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Ford Rethinks US Manufacturing After Fiery Union Clash

Source: Eric Perry

A contentious standoff between Ford and the auto workers’ union has left relations badly strained. Now Ford’s CEO is openly questioning the company’s loyalty to domestic factories in the wake of the clash, sparking fears for American jobs.

Ford CEO Hints at Major Overseas Moves in Wake of UAW Strike

Last fall’s bitter strike by the United Auto Workers union fundamentally changed Ford’s historically cozy relationship with the UAW, says CEO Jim Farley. Ford has proudly avoided strikes since the 1970s. But when the UAW targeted Ford’s highly profitable truck plants last year, Farley admitted “It’s been a watershed moment for the company.” He is now rethinking Ford’s reliance on US factories and hinting at shifting operations overseas in the strike’s aftermath. Farley said bluntly that the clash will impact business decisions, adding ominously that Ford will “think carefully” about where future vehicles are built. That strongly implies offshoring more auto manufacturing jobs to cut costs.

Source: Wikimedia

UAW leaders are alarmed by Farley’s provocative remarks, seeing it as evidence of eroding corporate loyalty to American workers. But Ford feels freshly betrayed after the UAW prioritized crippling Ford’s most lucrative truck assembly lines. Farley revealed those tensions run deep, saying Ford is reevaluating its whole view of the labor-business compact after “our relationship has changed.”

CEO Claims Ford Growing Wary of “Right Cost” at US Plants

Ford has historically paid more to build profitable pickup models like the F-150 exclusively at American factories, notes Farley. Ford also directly employs more UAW-represented American autoworkers – 57,000 – than any US automaker. Farley indicates Ford saw the higher overall costs of domestic manufacturing as the ethical “right kind of cost” to protect well-paid American jobs.

Source: Wikimedia

But after last fall’s strike targeted Ford’s most profitable truck assembly lines, Farley admits Ford feels burned by the UAW partnership. With the first strike-hit plant being an F-150 factory, Farley said bluntly “our reliance on the UAW turned out to be we were the first truck plant to be shut down.” That breach of trust has Ford questioning whether higher US production costs still represent the “right kind” of investment, grimly warning “Does this have a business impact? Yes.”

White House Rattled by Ford CEO Comments on Potential US Job Cuts

Ford CEO Jim Farley’s provocative remarks about “rethinking” the company’s commitment to domestic manufacturing bases rattled the Biden Administration. Officials scrambled to respond, noting Biden has strongly aligned with union workers. Press Secretary Karine Jean-Pierre vowed vaguely that the White House will “do everything we can” to keep auto production anchored in America.

Source: Wikimedia

However, top Ford executives refused to walk back Farley’s explosive comments at an investor conference. Asked pointedly if Ford now sees American factories and workers as too expensive compared to foreign operations, Farley tellingly refused to reaffirm the company’s dedication to US jobs. That silence speaks volumes after his earlier remarks. Combined with Farley’s cryptic reference to smaller future Ford EVs being “really functional” vehicles, code for workhorses built for affordability over flash, the ominous subtext is clear – those models are prime candidates for offshored factories where labor is much cheaper.

Ford Pushing $2 Billion in Cuts This Year After Costly UAW Deal

With Farley claiming Ford labors under a massive $7 billion cost disadvantage versus rivals, the CEO is aggressively slashing expenditures. He already wrung $2 billion in savings this year. Those cuts aim to offset what Farley says was a nearly $1 billion price tag for the recently expired UAW contract. As part of that deal signed last fall, Ford agreed to a whopping 33% cumulative raises for workers over the 6-year deal term.

Source: Flickr/U.S. Department of Agriculture

Ford is under intense pressure from investors to boost profitability, especially as the company bleeds billions on money-losing electric vehicle development. With Farley indicating cuts will completely offset the UAW’s industry-leading contract gains by 2024, the bar is set high for austerity measures. The axe is also poised to fall harder on US operations making gas-powered vehicles, which Ford is deemphasizing in its EV evolution.

Ford’s Strategic EV Shift Signals Move Away From American Factories

Ford plans to compete harder on affordable, high-volume mainstream EVs instead of pricier models aimed at early adopters. But pursuing cheaper electric sedans and work vehicles conflicts with maintaining premium wages at the company’s US plants. Farley tellingly noted Ford has a specialized team crafting a future EV model he says will be especially budget-conscious. By pointedly positioning the mystery vehicle as “really functional” – industry code relegating it to a workhorse role – Farley drops a strong hint that Ford sees overseas factories as key to hitting lower cost targets.

