Ford announced on Tuesday that it will spend $550 million to convert its Michigan truck plant into a facility that will produce the Ford Focus compact, including a zero-emissions electric version of the Focus.
The Michigan Truck Plant in Wayne, west of Detroit, has long been known for producing Ford Bronco sport-utility vehicles and the classic Ford F-series pickup. For years, the Ford F-150 was America's best-selling vehicle and the metaphorical backbone of a working nation. The plant also produced the three-ton, 14-mile per gallon Lincoln Navigator and Ford Expedition - among the biggest SUVs on the road - 300-horsepower monsters built to tow powerboats and invite the ire of environmentalists.
Now however the facility - renamed the Michigan Assembly Plant - is retooling so it can build the 2,588-pound Focus, a 35-mpg fuel-sipper that pulls Ford's hopes with its little 140-horsepower engine. Those will begin rolling off the line in late 2010, and the electric Focus a year later.
The announcement is the next step of a process that was set in motion by Ford chief executive Alan R Mulally in July, when he said Ford would revamp the plant to produce one of Ford's small cars at the Michigan plant. So far, Ford has committed $75 million to the conversion.
Ford is the only one of the Big Three US automakers that has not asked for anything from the $25 billion approved by Congress last fall to help the US Big three retool to make more fuel-efficient vehicles. However, Ford, the second-largest US automaker, is receiving $159 million in state tax incentives and $15.3 million in municipal tax abatements from the government.
At its peak in the 1990s, the Michigan Truck Plant had three shifts working around the clock to produce the highly profitable SUVs, which allowed Detroit's Big Three to ignore innovation on small cars.
"This was one of the most profitable plants in the world," Ford vice president of global manufacturing Joseph Hinrichs said. "Now in stark contrast to that, we're going with a more balanced portfolio" of vehicles.
Ford will continue to make the big SUVs but has moved their manufacture to Kentucky. Despite the recession, Ford is turning out about as many $40,000 Expeditions and Navigators as it did this time last year, Hinrichs said.
Ford and Detroit's other automakers gave their small cars less attention in recent decades simply because they could not profit from them. High US production costs - spurred by high union wages and benefit expenses - combined with low sales prices made the little cars losers in the market.
The new investment will save 3,200 jobs and may create 1,500 new positions over five years, the company said. However, building a profitable Ford Focus small-car line will require huge changes in how the vehicles are equipped and assembled, since so far the Focus has failed to make an impact on the market. By one estimate, the earlier-model Ford Focus lost as much as $1 billion a year. But Ford believes it now has a new formula to turn those losses into steady profits.
Among the changes planned is that Ford will build the same vehicle here as in Asia and Europe, allowing for greater economies of scale. It is also counting on new union work rules to reduce labour costs. The Dearborn, Mich., auto maker aims to revive the car's reputation by producing a battery-powered Focus model, its first all-electric passenger car.
At the heart of the plant's transformation is a flexible body shop operation that will allow multiple models to be assembled in the same plant. Since 2006, one of Ford's priorities has been the development of vehicles that use the same architecture.
Ford still must finalise an agreement with the plant's United Auto Workers local to achieve the cost savings needed. Those talks are in addition to wage and benefit concessions the company won in February negotiations with the UAW. The work-rule changes would allow the plant to operate similar to Toyota Motor Co's US plants.