Posted on 09/20/2016 1:56:30 PM PDT by Kaslin
Ford Motor Company made headlines on Wednesday, September 9, when, during an investor conference, CEO Mark Fields told attendees that it will invest $1.6 billion building a manufacturing plant in San Luis Potosi, Mexico, and will move all of its small car production there during the next two to three years.
The announcement was hardly news as Ford has been talking about the shift for more than a year. But in the throes of an election that has both candidates decrying companies that send jobs to low-wage countries, the decision was an invitation for attention. The next day, during a speech in Flint, MI, Donald Trump declared that it was: “horrible.” He’s previously called the proposed move “an absolute disgrace” and promised to punish Ford with a 35 percent tariff on cars made in Mexico that are then sold in America—which he believes will prevent them from moving production out of the U.S.
No one wants American jobs to go away—and Ford plans to build more profitable vehicles in the plants that currently produce the Focus and C-Max small cars. It claims it is not going anywhere and that the U.S. is its home. Reports do indicate that no jobs at the Wayne, MI, plant will be lost, as it will likely be converted to building the new mid-size Ranger pick-up truck and, possibly, a new Bronco compact sport-utility.
But there’s more to the story that isn’t generally being addressed.
Earlier this year, Fields told CNBC: “We’re always going to invest where it makes sense for business.”
Obviously, it no longer makes “sense” to invest in small car production in America. Most of the news surrounding the move to Mexico addressed the benefit of low-cost labor. According to the Detroit Free Press: “The industry has known for decades that domestic manufacturers struggle to make a profit on small cars.” In Slate’s MoneyBox blog, Jordan Weissmann says: “You can protest that Ford should find a way to consistently churn out profits while manufacturing small cars at home, but that’s easier said than done.”
The number of auto jobs in Mexico is up 40 percent from 2008, while they are only up in the U.S. by 15 percent over the same period. Reuters reports: “American automakers pay Mexican workers $8 to 10 an hour, including benefits.” By comparison, Ford’s labor costs average $57 per hour at home.
Even with the huge labor cost differential, American car companies’ trucks and SUVs are profitable to manufacture in the U.S. and they are the vehicles Americans want to buy—which should raise the question: Why do car companies make small cars when they can’t make them profitably? The answer is the story not being addressed in the current coverage of Ford. And this is where Trump could, possibly, change the outcome.
In a free-market world, companies that want to stay in business should stop activities that lose money and focus on those that make money. Yet, the big three automakers, continue to produce small cars that for years have made little, if any, money.
Business Insider explains: “If Ford is going to keep them around, it needs to address the profit problem. Americans don’t want to buy small vehicles at the moment (actually, they almost never want to buy small cars), so Ford’s only rationale for continuing to build them is to satisfy the more stringent fuel-economy standards in the future.” Those fuel standards are called CAFE—which stands for Corporate Average Fuel Economy. In short, it means that car companies can only sell the bigger vehicles that Americans want, if it also produces cars that achieve very high fuel efficiency (including electric vehicles, in which Ford is investing heavily) that results in an “average” of the mandated miles per gallon—which is now 54.5 by 2025.
Merrill Matthews, Ph.D., a resident scholar with the Institute for Policy Innovation, blames the Ford move on, along with other draconian government policies, the CAFE standards: “The CAFE standards, which began in 1975, require auto manufacturers to meet government-imposed fuel economy standards across a fleet of cars. In order to meet those standards, which have been dramatically increased under President Obama, carmakers have to make light, inexpensive cars with high fuel economy to offset their trucks and SUVs with lower fuel economy. And electric cars really help their fuel economy balance. So the companies make minimally or even unprofitable small cars and electric vehicles so they can sell their popular and profitable large products—and hope for a profit in the end. By moving their small cars to Mexico, which has skilled but cheaper labor, Ford hopes to break even or make a little profit off of them.”
While the CAFE standards have increased dramatically under the Obama administration, and have also increased costs for consumers, most people don’t realize that they are not set in stone. Brad Plumer, senior editor for VOX.com outlines the options: “A new president can revise them, up or down. These CAFE (corporate average fuel economy) rules are scheduled to come up for a midterm review in 2017. At that point, automakers may lobby to allow the standards to rise more slowly—particularly if sales of fuel-efficient vehicles have been sluggish due to low oil prices. Green groups, meanwhile, could push to make the standards stricter, or to have them keep increasing past 2025, to push vehicle emissions down even further.”
