By on September 9, 2010

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.

Get the latest TTAC e-Newsletter!

29 Comments on “Currency, UAW Doom US Production Of Ford’s Kuga...”


  • avatar
    twotone

    No Kuga? What are “women of a certain age” going to drive?

    Twotone

  • avatar
    philadlj

    Well, according to sales figures, the Escape ain’t broke.

  • avatar
    gslippy

    Another win for the UAW.  That’ll teach Ford.

  • avatar
    jimboy

    Apparently, even with their near death experiences of the last several years, the unions here still hold on to their ‘culture of entitlement’. Those who won’t learn from the past are condemned to repeat it. In future, I will have zero sympathy for union posturing. If they haven’t smelled the coffee yet, they deserve to go the way of the dinosaur, enough is enough. Ford, hire non union in the south!

  • avatar
    dwford

    So basically, Ford still plans to build the Escape there, but not build the Kuga for export to Europe also. If the UAW was smart, which they obviously aren’t, they would have locked Ford into this deal when they had the chance, then Ford would have been obligated to produce the Kuga here even though there was no longer any benefit.
     
    The UAW better wake up. In the next few years, the Detroit 3 will have completely globalized their design and production. They won’t be captive to US production for US consumption much longer.

  • avatar
    tced2

    Germany isn’t exactly a “low cost of production” country.  It says something when the domestic union prices themselves over Germany. Let the market forces come to bear since the UAW doesn’t have a seat on the Ford board.

  • avatar
    AaronH

    “Ford’s U.S. cars don’t have to be produced in the U.S. Ford’s global architecture allows them to build anywhere.”

    The UAW has known this forever and is why Americans were stuck with crappy cars for so long. Now that these locusts have lost, Americans are getting quality cars that the rest of the world already had….Fords based on global Mazda and Volvo…GMs based on global Opel, Lotus, and Holden.

    NAFTA agreement started the loss of corrupt/criminal Union power…You Americans should kiss Bill Clinton for signing that!

    • 0 avatar
      psarhjinian

      What does a car being based on a non-North American-designed platform have to do with the UAW?  Or are engineers unionized now and I didn’t notice?

    • 0 avatar
      rnc

      Ford’s cars are based on Ford Europe designs (at this point in time (except for some legacy models, due to be replaced in the next 2-4 years) Volvo and Mazda are using Ford platforms not the other way around).  The fallacy about Ford being saved by mazda and volvo is a creation to try and explain ford’s turn around in any other way than giving credit to ford (which is getting harder and harder and ofcourse if ford failed it would be ford’s fault inspite of mazda’s best attempts at saving them)

  • avatar
    Russycle

    The UAW has been building Fords based on Mazdas since at least 1991 (Escort), if the union made a big stink about it I missed it.

  • avatar
    Robert.Walter

    could it be that this was just a plan to have something to pull-out of a uaw plant to send a signal?  could it be that there is a capacity issue here (not enough at lap and too much at sap)?

  • avatar
    xyzzy

    Wait.  Ford made this long-term production decision based on a relatively short-term currency fluctuation and people think that’s smart?  The Euro can go back up 14% just as easily as it went down 14% guys.  Oh, and they also have “greedy unions” in Germany last I heard.  In fact I have that fact on very recent Bertel Schmidt authority on this very website (see his most recent article about Opel).  Oh, and Ford has said they are going to build something else to be announced in that plant, so it’s not like the union is losing production.  But hey, if  people think it makes a good UAW-bashing story just ignore all of that!

    • 0 avatar
      psarhjinian

      I’m wondering if the real reason behind this isn’t currency fluctuations or a kick at the union, but rather a way to extend production of the Escape in lieu the Kuga?  After all, the Escape is selling well and the oily bits are likely long since amortized.
       
      Why stop the money train?

    • 0 avatar
      NulloModo

      The Escape being an old design is another one of those TTAC popular fallacies.  Yes, the underlying platform dates back a bit, but the engines, transmission, electronics, and interior/exterior styling were all heavily revised or updated in ’08/’09.  Try driving a 2007 Escape vs a 2010 model, the difference is night and day.

    • 0 avatar
      Gardiner Westbound

      Why not index Louisville UAW wages to the Euro?

  • avatar
    portico

    Couple of thoughts. 1. I do not think that the Kuga is going to appeal to current Ford Escape owners who bought the Escape because of its truck like styling. 2 THis sounds to me like Ford is looking to leverage its current financial success as a way of holding the UAW’s feet to the fire. 3. I think that I would second guess my purchase of an Escape/Kuga if I knew that it was not manufactured in the United States. I am one of those folkes who have purchased American lately to give them another a try and to keep more of my dollars in the hands of US workers. If Ford does not make the Kuga here it would nullify my desire to purchase the product for this reason.

    • 0 avatar
      NulloModo

      If you buy a Ford product, regardless of where it is built, you help Ford as a company which helps all of their employees, regardless of where they are.  The higher margins made on vehicles built without union labor help to subsidize the higher wages that the unions demand for the vehicles they build.  Plus, you help support the engineers, designers, marketing people, and the white collar staff no matter where it was built.

  • avatar
    OldandSlow

    I have an 03 Mazda Tribute with a 5 speed manual, powered by the old 2.0 Zetec. It is basically the Ford Escape and is built on the same assembly line outside of Kansas City, Missouri.
     
    Ford has revamped the drive-train twice since the 01 model, but the Escape is still riding on an old set of bones from the old Mazda 626. If the new Escape is as small on the outside and as roomy in the inside as the old one, then I may consider one once the bugs are worked out.
     
    After reading the full Bloomberg article and the “sky is falling,” anti-UAW spin of TTAC, I must ask what is the big friggin deal?   Shouldn’t an EU Kuga be built in an EU country?
     
    You can do a global platform on both continents – but the local markets are not the same. I hate to say it, because I’m part of the problem – the US is a value oriented market.  Read that to mean that US pricing for Ford and GM will be stuck competing with the likes of  Hyundai.
     
     

  • avatar
    niky

    There may be some truth to the idea that Ford wants to keep building Escapes there… Ford’s European platforms are great cars… but make no mistake they are expensive to build. Which is why Ford is doing all it can to bring the cost of production down. Forced to sell German Kugas, Ford will have to sell it at a good premium as opposed to the Escape… which might work out fine for all involved… they keep their cheap and sellable Escape, and have a premium Kuga over it to appeal to the higher end market.

  • avatar
    DenverMike

    Politics have a lot to do with why you won’t see any U.S. built Fords officially imported in Europe. A few years ago the U.S. impossed a high tariff on European steel that has since been lifted. They are stll pretty PO, I’m sure.
    The Mustang GT would be a hot seller in the EU, even after tariffs. Nope, they banned the new 5.0 for emissons reasons even though it runs cleaner and gets better fuel economy than the 4.0 in the BMW M3.

  • avatar
    ronin

    Wow, yet another new suv/cuv thingy from Ford?

  • avatar
    Rday

    I don’t get it. Both Germany and the US are high cost labor markets. Why is ford even still considering either of these countries for new construction? Surely Mexico or SE Asia offer many more opportunities for making money. Of course Mexico is having a civil war so I don’t know how much longer companies will want to add new plants there. But there are other countries that can offer them great savings. If this was an attempt to intimidate the UAW it failed iMO.

  • avatar
    xjug1987

    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!

  • avatar
    ihatetrees

    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?


Back to TopLeave a Reply

You must be logged in to post a comment.

Subscribe without commenting

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Authors

  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Matthias Gasnier, Australia
  • Tycho de Feyter, China
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Faisal Ali Khan, India