Currency, UAW Doom US Production Of Ford's Kuga

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.