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Ford's real plan

Mexican factory will produce a subcompact b-cars; high-efficiency southern facility will build c-car sedans

Bryce G. Hoffman / The Detroit News

Restructuring
Ford is streamlining operations to help restore profits in North America. Previously announced details:

Cut up to 30,000 factory jobs by 2012

Close 14 factories by 2008. Of the seven already identified, five are vehicle assembly plants.

Reduce material and purchasing costs by $6 billion by 2010

Trim 1.2 million units annually from production
What's new

Plans to build two vehicle assembly plants, one in the southern United States, the other in Mexico.
Source: Detroit News research

DEARBORN -- Ford Motor Co. has struck a deal with the Mexican government to build a factory south of the border, according to sources familiar with the plan, but the automaker also is planning to build a super-efficient and flexible plant in the southern United States in cooperation with the United Auto Workers union.

The Mexican factory will produce a subcompact car or "B-car" that Mark Fields, president of Ford's Americas group, has touted as a key element of his turnaround strategy. The vehicle will be sold in several countries and is expected to appeal to younger buyers in the United States.

The new U.S. plant will produce slightly larger vehicles -- known as C-cars -- similar to the current Focus entry-level sedan, sources said.

The new plants, which should be completed in the next several years, are being planned at a time when Ford's is closing domestic factories to trim excess capacity.

In January, Fields outlined a sweeping restructuring plan for North America that calls for shuttering 14 factories and cutting as many as 30,000 factory jobs over the next six years. As part of that plan, dubbed the "way forward," Fields did say the company would build a low-cost manufacturing facility somewhere in North America. The facility he was referring to is the one planned for the southern United States, sources said.

Reports of Ford's planned expansion in Mexico came as UAW leaders gathered for their convention in Las Vegas. Ford had hoped to keep its Mexican plan under wraps until after the UAW convention, but a person described as a "disgruntled" Ford employee leaked a preliminary proposal to the Oakland Press of Pontiac.

According to the paper, those documents outlined a proposal for Ford to invest $9.2 billion in Mexico over the next six years, building plants, expanding existing facilities and increasing purchases of Mexican-made components 300 percent. It suggested Ford's investments could bring 150,000 jobs to Mexico over the next decade.

Ford called the Oakland Press report "speculation." It also described information on the new plants in Mexico and the South as speculative.

"We spend 90 percent of our North American resources in the U.S. and we spend 98 percent of our engineering dollars in the U.S.," Fields said Wednesday in Washington. "I don't expect that to change appreciably."

Sources familiar with the documents and Ford's expansion plans told The Detroit News that they were part of a presentation given by Ford of Mexico President Louise Goeser to Anne Stevens, chief operating officer of Ford's Americas group, in April. While Ford of Mexico proposed huge expansion in Mexico, the company did not approve the plan.

"We never agreed to that," said one person familiar with the situation. "That was a wish list from Louise Goeser and her team." Executives in Dearborn did, however, agreed to move forward with plans to build a new subcompact car factory.

"We did go back to Ford of Mexico and the Mexican government and reached a deal on money and tax credits for a new plant," the source said.

The source suggested that the person who leaked the documents timed the release to coincide with both the UAW convention and an appearance Wednesday by Fields in Washington.

"Someone was trying to embarrass (UAW President) Ron Gettelfinger and the company," the source said.

Fields: 'Made in America'

In his speech to the U.S. Chamber of Commerce in Washington, D.C., Fields urged support for the domestic auto industry and said foreign automakers are overselling their made-in-America credentials.

"Despite all their claims about being 'American,' most of the cars and trucks the foreign automakers sell in America aren't actually made in America," he said.

Nor are all Ford vehicles. The automaker already has three plants in Mexico, including one in Hermosillo that produces its new Fusion, Mercury Milan and Lincoln Zephyr sedans.