A President Trump could, perhaps, by promising to allow car companies to make whatever kind of cars they want to make, entice Ford to keep its money in America—though, admittedly, there are other factors (such as trade deals) that make manufacturing small cars attractive in Mexico. CAFE is just one of the many policies that make doing business difficult in America. Revising the CAFE standards, which could reduce the cost of future cars and would remove government intrusion from vehicle selection, is something Trump can do that would make doing business in America “make sense” again for U.S. car companies. For all business, let’s make America a place where it makes sense to invest.
Made in West Point, Georgia
Kia Sorento MSRP: $25,400 - $45,700
Kia Optima MSRP: $22,140 - $36,040
Good one!!! Won’t buy either!!!
FORD = F...ed Overpriced Ratty Deathtrap ( FR rhymes with trucked but the “tr” is replaced by the letter “f”
KIA just opened a big planet in Mexico this past month. I know. My family has three KIA’s.
From what I’ve read, both have excellent reliability records, too.
Well, my f-150 saved my life last Jan in a head on, I walked away. So, whatever.
.
Focus and C-Max are total junk cars that only a fool would own.
We desperately need for congress to alter the CAFE mileage standard to Ton-Miles per gallon, so that we can get the trash cars off of our highways.
.
.
Full sized Fords are the best cars built anywhere.
.
.
>> “I will never buy another Ford product...” <<
That will be your great loss.
It is better to use political pressure to remove the tiny bubble cars from our highways than have a tantrum.
.
.
The bad behavior is in congress, put pressure on them to end the production of bubble cars.
I will definitely continue to buy the vehicles that do the job. Not doing so would be cutting off my nose to punish my face.
.
What’s funny here is that by moving to Mexico Ford can continue to say:
Made in America!
Well I have no sympathy for union overpaid autoworkers but that is no reason to pay unskilled workers a pittance.
Wow! You're so clever! Making disguised little dirty jokes.
But we all know the biggest joke is *YOU*. You are a fraud, guilty of Stolen Valor and we've got just the award for your fake Marine uniform -
There you go - a fake purple heart featuring your role model.
And here's a Band Aid for your wounds -
It's the John Kerry Purple Owie Band Aid.
And it's way better than you deserve you stinking low-life liar.
You sound like that you are responding to an old boyfriend that gave you an std. I read your post three times and other than the explanation I gave, could not make heads or tails to it.
http://www.freerepublic.com/focus/news/3358926/posts?q=1&;page=51
The poster, hondact200 is a Stolen Valor fraud and a blot on FreeRepublic.
Here is an example of his outrageous claims:
For the record, *NO ONE* was pulled from that rubble after the first day. There are other examples if you are interested.
Sorry - I should have said “No one was pulled from that rubble alive after the first day.”
Thank you. Your explanation made it clearer.
As a side note to this thread, please consider the following from related threads.
Patriots beware !
You would never know from these Obama-bashing articles that the USA has a Congress that has the constitutional authority to stop a presidents action’s.
The problem is that both the legislative and executive branches are corrupt, Obama allowing himself to be used as Congress’s “useful idiot,” Obama just one of many such “idiots” in the federal system.
More specifically, Congress is not only letting Obama get away with stealing and exercising legislative branch power imo, but also letting him exercise 10th Amendment-protected state powers that the corrupt feds have stolen from the states.
Corrupt lawmakers are likely letting last-term Obama get away with doing all the unpopular, unconstitutional things that Congress probably wants to do. But by letting Obama do Congress’s dirty work for it, lawmakers are able to keep their voting records clean.
And by keeping their voting records clean, lawmakers are able to fool low-information voters into reelecting them. (Patriots need to iron the wrinkles out of the 22nd Amendment. When both legislative and executive branches are corrupt, watch out for unconstitutional actions by last-term presidents.)
Remember in November !
Patriots need to support Trump / Pence by also electing a new, state sovereignty-respecting Congress that will not only work within its constitutional Article I, Section 8-limited powers to support Trump’s vision for making America great again for everybody, but will also put a stop to unconstitutonal federal taxes and likewise unconstitutional inteference in state affairs.
Note that such a Congress will also probably be willing to fire state sovereignty-ignoring activist justices.
.
How about union overpaid transit operators, teachers, and police officers?
Where do you propose to draw the line?
.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.
