Ford Motor Co. (F) plans to move production of its Focus subcompact from Michigan to Mexico in 2018. That was the plan that drew attacks from Donald Trump when he was campaigning for president last year. It’s still Ford’s plan.
Ford earned some goodwill from Trump for a new initiative to invest $700 million in Michigan and create 700 new jobs there. Trump signaled his approval by tweeting a news story that said Trump’s policies were to thank for the move. But production of the Focus is still moving to Mexico.
Ford announced several things at once, leaving the impression that it’s capitulating to Trump and ditching its operations in Mexico, where assembly-line workers earn about one-fifth what their US counterparts do. But that’s not what Ford is doing. “We’ll continue to do the right thing for our business, and the right thing for our customers,” Ford CEO Mark Fields tells Yahoo Finance in the video above.
The right thing for a business is usually to minimize costs and maximize profits. The right thing for customers is to offer the best possible product at the lowest price. Mexico’s low labor costs allow Ford to do that, which is why the automaker is determined to shift the production of its small cars, which usually have the lowest profit margins, south of the border.
Here’s what did change: Ford is canceling the construction of a new $1.6 billion factory in Mexico, which would have been its third in the country, and moving production of the Focus to another factory in Mexico where output has fallen recently. “We simply didn’t need the new capacity,” Fields says. “We can use existing capacity.”
The new investment in Michigan is essentially unrelated to the Focus or the Mexico news. Ford will spend $700 million in Michigan on new efforts to develop self-driving and electric cars, which, it says, will help create 700 new jobs. In a clever PR move, Ford announced all of this at once, with the the news of 700 additional jobs in Michigan overshadowing the fact that it is still moving the Focus production to Mexico—just to a different location.
Like Trump, Ford shareholders seem to approve. The company’s shares rose roughly 3% on a day the broader markets were flat. Investors may like the fact that Ford is reducing capacity in Mexico, which means lower costs, while possibly getting on the next president’s better side. But Focus production is … still … moving … to … Mexico.
Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman.
