciding to keep Lincoln MKC production in Kentucky. But the move was largely symbolic.
And that Mr. Trump seemingly overstated its impact — if it proves emblematic of his future dealings with the industry — could indicate that his promises to save and restore auto jobs may not require significant changes on the part of carmakers.
Mr. Trump’s vows to protect manufacturing jobs in the United States helped him win the support of working-class voters, including many factory workers in Michigan, Ohio and Kentucky. He sought to underscore the message in his Twitter dispatches on Thursday night.
“Just got a call from my friend Bill Ford, Chairman of Ford, who advised me that he will be keeping the Lincoln plant in Kentucky — no Mexico,” Mr. Trump wrote in a message.
In a subsequent post, he wrote: “I worked hard with Bill Ford to keep the Lincoln plant in Kentucky. I owed it to the great State of Kentucky for their confidence in me!”
Both posts overstated certain issues.
The plant is not primarily a Lincoln plant — the MKC represents roughly 10 percent of its total output. The MKC is a more expensive version of the Ford Escape, which is a much bigger seller than the MKC. Production of the Escape alone is enough to keep the Louisville plant running at full capacity.
Moreover, the decision to keep the MKC in Louisville was made before the two men spoke on Thursday, not as a result of their conversation, according to Ford.
“We have been reviewing the sourcing of this product, and Bill Ford spoke to the President-elect yesterday and shared our recent decision to keep Lincoln MKC in Kentucky,” a Ford spokeswoman, Christin Baker, said in a statement on Friday. “We are encouraged the economic policies he will pursue will help improve U.S. competitiveness and make it possible to keep production of this vehicle here in the U.S.”
Ford’s chief financial officer, Robert L. Shanks, held a conference call with analysts on Thursday morning in which he expressed hope that Mr. Trump’s policies would “provide an environment where it makes economic sense to build back up manufacturing jobs here.”
But how Mr. Trump governs may be “a bit different” from his campaign speeches, Mr. Shanks said. “So let’s just wait and see.’’
During the campaign, Mr. Trump heavily criticized Ford for deciding to shuffle its manufacturing operations so that all its small cars are made in Mexico. At times, he even suggested hitting the company and others with a 35 percent tariff on vehicles imported from Mexico.
Ford has countered that moving small-car assembly to Mexican plants would have no impact on American jobs.
For example, a factory in Wayne, Mich., that now makes the weakly selling Ford Focus compact will be retooled to make trucks and S.U.V.s, which are selling briskly. Ford said the higher profit margins on trucks and S.U.V.s allow it to absorb the higher labor costs of building the vehicles in the United States.
The Wayne plant is expected to remain fully staffed with 3,700 workers.
In October, speaking to reporters at an auto technology conference, Mr. Ford voiced frustration with the criticism Mr. Trump was then aiming at the company.
“Look, we are everything he should be celebrating about this country,” Mr. Ford said, noting that the company makes more cars and trucks in United States plants than any of its rivals and that it was investing in its American operations and adding jobs.
“He knows all that,” Mr. Ford said of Mr. Trump at the time. “I can’t control what he says.”
This week, Ford’s chief executive, Mark Fields, spoke at the Los Angeles Auto Show and reiterated the company’s commitment to shift assembly of small cars like the Focus to Mexico.
The decision on the MKC gave Mr. Ford some good news to pass on to Mr. Trump.
Ford wanted to move the MKC to another plant to increase production of the Escape, a change that had been planned for 2018. It could still increase output of the Escape by cutting back the number of MKCs it makes in Louisville, or it could move the Lincoln model to another plant in the United States.
The Louisville plant’s work force would remain unchanged even if the MKC were moved to a new factory. The factory employs 4,500 hourly workers and is operating on three shifts, producing vehicles almost around the clock.
In the first 10 months of this year, the plant made nearly 300,000 Ford Escapes and just over 37,000 Lincoln MKCs.
In the auto industry, plants are considered to be operating at 100 percent capacity if they are running two shifts a day. Most typically produce 200,000 to 250,000 vehicles a year.
nytimes.com
 
Neal E. Boudette
A worker inspecting a Ford Escape frame in April at a Ford plant in Louisville, Ky. The plant employs about 4,500 hourly workers. Luke Sharrett/Bloomberg
Judging from a couple of Twitter messages by President-elect Donald J. Trump, he had scored a hard-won victory for American autoworkers by persuading Ford Motor to keep a Lincoln plant in Louisville, Ky., rather than move it to Mexico.
The reality proved less straightforward.
Ford had never said it was moving a plant to Mexico, only that it was transferring the production of a small Lincoln sport utility vehicle there so it could fully dedicate a Louisville plant to a larger-selling model.
