ford motor co. chairman bill ford called president-elect donald trump to extend an olive branch this week, saying the dearborn, mich., auto maker is shelving a plan to move production of a lincoln crossover suv from kentucky to mexico. mr. trump tweeted about the call thursday night and ford quickly confirmed the move. as the debate heats up over moving manufacturing jobs overseas, here<u+2019>s a rundown of what exactly has changed in ford<u+2019>s plans<u+2014>and what hasn<u+2019>t. what did ford decide to do? ford builds two small crossover sport-utility vehicles in louisville, ky.<u+2014>the high-volume ford escape and the lower-volume lincoln mkc. these vehicles compete in the hottest segment in the u.s. market, and the auto maker planned to move output of mkc to mexico so that it could build more escapes. the lincoln move to mexico wasn<u+2019>t expected to cost anyone in kentucky their job. ford is going to keep the lincoln in kentucky. was this a genuine business decision by ford, or just a way to throw the incoming administration a bone and relieve pressure in the short term? mr. ford<u+2019>s call represented a genuine change in direction for the auto maker, not just a symbolic gesture, according to people close to the executive. the auto maker has been in contact with mr. trump<u+2019>s transition team over the past 10 days, and executives see the lincoln move as a relatively painless but authentic way to give mr. trump a victory even before he moves into the white house. will the lincoln decision lead to new jobs? it may end up being more about job preservation than job creation at a time when u.s. automotive manufacturing employment levels and wages still trail decade-ago levels. the employment impact depends on how the u.s. light-vehicle market behaves during a trump administration. the u.s. auto industry has boomed for six years and is plateauing, but suvs such as the lincoln mkc and ford escape are in a red-hot segment. the best-case scenario would have kentucky auto workers working at full speed on three shifts and collecting overtime to keep that demand met. whether ford needs to hire in the future to keep up with demand remains to be seen, but it could be argued that having the lower-volume mkc (ford sells more than 10 escapes for every mkc it sells) offers a small cushion in the volatile auto industry. indeed, for the united auto workers union , retaining production of even lower-volume nameplates is a priority, partially because it is conceivably better for job security to have two nameplates instead of one rolling off an assembly line. union officials said friday that they weren<u+2019>t aware ford had had plans to move output of the lincoln mkc to mexico, although the company had told them it would move that production to another, unspecified plant after 2019 to make room for building more escapes. no job reductions were expected to result from the move and the plant was never in danger of closing, said todd dunn, president for the union local in louisville, ky. does this end the rift between ford and mr. trump? no. as a candidate, mr. trump held ford up as a poster child for u.s. companies moving work to mexico, and as a reason the north american free trade agreement needs to be retooled or trashed. ford isn<u+2019>t backing away from its bigger mexico plan , it is just tweaking it. ford still plans to spend $1.6 billion building a new factory in mexico that will serve as the home of ford focus production . that small car is currently built in michigan, but is a money-loser given the high cost of uaw union employees and the low appetite that americans have for the focus. ford has argued that this move won<u+2019>t cost american jobs because the company plans to use the capacity at the michigan plant to build new trucks and suvs that are more profitable and in higher demand than the focus. however, some will argue those new products could have theoretically come from a brand new u.s. plant rather than a refurbished small-car plant. put another way, all those new jobs that ford will provide to mexican workers could have been given to american workers not currently employed by the company. who really cares about small cars? ford does. and the uaw does. the focus is far more important to ford<u+2019>s top line and to the uaw<u+2019>s reputation than the lincoln that will remain in kentucky is. the focus is a big seller, popular among young buyers on a budget and rental-car companies looking for cheap people movers. even though small-car demand sinks when gas prices are low, they remain relevant. the uaw, meanwhile, has aligned with mr. trump on trade<u+2014>particularly on disparaging nafta<u+2014>and an area where it is most vulnerable is small-car production. ford<u+2019>s $1.6 billion is a part of a flood of auto investment in mexico , which has lower wages and more free-trade deals, which are two critical components for making small-car production viable. when ford decided to put focus production in michigan shortly after the detroit car-industry bailouts, it was heralded as a win for the uaw and proof that labor unions could make the compromises needed to build a small car profitably in the u.s. is this a ford problem, or a domestic auto-industry problem? it isn<u+2019>t clear why mr. trump specifically targeted ford when all three detroit auto makers are making bigger bets on mexico. fiat chrysler automobiles nv, for instance, is moving the small jeep compass from illinois to mexico. gm is also investing in mexican production upgrades. importantly, ford<u+2019>s statement thursday night indicated it is banking on mr. trump<u+2019>s new economic policies to address the disadvantages that u.s. auto production carries. <u+201c> <u+201c>we are encouraged that president-elect trump and the new congress will pursue policies that will improve u.s. competitiveness and make it possible to keep production of this vehicle here in the united states,<u+201d> the company said. write to john d. stoll at john.stoll@wsj.com and christina rogers at christina.rogers@wsj.com
donald trump, ford motor and kentucky jobs: what<u+2019>s really happening - wsj
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