Ford Motor Co announced Tuesday it would move some of its production of its small car model Focus to China, and then import the vehicles into the U.S. as it makes a long-term bet on oil prices remaining low and stable trade relations between the U.S. and China despite tensions of late.
This move hints that China could be playing a larger role in the vehicle production for the U.S. and Canada in the future, perhaps eclipsing Mexico as a manufacturing source that is low cost.
Ford called the mid-2019 shift to China from Mexico a financial move and nothing more that will save Ford $500 million in lower tooling costs.
However, Ford is also expecting to ship close to 80,000 vehicles this year to China, including the Lincoln Navigator luxury SUV, which enters production in Kentucky this fall.
The decision by Ford to import vehicles for the first time from China into the U.S. is the first big investment decision in manufacturing made by new CEO Jim Hackett, who took over for Mark Fields last month.
Discussion of the production shift for small cars to China from Mexico started a few months ago while Fields was still CEO the automaker’s global operations president said.
The decision signals as well a shift in Ford strategy as it responds to dropping consumer demand in the U.S. for small vehicles in favor of more profitable and more expensive SUVs and trucks.
Cars represented over 50% of the auto sales in the U.S. through 2012 but have dropped to only 37% of sales in 2017.
On Tuesday, Ford also said it was investing $900 million at its truck plant in Kentucky to build the Ford Expedition and Navigator.
It also has a contingency plan to build more large SUVs at a plant in Ohio if the demand calls for it.
During January, after President Donald Trump criticized Ford repeatedly for shipping its manufacturing of small cares to Mexico, the automaker said it would end its plans to build a Focus plant for $1.8 billion south of the border and would instead make the new Focus at its existing Hermosillo, Mexico plant.
On Tuesday, Secretary of Commerce Wilbur Ross when asked about the decision by Ford said it shows the flexibility of multinational companies related to geography.
Trump on Tuesday did not mention the issue during his public appearances.