Ford less exposed to Mexico tariffs than competitors, but impact 'significant,' top official says
Ford Motor Co. would be less impacted by pending tariffs on Mexico than its rivals, but the duties would have significant ramifications for the auto industry, according to a top official at the carmaker.
The Trump administration is threatening to impose a 5 percent tariff on shipments from the U.S.’s southern neighbor on Monday if Mexico does not do more to curb the crossing of undocumented individuals over the border.
Those duties would rise to 25 percent by October, an increase that car executives and outside experts say would lead to higher vehicle prices for consumers.
On Thursday, Ford President Joe Hinrichs said competitors like General Motors would be affected more significantly by the escalating trade feud, but warned that any tariffs on auto parts or vehicle imports would “have a significant impact on the industry and ourselves included.”
“It’s not a secret that others produce more in Mexico than we do and import more in the U.S. than we do,” he told attendees at an investor conference hosted by UBS. "On a relative basis, we’re probably not as exposed as others."
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General Motors shipped over 725,000 vehicles from Mexico in 2018, compared to Ford’s 245,182, according to data from LMC Automotive.
While President Trump still expects the duties to be imposed on Monday, top White House officials are optimistic an agreement with Mexico can be reached.
The country’s top diplomat met on Wednesday with Vice President Mike Pence, Secretary of State Mike Pompeo and Kevin McAleenan, the acting head of the Department of Homeland Security, a day after meeting with House Speaker Nancy Pelosi of California and other Democrats in the chamber.
“I am optimistic that what we are seeing already is good cooperation,” Hinrichs said.
As Ford battles new trade threats in the U.S., the company is moving forward with a broader $11 billion restructuring plan.
The Dearborn, Michigan-based company will close the Bridgend Engine Plant in South Wales. The decision, announced on Thursday, will cost the company $650 million and is expected to lead to the loss of 1,700 jobs.
In a statement, Europe president Stuart Rowley said Ford remains “committed to the U.K.”
“However, changing customer demand and cost disadvantages, plus an absence of additional engine models for Bridgend going forward make the plant economically unsustainable in the years ahead,” he said.
The pending end of production of the Jaguar Land Rover contributed to significant underutilization of the plant, Ford said, and higher production costs made it uncompetitive when compared to other facilities in the region.
Bridgend is expected to close in September 2020. The company has offered to help employees find jobs at other U.K. sites and assist with domestic relocation.
“We recognize the effects it would have on their families and the communities where they live and, as a responsible employer, we are proposing a plan that would help to ease the impact,” Rowley said.
Additional layoffs in Europe could be pending, but Ford says it has an opportunity with its commercial vehicle line in the region.
“Our European team has been and is committed to restructuring the business,” Hinrichs said. “Some of that’s capacity, some of that is rationalization of the product portfolio and some of that is where we focus our attention in the future.”
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Auto production and sales in the U.K. have plummeted, as the potential for a hard Brexit raises the possibility of potentially billions of dollars in added costs for carmakers.
Engine manufacturing in the country dropped 23.4 percent in April, according to The Society of Motor Manufacturers and Traders, as commercial vehicle production dropped 70.9 percent.
In a statement, CEO Mike Hawes called Ford's announcement a "crushing blow for UK automotive manufacturing."
"Ford’s challenges are not unique: economic uncertainty at home and abroad, technological change and global trade issues are stressing markets and forcing companies to review operations and make difficult decisions," he said. "Success in this fiercely competitive global industry, however, starts at home and we hope that all efforts will be made over the coming weeks to restore confidence."