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Here's what Trump doesn't understand about Ford moving small-car production to Mexico
(Trump is missing that Ford's move is actually about saving US jobs.Thomson Reuters)
Donald Trump has issues with Ford's recent decision to relocate small-car production to Mexico, and he again focused on the automaker's decision during this week's debate.
But he's been attacking Ford since last year. The Republican candidate for president took a shot at Ford before he secured the nomination, insisting that he compelled the company to bring jobs back to the US from Mexico.
At the time, Ford CEO Mark Fields said on a conference call with bank analysts that "we deal with the facts — facts are stubborn things." He added that "[f]acts don't cease to exist because they're ignored."
In response to Trump's latest accusation, Fields reiterated his declaration that moving small-car manufacturing to Mexico would result in no job losses in the US, according to Bloomberg.
This is one of those cases where Trump isn't paying very close attention to what's going on either with the US auto industry in general or what Ford is doing to capitalize on current sales trends, which decisively favor SUVs over passenger cars.
(Ford CEO Mark Fields.REUTERS/Rebecca Cook )
Earlier this year, Ford announced that it would be rolling out four new SUVs. Production of those vehicles will likely take the place of the small cars that are shifting to Mexico. This is actually good for Ford's US workers because as low-profit small car sales slip in the US, it becomes more difficult for the automaker to justify the labor needed to build them. Better to repurpose that production capacity to assemble higher-margin SUVs — especially new designs that are planned to serve booming segments, such as compact crossovers.
Ford also doesn't build that many small cars in the US. The production that's headed for Mexico will involve only the Focus and the C-Max, two nice vehicles, but not ones that are helping Ford sales as much as big pickups and larger SUVs.
Beyond Ford's specific plans for its own portfolio, there's growing belief in the auto industry that a permanent shift away from passenger cars is underway. Fiat Chrysler Automobiles CEO Sergio Marchionne is leading the charge in this front, repeatedly declaring that cars are over and that FCA will now concentrate mainly on trucks and SUVs.
(A Ford Escape crossover.Matthew DeBord/Business Insider)
Duncan Aldred, the General Motors executive who oversees the car maker's Buick and GMC brands, told Business Insider that he appreciates Marchionne's take, although he didn't suggest that GM should similarly abandon passenger car production.
The last thing Ford wants to do is lose the ability to serve demand in its key market, the US. That what's driving the small-car move to Mexico, where over the last decade significant auto-manufacturing capabilities have emerged. Popular and profitable SUVs and crossovers can be built by US workers, while at the same time Ford can retain small cars in its lineup — as a hedge against an economic downturn or rising fuel prices — and bolt them together with a much better margin south of the border.
NOW WATCH: Ford CEO responds to Trump’s criticism of the company
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