Ford may steer work on Verve to Mexico by Sarah A. Webster
DETROIT – Ford Motor Co.'s future subcompact car for the United States, called Verve, will likely be built in
Mexico, adding to that nation's growing automotive industry, particularly for small cars.
Ford officials would not comment on production plans for the European-engineered Verve, which was well-received
at the Detroit auto show in January and is slated to come to market in the United States in 2010.
Two people with knowledge of Ford's production plans said the car is slated to be assembled in Cuautitlan, Mexico.
They did not want to be identified because the automaker has not disclosed its decision.
Mexico would make sense, said Haig Stoddard, the manager of North American light-vehicle production forecasting
for Global Insight, because movement of auto factories to that low-cost country “is escalating.”
“In general, we still see capacity in the U.S. dropping . . . and continuing to gradually rise in Mexico,” he said.
Despite a new labor contract with the United Auto Workers that lowered the wages of incoming hourly workers by
about half, it still doesn't make sense for automakers to build the cheapest and smallest cars in the United States – at
least, not until a substantial number of older UAW workers have been replaced, Stoddard and other experts said.
Although some automotive analysts said Ford is still considering Brazil as a possible location to build the Verve,
others said Mexico is a far more logical choice.
“We've not identified where we would build our new subcompact car,” Ford spokesman Said Deep said.
“I just don't think they'll make it in Brazil,” said Erich Merkle, vice president of auto industry forecasting for the
consulting firm IRN Inc. in Grand Rapids, Mich. “Mexico really makes the best sense for the subcompact.”
That's especially true, Stoddard and Merkle noted, as consumers increasingly turn to smaller, economical cars in the
face of higher gas prices. Last month, U.S. sales of subcompact cars increased 40 percent, while overall passenger
car sales declined by 2 percent.
But it is going to be difficult to meet that demand with U.S.-made cars, experts say.
Under the Ford-UAW contract, the automaker can pay new workers a starting rate of $14.20 per hour, or about half
the salary of outgoing UAW workers. The number of workers paid the lower wage will be limited to about 20 percent
of Ford's UAW work force. At GM and Chrysler, the lower wage is limited to new workers in noncore jobs.
“You're still going to have lower labor rates in Mexico for several years,” Stoddard of Global Insight said. “It makes
more sense to build smaller vehicles down there that don't have large profit margins to begin with.”
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Merkle agreed. “It's very difficult to make money on a vehicle like that in the U.S.,” he said.
A host of fuel-efficient cars are already built in Mexico or are likely to be built there soon:
Ford – the Ford Fusion, Mercury Milan and Lincoln MKZ, built in Hermosillo.
Chrysler – the PT Cruiser and 2009 Dodge Journey, which will be built in Toluca.
General Motors – the Chevy HHR, Saturn Vue and Chevy C2 (sold outside the United States), built in Ramos
Arizpe.
In June, the Chevy Aveo will also begin production at a new GM plant in San Luis de Potosi. Stoddard said GM will
increase production at that plant from 150,000 cars a year to 400,000.
Aside from Mexico's low wages, the country is a favorable plant location, experts said, because of its proximity to the
United States, especially the big auto markets of California and Texas. Ford can also export vehicles easily from
Mexico to South America.
And there's an established and growing supplier community there. Ford, in a 2006 internal document, noted these
benefits as well as the willingness of the Mexican government to contribute incentives.
“Mexico is ready,” wrote Louise Goeser, president and chief executive of Ford of Mexico. “Mexico is a key partner as
we're targeting lower fixed costs.”