Ford canceled plans to move production of a SUV from Europe to Kentucky

Article by Christian A., on September 11, 2010

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.”

Founded by Henry Ford, the Ford Motor Company was incorporated on June 16, 1903, with 12 investors owning a total of 1,000 shares. At the time, Henry Ford, only 39 years of age, owned a quarter of the company. Ford has been in continuous family control for more than century. It is considered as the second-largest carmaker in the US and one of the largest automotive companies in the world.

Headquartered in Dearborn, Michigan, Ford builds and sells passenger and commercial vehicles under the Ford brand and luxury vehicles under the Lincoln brand. The company also boasts of having one of the most recognizable corporate logos in the world.
Ford faced near extinction in the past decade. The carmaker posted a loss of $12.7 billion in 2006, as the company disclosed plans to close factories around the world and slash up to 30,000 jobs. Its restructuring commenced and Ford was expected to file for bankruptcy soon.

In 2007, however, Ford was able to cut its losses to around $2.7 billion. Nonetheless, the automotive industry faced a severe crisis in 2008 and Ford was one of the companies heavily affected. In fact, in 2008, Ford posted around $14.7 billion in losses.

In 2009, other members of the Detroit 3 – General Motors and Chrysler – surrendered to their financial problems and filed for protection under the Chapter 11 of the US Bankruptcy Code. In contrast, Ford was able to avoid heavy losses in 2009, and logged around $2.7 billion in profits.

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