Source: Wikimedia

Most ominously, Farley called out the sub-$30,000 price as the team’s goal. That affordable niche aligns closely with cheaper Asian and Mexican auto plants where wages are suppressed. And critically, vehicles produced in those foreign factories still qualify for US federal EV tax credits driving sales. That incentive means domestic jobs stand to lose out under Ford’s strategic shift.

Ford Racing to Cut Costs as Chinese Brands Overtake Europe EV Market

Ford is desperate to improve economies of scale and trim production costs to vie with surging Chinese automakers flooding the mainstream electric car market. Chinese brands had virtually zero market share in Europe just two years ago. But thanks to ultra-affordable EV models from giants like BYD, Chinese marques have since carved out an astonishing 10% chunk of European EV sales.

Source: Wikimedia

BYD’s budget Seagull EV underscores the Chinese competitive advantage on costs. BYD spends just $9,000 manufacturing the Seagull, enabling a showroom sticker price under $11,000 after minimal regulatory compliance costs. Ford’s own EV platform costs are magnitudes higher. Farley pointedly warned Ford must learn to compete far more aggressively on price with Chinese brands making rapid inroads across Europe. With European labor relatively costly, that spells shifting more baseline manufacturing to plants in lower-wage countries.

Ford’s Massive EV Spending Weighs on Business Amid UAW Deal

Ford’s entire electric vehicle business lost a staggering $5 billion in 2022 as the company heavily invested in new products and technology. But CEO Jim Farley conspicuously declined to give any estimate for when Ford expects its EV program to turn profitable. That is an ominous sign the company anticipates losing substantial sums in the long term – perhaps the whole decade.

Source: Flickr/Mike Mozart

With Ford already operating on razor-thin margins compared to rivals while carrying new UAW contract costs, persisting losses spread over years in its EV program would be backbreaking without offsetting cuts. That bleak outlook offers more evidence of coming job reductions hitting higher-paid American factory workers to pare expenses overlong haul-haul.

Ford CEO Comments Point to Retreat from US Manufacturing 

Top Ford executive Jim Farley’s remarks openly questioning the company’s commitment to domestic manufacturing sent shockwaves through the auto industry. Farley admitted last fall’s fiery clash with the United Auto Workers union caused Ford to “think carefully” about where future vehicles will be built going forward. That phrasing alone signals the sacrosanct status of US auto jobs faces new threats.

Source: Wikimedia

But other comments point to Farley overseeing a strategic retreat on American production. Ford is aggressively cutting costs to the bone after inking a rich UAW contract. Meanwhile, Ford’s strategic EV shift toward affordable models hints that lower-wage overseas factories will increasingly take priority. For American auto workers, Farley’s tough talk seems a harbinger of US job losses.

Cost Pressures Forcing Ford to Grapple With Shrinking US Role

For most of its history, Ford proudly cultivated its made-in-America image as a core part of the brand identity. Past CEOs touted the higher costs of domestic manufacturing as the ethical price worth paying to keep good-paying jobs on US soil.

Source: Wikimedia

But new CEO Jim Farley is rapidly shedding that historically paternalistic view as global competition reaches cutthroat intensity. Ford still enjoys patriotic brand associations as an American industrial icon. But under the cold calculations of Farley’s bottom line doctrine, future priorities point away from the red, white, and blue.

Brace For America’s Diminished Place in Ford’s Future

Ford is at an inflection point after June’s fiery labor battle caused a split from its longtime union ally and fed growing cost concerns around domestic factories. With Ford adopting a newly ruthless posture toward expenses under CEO Jim Farley, America’s role in the company’s future is steadily fading even as the Ford name remains embedded in American culture.

Source: Wikimedia

Flagship models like the Mustang with huge US brand recognition will surely maintain some American DNA. But when it comes to workaday vehicles grinding out profits from high-volume sales, Farley seems poised to steadily shift output away from higher-cost US plants. That may keep iconic nameplates here while average American auto workers suffer a 20th-century fate – Model T prosperity fading in the rearview mirror.

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Matty Jacobson

Written by Matty Jacobson

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