Currency, UAW Doom US Production Of Ford's Kuga

Edward Niedermeyer
by Edward Niedermeyer

Bloomberg reports that Ford will not build its Kuga compact crossover at its Louisville, KY plant due to the falling Euro and UAW recalcitrance. According to the report

The promise of Kuga production in Louisville began to fall apart in November when UAW members rejected Ford’s request to match givebacks it gave General Motors Co. and Chrysler Group LLC. Ford’s U.S. rivals, which each reorganized in bankruptcy last year, were granted a six-year freeze on wages for new hires and a ban on some strikes until 2015… The euro has fallen 14 percent against the dollar since Ford reached a tentative deal with the UAW in October to build the Kuga in Louisville alongside its mechanical twin, the Escape. At the time, the dollar had declined against the euro, lowering the cost of U.S.-made goods. Since then, the euro has dropped amid concerns Europe’s debt crisis may trigger another recession.

Barclays analyst Brian Johnson explains

This is a reminder to the UAW that Ford’s U.S. cars don’t have to be produced in the U.S. Ford’s global architecture allows them to build anywhere. That’s good news if the U.S. has competitive labor costs. It’s bad news if they don’t

Ford will, however build something based on its global compact car architecture at Louisville… they’re just not saying what. Spokesman Mark Truby tells Bloomberg

We are on track to begin production next year of a new vehicle from our global C-car platform at the Louisville assembly plant. Though we are not providing product details, we intend to fully utilize capacity at the transformed facility.

When plans were initially made to produce the Kuga at Louisville, German wages were $10/hour more than the UAW rate. Thanks to a 14 percent decline in the value of the Euro, that advantage has been wiped out. And thanks to Ford’s global architecture, production is now flexible enough to switch factories with only a year before the Kuga launches. The Kuga is likely to continue to be built in Saarlouis, Germany.

Edward Niedermeyer
Edward Niedermeyer

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  • Xjug1987 Xjug1987 on Sep 10, 2010

    The Unions are pathetic, cutting off their noses to spite their faces. With the car business somewhat recovering now they're rattling their sabres to demand back what they said they gave up. Gee didn't "Barry the Pious" give them ownership of GM & Chrysler, along w/$5B for their Union Health-care? (I thought we were all getting free health-care, so why the $5B?) I digress: The unions will eventually realize that this is a global market place and Union Labor must be competitive or they're out... zero... natta... = NO JOBS at all. (Except for the Union Bosses aligned to the Democratic Party). Eventually these jobs will go to another lower cost mfg region which means, "US jobs shipped overseas". This is the Unions fault and the Democrats that support them, 100%, period. I want the Auto industry to flourish and America be the industrial giant is used to be and can be. Govt Regulations, taxes, and Unions not "white collar greed" is responsible for the decline of US Mfg, period. The unions wouldn't give Ford the concessions it gave Govt Motors or Fiat/Chryco, as has historically been done for decades was an in your face to Ford, for not taking Gubment, nee: Taxpayer Money. Good for you Ford for shoving it right back in their faces. The entitlement mentality has gotten us $14Trillion in debt... it needs to end... now!

  • Ihatetrees Ihatetrees on Sep 10, 2010

    It would be interesting for this discussion to move beyond the usual anti-UAW sentiment here. I'd really be interested in how high cost German production can compete with similarly high cost US production. Are German car factories that much more efficient than unionized US plants? I'm familiar with anecdotal evidence that suggests this. But what are the shop floor details that tip the scale to Germany?

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