Range Rover

Oct. 22 (Bloomberg) -- Ford Motor Co. is moving production of a small sport-utility vehicle from Europe to the U.S. to take advantage of lower labor costs and the weaker dollar, according to three people familiar with the plan.

Ford in October 2011 will shift the Kuga model to Louisville, Kentucky, from a factory in Saarlouis, Germany, said the people, who asked not to be identified because the plan is private. As many as 80,000 a year will be exported to Europe, one of the people said. The dollar has fallen 18 percent against the euro this year, lowering the cost of U.S.-made goods.


“This makes sense because western Europe is not a particularly cheap place to make cars,” said Barclays Capital auto analyst Brian Johnson, who estimates Ford’s labor costs in the U.S. could be $10 an hour lower than in Germany. Johnson, based in Chicago, rates Ford “equal weight.” “Building a car with European specifications on a U.S. assembly line also shows the benefits of having common vehicle platforms.”


Ford, aiming to be profitable by 2011, is asking the United Auto Workers union to approve a second round of concessions this year to lower its labor costs to match Toyota Motor Corp.’s U.S. plants. The new models for the Louisville factory, which will also make the Escape small SUV, are part of the automaker’s Oct. 13 tentative agreement with the union, the people said.

“We’re not yet ready to announce which products will be sourced” in Louisville, said Mark Truby, a spokesman for Ford, based in Dearborn, Michigan.


Union Resistance

Ford is facing union resistance to the latest concessions, which workers began voting on today. To win approval, Ford offered to bring new work into 10 U.S. factories, according to a UAW summary of the tentative agreement. The Louisville assembly plant, which now makes the larger Explorer SUV, “will be sourced an incremental product with significant export volume,” the UAW summary said.

“We’ve been told we’ll receive some type of fuel-efficient vehicle based on the C-platform” used for small cars, said Rocky Comito, president of the UAW local representing the Louisville plant, who added he didn’t know the name of the models the plant will receive.

The Escape and Kuga models are code named C520 and based on Ford’s chassis for compact cars, the people said. Ford said in a July 24, 2008, press release it would convert Louisville in 2011 from an SUV factory “to produce small vehicles from the global C-car platform.”


Ratification Votes

Ford workers there will begin voting Oct. 28 on the contract changes, which include a six-year freeze on wages for new hires and a ban on strikes over wages and benefits until 2015, Comito said. Voting will conclude Oct. 30, he said.

At Ford’s Dearborn, Michigan, manufacturing complex, voting began today and concludes Oct. 30, said Ron Lare, a retiree from the automaker’s truck factory who remains active in union politics. Workers are reluctant to give additional concessions after agreeing in March to cede annual bonuses and cost-of- living increases and to accept reduced layoff benefits, he said.

About 500 workers at the Dearborn truck factory shouted down UAW Vice President Bob King yesterday by chanting “No, no, no” when he attempted to sell the latest deal, said Gary Walkowicz, a union official at the plant.

Besides the new production commitments, Ford also agreed to pay its 41,000 U.S. hourly workers a $1,000 bonus next March tied to meeting quality and productivity goals this year, according to the union’s summary of the deal.


Against Toyota

The automaker has said the concessions the union accepted in March will reduce its annual labor costs by $500 million. That deal reduced Ford’s hourly labor and benefit costs to $50, near par with Toyota’s U.S. labor costs of about $48 or $49 an hour, Ford said at the time. Ford has not said how much the latest round of givebacks would save the company.

The weaker dollar also makes U.S. production of the Kuga more profitable. The euro crossed the $1.50 threshold Oct. 21 for the first time in 14 months on optimism over a global economic recovery.

As a sign of the gains from the weaker dollar, the U.S. trade deficit unexpectedly narrowed in August as exports climbed to the highest level of the year and oil imports plunged. The gap fell 3.6 percent to $30.7 billion from a revised $31.9 billion in July, the Commerce Department said Oct. 9. Exports increased 0.2 percent to $128.2 billion, led by a $496 million gain in sales of cars and parts.



Via: Bloomberg