Analysts say the subcompact B-car cannot be made in the United States because of cost reasons. Jim Hall, who follows the industry for AutoPacific in Southfield, says there are other reasons why Mexico makes sense.

According to Hall, Ford plans to export these next-generation subcompacts all over the world, as well as to the United States. Mexico has more favorable trade agreements with important markets in Europe and Latin America. Moreover, because of the North American Free Trade Agreement, Ford will not be penalized when it imports the cars back into the United States.

"They want this to be the big, global B-car plant," Hall said. "It's really a slick idea."

Some UAW members in Las Vegas said the Mexico deal doesn't sound good for U.S. workers, said Wendy Thompson, a UAW convention delegate from Local 235 in Detroit.

"It's another sign that the idea of partnerships with the companies is completely bankrupt," said the self-described UAW dissident.

UAW leaders had little to say about the plan, saying they had not seen the details.

"I've heard rumors. But I don't know anything specific," Gettelfinger said Wednesday in Las Vegas, where he was re-elected to a second four-year term as head of the UAW. "That's just something we'll have to get into when we get out of here."

Exactly where and when the Mexican plant will be built remains unclear.

In addition to postponing any public discussion of the plan until after the UAW convention, Ford also planned to time its announcement with an eye toward Mexican politics.

Mexico's presidential election is scheduled for July 2. Some within Ford wanted to announce the plant deal before that date to provide a boost to Felipe Calderón, the candidate of the ruling National Action Party candidate and incumbent President Vicente Fox's hand-picked successor. The conservative Calderón is locked in a tight race with leftist candidate Andrés Manuel López Obrador, who is seen as less friendly to U.S. corporations.

However, others in Ford worried such a move could provoke a backlash against the company if López Obrador wins, and the company decided to hold off until after the election. That may not be possible now.

No U.S. site chosen yet

The company is not expected to announce the new U.S. plant until later this year.

Sources said Ford has not picked a site for the new facility, but has decided to build it in a southern state. The automaker is likely to shop the plant to several states to get the best package of incentives.

Gov. Jennifer Granholm said she was still hoping to convince Ford to build its new low-cost facility in Michigan.

"We have been in ongoing discussions with Ford about expanding their presence in Michigan and it's been our impression that they are very committed to the state of Michigan," said the governor's spokeswoman, Liz Boyd.

But sources in the company say the decision to locate the plant in a southern state is part of a strategy designed to counter the growing threat posed by Japanese and Korean automakers that are blurring the line between foreign and domestic by assembling more of their cars and trucks in U.S. plants.

Most of those plants are in the South. They have avoided efforts by the UAW to organize their workers. Unburdened by union contracts, they enjoy a significant cost advantage. That is bad news for Ford, but it is also bad news for the union, which faces a dwindling membership base.

Factory would be new model

Ford's leadership envisions a quid-pro-quo deal with the UAW that would help both the company and the union counter this threat. Ford could locate its new factory near one of the Asian transplants, providing the UAW with a beachhead from which to organize in the South. In exchange, the union would give Ford the sort of operating agreement needed to make the new plant competitive.

"It's potentially something that could change the whole dynamic in the region," said David Cole, chairman of the Center for Automotive Research in Ann Arbor, who called Ford's plan a "bold strategy" and predicted that the UAW would be receptive to it.

"More than anything, they covet being able to organize the international companies."

Today, most UAW plants divide the labor of automotive assembly among dozens of different job classifications and workers are rarely allowed to do anything not specifically covered by their job description. In contrast, Asian-owned auto plants in the United States have as few as two job classifications and stress cross-functionality and a team-based approach to manufacturing.

The UAW has been more willing to consider similar operating agreements in recent years. Both General Motors Corp. and DaimlerChrysler AG have succeeded in building efficient, cost-competitive plants in Michigan in cooperation with the union.

Ford's new factory is envisioned as a model of flexible manufacturing, meaning it will be able to produce several different models on the same assembly line.
 
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