Ford to Import Focus to U.S. From China -- 2nd Update

By Christina Rogers and Mike ColiasFeaturesDow Jones Newswires

Ford Motor Co. said it plans to start importing its compact Focus from China, reflecting a wider industry trend that gives auto makers more flexibility but threatens automotive jobs in the U.S.

The move, announced Tuesday, is the latest shift in Ford's approach to the source of production for its once-hot Focus, a small car the company started building in Michigan earlier in the decade. Ford had initially planned to move production of the Focus to Mexico.

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The move to Chinese factories, slated for mid-2019, has broad implications for the U.S. auto industry. Although Ford won't be the first Detroit company to import cars into the U.S. from China, it will be by far the highest volume of vehicles to come from Chinese factories to American dealerships. In 2016, Ford sold 170,000 Focuses in the U.S.

Companies producing in Mexico have been under pressure as the Trump administration renegotiates the North American Free Trade Agreement, a decades-old pact that has led several auto makers to bulk up Mexican head count and production activities. Ford and rivals have already signaled changes in response to President Donald Trump's repeated attacks on companies importing cars from Mexico to the U.S.

The decision to move production of the Focus for the U.S. market to China comes as many auto makers are retrenching from the struggling small-car market.

Joe Hinrichs, Ford's global operations chief, said in an interview that Mr. Trump's push to rewrite Nafta wasn't influential in Ford's decision to relocate the Focus.

Rather, with small-car sales slumping in the U.S., Mr. Hinrichs said it made more sense to add production in China, where it is already retooling its Focus plant for the next-generation model, rather than spend additional money to convert an existing factory in Mexico.

"This is really about saving capital, cash to reinvest in the business elsewhere," Mr. Hinrichs said.

Small cars built by U.S. workers are generally money losers in the American market because buyers won't pay a premium for them. The red ink deepens as gas prices fall and demand for fuel-efficient vehicles fades. Sales of compact cars, such as Honda's Civic or Chevrolet's Cruze, thrive when fuel is pricey and buyers want fuel efficiency, but the models require hefty discounts when gasoline is cheap.

Ford in January decided to move manufacturing of the Focus to Mexico so it could convert the Michigan factory back to pickups and sport-utility vehicles. That decision was criticized by Mr. Trump during the presidential campaign even though it would have preserved thousands of United Auto Workers jobs.

Critics say moving any product to Mexico is problematic, but Ford says such moves are necessary to preserve the bottom line.

Ford later softened that blow by saying it would cancel the new plant planned in Mexico and allocate $700 million in savings to create jobs at a separate plant in Michigan slated to make electric cars.

The turn to China may heighten the White House's concerns because vehicles coming from Asia are typically far less dependent on U.S. parts than those coming from Mexico.

General Motors Co. last year became the first major auto maker to rely on China for significant volumes of vehicles to be sold in the U.S. Buick dealerships have sold more than 30,000 Envision SUVs, built in northeast China, since it went on sale in 2016.

Sourcing vehicles from China allows global auto makers to make better use of capacity in the world's largest car market amid a slowdown in sales growth there. But a combination of factors, including hefty tariffs and lower logistics costs, means U.S. workers have essentially no role in the construction of those vehicles.

Unlike cars built in Mexico, which often carry several components made by U.S. parts suppliers due to the lack of trade barriers, the Buick Envision relies on Chinese sources for 88% of its components, according to the National Highway Traffic Safety Administration. Only 1% is provided by U.S. or Canadian companies, the NHTSA says.

Mr. Hinrichs said the decision to relocate the Focus should have limited impact on North American supplier jobs because the auto maker has a slew of new models coming that will be built in the region, including several new SUVs.

The current Focus built in Michigan, which is scheduled to end production in 2018, gets about 46% of its parts from Canadian or U.S. suppliers, Mr. Hinrichs said.

Building the next-generation Focus in China rather than in an existing plant in Hermosillo, Mexico, will save Ford $500 million annually, helping the No. 2 U.S. auto maker trim costs amid slowing U.S. volumes and rising expenses related to technology investments, both of which are pressuring profits.

GM is also signaling a reconsideration of its reliance on Mexican facilities. In its case, though, GM has said it wants to use more American-made parts in pickup trucks and large SUVs being introduced in coming years.

Last week, for instance, the auto maker said it would open a new supplier park in Texas, expecting the creation of 600 U.S. jobs for work that would have otherwise been handled by Mexican workers.

In addition to shifting economics and global demand, auto makers are grappling with political uncertainty in the U.S. as Republican lawmakers promote a border-adjusted tax that would put imports at a disadvantage.

The Trump administration is currently preparing to renegotiate Nafta in ways that could change the rules of the game for auto makers. For example, some administration officials have backed tightening the "rules of origin" that spell out how much of a car has to come from North American in order for the vehicle to be shipped from Mexico to the U.S. duty free.

Tightening the rules of origin for a car with significant overseas components could destroy the advantage Mexico has over other countries, including China. Mexican-assembled cars that don't meet the rules of origin in Nafta would be slapped with a 2.5% tariff upon entering the U.S., the same duty that would apply to cars made in China.

Write to Christina Rogers at and Mike Colias at

(END) Dow Jones Newswires

June 20, 2017 14:02 ET (18:02 GMT)