That decision has now been reversed — but either way, it will have no impact on jobs at the factory. The plant is already operating virtually around the clock at full capacity.
The decision, which Ford Motor said it made before Mr. Trump spoke by phone on Thursday with William Clay Ford Jr., the company’s executive chairman, will simply keep the current product mix in place at the factory.
The Louisville plant will continue making a far larger number of Ford Escapes, a small S.U.V. that is a less luxurious vehicle than the Lincoln model, the MKC.
Ford, which during the election campaign was a frequent target of Mr. Trump’s criticism for moving jobs to Mexico, was no doubt waving a political olive branch by deciding to keep Lincoln MKC production in Kentucky. But the move was largely symbolic.
And that Mr. Trump seemingly overstated its impact — if it proves emblematic of his future dealings with the industry — could indicate that his promises to save and restore auto jobs may not require significant changes on the part of carmakers.
Mr. Trump’s vows to protect manufacturing jobs in the United States helped him win the support of working-class voters, including many factory workers in Michigan, Ohio and Kentucky. He sought to underscore the message in his Twitter dispatches on Thursday night.
“Just got a call from my friend Bill Ford, Chairman of Ford, who advised me that he will be keeping the Lincoln plant in Kentucky — no Mexico,” Mr. Trump wrote in a message.
In a subsequent post, he wrote: “I worked hard with Bill Ford to keep the Lincoln plant in Kentucky. I owed it to the great State of Kentucky for their confidence in me!”
Both posts overstated certain issues.
The plant is not primarily a Lincoln plant — the MKC represents roughly 10 percent of its total output. The MKC is a more expensive version of the Ford Escape, which is a much bigger seller than the MKC. Production of the Escape alone is enough to keep the Louisville plant running at full capacity.
Moreover, the decision to keep the MKC in Louisville was made before the two men spoke on Thursday, not as a result of their conversation, according to Ford.
“We have been reviewing the sourcing of this product, and Bill Ford spoke to the President-elect yesterday and shared our recent decision to keep Lincoln MKC in Kentucky,” a Ford spokeswoman, Christin Baker, said in a statement on Friday. “We are encouraged the economic policies he will pursue will help improve U.S. competitiveness and make it possible to keep production of this vehicle here in the U.S.”
Ford’s chief financial officer, Robert L. Shanks, held a conference call with analysts on Thursday morning in which he expressed hope that Mr. Trump’s policies would “provide an environment where it makes economic sense to build back up manufacturing jobs here.”
But how Mr. Trump governs may be “a bit different” from his campaign speeches, Mr. Shanks said. “So let’s just wait and see.’’
During the campaign, Mr. Trump heavily criticized Ford for deciding to shuffle its manufacturing operations so that all its small cars are made in Mexico. At times, he even suggested hitting the company and others with a 35 percent tariff on vehicles imported from Mexico.
Ford has countered that moving small-car assembly to Mexican plants would have no impact on American jobs.
For example, a factory in Wayne, Mich., that now makes the weakly selling Ford Focus compact will be retooled to make trucks and S.U.V.s, which are selling briskly. Ford said the higher profit margins on trucks and S.U.V.s allow it to absorb the higher labor costs of building the vehicles in the United States.
The Wayne plant is expected to remain fully staffed with 3,700 workers.
In October, speaking to reporters at an auto technology conference, Mr. Ford voiced frustration with the criticism Mr. Trump was then aiming at the company.
“Look, we are everything he should be celebrating about this country,” Mr. Ford said, noting that the company makes more cars and trucks in United States plants than any of its rivals and that it was investing in its American operations and adding jobs.
“He knows all that,” Mr. Ford said of Mr. Trump at the time. “I can’t control what he says.”
This week, Ford’s chief executive, Mark Fields, spoke at the Los Angeles Auto Show and reiterated the company’s commitment to shift assembly of small cars like the Focus to Mexico.
The decision on the MKC gave Mr. Ford some good news to pass on to Mr. Trump.
Ford wanted to move the MKC to another plant to increase production of the Escape, a change that had been planned for 2018. It could still increase output of the Escape by cutting back the number of MKCs it makes in Louisville, or it could move the Lincoln model to another plant in the United States.
The Louisville plant’s work force would remain unchanged even if the MKC were moved to a new factory. The factory employs 4,500 hourly workers and is operating on three shifts, producing vehicles almost around the clock.
In the first 10 months of this year, the plant made nearly 300,000 Ford Escapes and just over 37,000 Lincoln MKCs.
In the auto industry, plants are considered to be operating at 100 percent capacity if they are running two shifts a day. Most typically produce 200,000 to 250,000 vehicles a year.