Ford moving all production of small cars from U.S. to Mexico
usatoday.com
usatoday.com
Oh wow, the Fiesta!
Look, I'm being glib but until Ford decides to move its true cash-cows like the F-150 out of the country, I'm more inclined to deal with the nature of globalization in manufacturing in rational ways. Calling the move "inherently bad" is not my perspective. I remember when it seemed like Ford couldn't design and build their way out of the dark ages, and then, lo and behold, their European operations provided some much needed quality and design and production guidance and it stabilized a large section of their global footprint. Global companies have global concerns!
The posted article fails to mention Ford will be producing two brand new vehicles in this plant: the Ranger and a compact SUV, the Bronco.
In the same time span, full-size trucks have grown a fair bit, so it appears it's now possible to market a mid-size truck (the Canyon and Tacoma are quite a bit larger than the old S-10 or Ranger). Nobody is actually selling compact trucks in the US any more, nor does anybody plan to do so (that I've seen).
Redesigning the Ranger to have a larger footprint results in a mid-sized pickup only slightly smaller than the base model F-150, which is where the sales-cannibalism problem comes in.
They did keep building the Ranger, 180,000 of them per year in South Africa for export to everywhere except... North America.
Mainly, as noted below, because they felt that new cleaner engines could move the F-series into that market segment.
(Double dipping on a single news story seems highly profitable, sadly.)
The key to a successful move is to have a native US person embedded in the Mexico plant. They can keep operations running and put out fires.
NAFTA requires lots of paperwork and reconciliation. If one can navigate the paperwork requirements, then yes it is free trade. If not, have to pay an assist to move goods back and forth.
In 2015 the Ford Brand sold ~2.502M vehicles in the US. For the cars being moved over to Mexico...
* C-MAX - 21,768
* Fiesta - 64,458
* Focus - 202,478
* Total - 288,704
About 11.5% of units sold in the US, and I think all the vehicles they sell in the US on their B3 (Fiesta) platform. Interestingly, not all C1 platform cars are moving over, as the Edge (124,000 units) and Transit Connect (52,000 units) will continue to be built in the US, again, because they offer better front-end margin.
But it's hard for me to see (in this case) the advantage of NAFTA for the USA. There are now 675,000 auto jobs in Mexico. The majority of that production is exported to the USA.
How does that help the USA? Do we really make it up in the goods we export to Mexico?
We run a trade deficit with Mexico, which can be looked at as arbitrage of the USD as a reserve currency. We pay an IOU and get cars, they give us cars and get a means of parking their money safely.
This being said, comparative advantage is a simplistic but not terrible way of looking at international trade in general. Though US workers are more productive at making cars than Mexican workers, they're also more productive at other things and you end up with more net production at some form of equilibrium when the workers that were making cars do something else.
Now, the funny thing about auto manufacturing is that the job losses we've seen are all due to automation. We keep making just as many cars, and it's unlikely that we'll ever employ as many people making cars as we used to, because people can only use so many cars at once. Mexico could fall into the ocean and this trend would not change.
By having the lower priced Mexican labor build the vehicles these can keep getting cheaper without major investment in technology that is unlikely to pay for itself and without reduction in American worker's wages.
This also allows American Factories to make higher profits by focusing on making higher margin models without Ford having to give up a market segment.
Also, Security is generally better at American plants so by allowing the foreign factories to only build the crap models they are unlikely to compete on the unauthorized manufacturing market.
Also, This does put some money and infrastructure into Mexico so we can benefit as their country has slightly fewer people try to cross the border illegally.
This is simple division of labor. It lets Americans focus on more profitable things, there is no way this is bad for Americans.
Those jobs would need to be replaced with something paying a similar wage for this to be true. Otherwise you'd move along the demand curve for labor to a point with the same number of total jobs and lower wages paid for each.
https://en.wikipedia.org/wiki/Comparative_advantage
and a somewhat friendlier description:
http://www.econlib.org/library/Topics/Details/comparativeadv...
IMHO if Trump were to openly and directly attack the culture war (and ditch the crypto-racism) he could win in a landslide. A line like "last year X million gay Americans lost their jobs for the same reason Y million straight Americans lost their jobs..." would basically nuke the entire American electoral landscape into glass.
Unfortunately he's a conservative xenophobe at heart, so he's not the droid we're looking for.
> Unfortunately he's a conservative xenophobe at heart
If you look in to it, throughout his life he's been rather liberal/progressive. In fact even now, he falls to the left of Hillary on a number of topics.
He also has a decades of history not being xenophobic.
I wonder what you attribute such a sudden change in attitude of a 70 year old man to?
First you get people on your side by making them think you're just like them (pacing) and once there you can take them in whatever direction you like (leading) because they believe you're on their side.
Before this week, would you have ever thought that so many of the Republican base would be in favor of a maternity leave policy like the one Trump just proposed? These are the same people who have previously been complaining and campaigning against handouts and government overreach, yet now are cheering for a 'pro-family' maternity leave policy (rationalising after the fact because it's their guy proposing it).
The Dems are already there on that sort of policy so to get it implemented you need to get the GOP to come to the party. Trump is doing that. I highly doubt that if Hillary had proposed an identical policy that so many of the Republican base would be so enthusiastic about it, and that's how you make policy work.
And it's only just the beginning, the pacing is mostly done and he just needs to follow through on the leading.
He is just fighting on behalf of a different culture -- instead of the traditional Republican Christian right, he's grabbing at a different Republican constituency.
Only when they themselves get to train their own H1B replacements does it occur to them that maybe transgender bathroom usage and legal weed were not the issues they should have concentrated on.
Why are you against freedom of association (general strikes)? Should people be serfs, without the right to refuse to work, in protest of working conditions?
If small economy cars must be built cheaply then protesting with fires and vandalism is more likely to get a factory shut down because of missed goals.
Moving these low end models to Mexico with their cheap labor allows the Americans to build higher margin models and actually grow the company. No wonder France has about 1/3rd the car exports the US does or about 1/7th exports of Germany.
Who cares which country has more exports or GDP? I care about quality of life, not which shareholders are reaping the most benefits.
Stated another way American factory worker's quality of life is good enough they have never needed to degenerate to setting fires. They have more effective systems in place.
Wealth only trickles down in fairy tales, or through low profit margins.
The quality of life then becomes dependent on whether or not people need to fight for a UBI and other wealth ditributing mechanisms because likely tons of jobs have been completely automated destroying conventional labor markets..
Riots? Burning cars? Not so much.
Also, the US factory will be getting new models, not closing down.
There's nothing "glib" about this move.
very public knowledge.
(edit: for the downvoters... https://news.ycombinator.com/newsguidelines.html "If they'd cover it on TV news, it's probably off-topic." but do what you must.)