Since currency exchange rates no longer favor US production, sources say that Ford Motor Co. has scrapped plans to transfer the production of a small sport-utility vehicle from Europe to Kentucky.
Ford had made plans next year to move production of the Kuga model to Louisville from Saarlouis, Germany, to benefit from lower labor costs and the weaker dollar.
But the euro is now falling, prompting Ford to decide to continue producing the Kuga in Germany.
This change illustrates the difficulty of lowering Ford’s US labor costs to globally competitive levels. The sources claim that Ford had meant to export up to 80,000 Kugas a year to Europe.
This plan was linked in part to exchange rates and labor concessions Ford asked for last year that UAW members denied. Brian Johnson, an analyst at Barclays Capital in Chicago, said that this “raises issues of how the 2011 contract negotiations will go.”
He said that if the UAW will attempt to try to extract givebacks, Ford will be demonstrating that “it can build wherever it wants.” [via autonews - sub. required]