DETROIT (Bloomberg) -- Ford Motor Co., which plans to cease making the Econoline van later this year, plans to revive the Ohio factory where the vehicle is made by investing $168 million to move truck production there from Mexico early in 2015.
Production of Ford’s commercial F-650 and F-750 medium-duty trucks will move from a plant in Escobedo, Mexico, to Avon Lake, Ohio, the company said in a statement today. Ford had operated a Mexican-based joint-venture with Navistar International Corp. known as the Blue Diamond Trucking Co. The automaker is cutting those ties to take full control of production, design and engineering of its top-selling F-series trucks, Joe Hinrichs, Ford’s president of the Americas, said in an interview.
Ford derives most of its profit from its F-series truck line, Morgan Stanley has said. The second-biggest U.S. automaker sold 763,402 such vehicles last year, including 8,682 medium- and heavy-duty trucks, up 18 percent from 2012. Later this year, the company will debut an aluminum-bodied F-150 pickup, to be followed early in 2015 with redesigned versions of the F-650 and F-750, still featuring steel bodies.
“This is a highly profitable vehicle,”said Kristin Dziczek, an analyst with the Center for Automotive Research in Ann Arbor, Mich. “The bigger the vehicle, the higher the profit, so that makes it less difficult that the labor costs are slightly higher in Ohio than Mexico.”
Ford also won’t have to share profits with Navistar now that it’s pulled out of that joint-venture, Dziczek said.
“We’re doing this to bring the 650-750 production in-house so that we have complete design, manufacturing and engineering control over our F-series lineup,” Hinrichs said.
Commercial drivers
“It’s so critical to be able to offer our commercial customers everything from an F-150 all the way to an F-750 and to know it’s built by Ford," he added.
Moving the work from Mexico will preserve the jobs of 1,600 workers at the Avon Lake factory and honors an agreement Ford made with the UAW in 2011 contract negotiations, Hinrichs said. No new jobs will be created and Ford’s labor costs will be unchanged by the move, he said.
“What’s going on with Ohio is really the utilization of the plant and the experienced employees we have there,” Hinrichs said.
The Escobedo plant will be a Navistar-only facility where the company will continue to build its own medium-duty and heavy-duty trucks, Steve Schrier, a spokesman, said in an e-mail. He declined to comment on whether Ford’s move would lead to job losses there.
“It would be premature to speculate on the specific details of ending Ford production at the Escobedo plant,” Schrier said.
Relocate manufacturing
The U.S. has surpassed Mexico as the preferred place to relocate manufacturing that had been moved offshore, according to an online survey of 143 senior executives conducted in January and February by consultant AlixPartners. It was the first time in the four years of the study’s existence that the U.S. was chosen over Mexico.
Forty-two percent of manufacturing executives identified the U.S. as their preferred location, up from 37 percent a year earlier, while Mexico fell to 28 percent from 37 percent.
“America is more competitive today,” Foster Finley, a managing director at AlixPartners, said in a statement.
“However, the decision as to where to source manufacturing should always be a clear-headed one, taking into account long-term considerations such as type of individual products and capability of the local workforce.”
In Ohio, Ford is ending production of the Econoline, also known as the E-series, to make way for the Transit Van it is bringing from Europe and will produce at its Kansas City assembly plant in Claycomo, Mo.
Machinery installation
Ford has been building autos in Avon Lake, Ohio, near Cleveland, since 1974 and that plant’s future was a key part of contract negotiations with the UAW in 2011.
The UAW is “extremely pleased” Ford has followed through on its commitment to build the trucks in Ohio, Jimmy Settles, the union’s vice president in charge of its Ford department, said in a statement.
The plant is currently operating on one shift and will wind down production of E-series cargo and commercial vans by the end of 2014, Hinrichs said. Ford has already begun converting the plant to produce the new trucks, installing new machinery and tools.
“A lot of equipment has been going in on the fly,” Hinrichs said. “It’s not what we would classify as a new body shop, but the investment that’s being made largely is for equipment in the body shop and for tooling associated with building the 650 and 750.”
Pickup production
It’s unclear how long the Ohio plant will shut down between the Econoline ending and the new truck production starting, Hinrichs said. It will not require as much downtime as the 13-week hiatus Ford is taking at its two U.S. F-150 plants this year to convert them to produce the new aluminum-bodied models.
“There won’t be significant downtime” in Ohio, Hinrichs said. “It’s not as complicated as when we go to aluminum on the F-150.”
