Ford Motor Co.
Ford Plans $900 Million Bet on Made-in-Michigan Electric Autos

Ford Plans $900 Million Bet on Made-in-Michigan Electric Autos

March 20, 2019
About 900 workers will be hired to build electric and self-driving vehicles.

Ford Motor Co. plans to spend about $900 million and hire about 900 workers to build electric and self-driving vehicles in Michigan while moving production of a small commercial van to Mexico from Europe.

The moves, announced the same day Donald Trump visits an Ohio tank plant, follows the president’s sharp criticism of General Motors Co. for idling a car factory in Lordstown, Ohio. Ford is reiterating some previous financial and employment commitments while changing gears for the third time on building electric vehicles at an underutilized factory south of Detroit.

Roughly a year and a half after shifting production of a future electric sport utility vehicle to Mexico from Flat Rock, Michigan, Ford says it now plans to build other battery-powered models there and add a second shift of workers by 2023, at a cost of $850 million. The automaker also is spending $50 million to establish a facility near Detroit where workers will add the self-driving software to autonomous vehicles that will be built at Flat Rock. The factory will continue to produce the Mustang sports car and Lincoln Continental sedan.

“When we stepped back and looked at our plans for the future with battery-electric vehicles and electrification in general and the commitment to $11 billion in investment, it was very clear to us over the last year or so that we were going to need a second plant,” Joe Hinrichs, Ford’s president of global operations, said in an interview. “It became pretty clear to us that Flat Rock was the right plant to have that capacity. It has a lot of experience building multiple different things.”

“The return on Ford’s ambitious, multi-billion dollar cost-cutting and R&D initiatives can’t arrive soon enough, as unprofitable international operations and a thin, aging product portfolio lacking competitive electrified vehicles will be battered by the next downturn,” said  Kevin Tynan, autos analyst at Bloomberg Intelligence

As sales of traditional sedans have dwindled, Ford is preparing for a future when electric vehicles and self-driving cars transform transportation. The Flat Rock factory has become a symbol of that change: Ford is cutting a shift of workers because of slow sales of the Continental and Mustang, but will now create new jobs to build battery-powered and autonomous vehicles.

The United Auto Workers union, which is entering contract negotiations with more than 150,000 workers at Ford, GM and Fiat Chrysler Automobiles NV, praised the new investment.

“As we transition to new technology and future products, Flat Rock through this investment, is well positioned to be a world leader for decades to come in auto industry technology and production,” UAW Vice President Rory Gamble said..

Hackett’s Overhaul

CEO Jim Hackett is leading an $11 billion overhaul of the automaker, which saw net income fall by more than half last year. Ford’s restructuring will involve cutting thousands of salaried jobs and closing factories in unprofitable overseas operations.

Ford is shifting production of its Transit Connect compact commercial van from Spain to Hermosillo, Mexico, where it will be built in the same factory now producing the Fusion sedan. Hinrichs said he doesn’t expect the move to have any impact on a U.S. Customs case in which Ford has been accused of “tariff engineering.”

Hinrichs said Ford had informed U.S. and Michigan government officials about the investments, but he declined to directly address Trump’s recent criticisms of GM.

“We’re just proud of our presence here in the U.S.,” Hinrichs said.

Shifting Gears

Ford has wavered with its plans for the Flat Rock plant several times over the course of just a few years. As Trump was taking office in January 2017, then-CEO Mark Fields announced the factory would build both self-driving cars and an electric SUV.

Fields was ousted four months later. In December 2017, his successor Hackett said the electric SUV would instead be built in Mexico, citing the need for more capacity in Flat Rock to build autonomous vehicles. The announcement on March 20 suggests Ford might not need as much capacity for self-driving cars as envisioned earlier, as it’s now again planning to also make electric vehicles at the factory.

Hinrichs denied that Ford is dialing back its autonomous plans.

“Nothing has changed with our volume plans or our commitment to the technology launching in 2021,” Hinrichs said. “But also, in the name of fitness, we were evaluating all of our capital expenditures, so it became clear to us that we could do a less capital-intensive way of manufacturing for the first few years of AVs.”

Hinrichs also dropped a hint on Ford’s plan to arrange for the supply of batteries to power its new electric vehicles. The company will procure them locally, he said, while declining to comment in detail on whether the shift to plug-in autos will hurt employment at its powertrain factories.

“Our batteries will be sourced here in North America,” Hinrichs said. “Certainly, we’re all watching what’s happening with internal combustion engine capacity over time, and those are things we’ll work together with our UAW partners on to do the right thing for our people and for our business.”

By Keith Naughton

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Licensed content from Bloomberg, copyright 2016.

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