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Ford Changes Plans to Build Small SUVs in Louisville

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On: Mon, Sep 13, 2010 at 4:31PM | By: Sherry Christiansen

Ford Changes Plans to Build Small SUVs in Louisville

According to anonymous sources, Ford Motor Company has decided against its initial decision to build a small Ford Escape-like SUV, called the “Kuga,” in Louisville, Kentucky for export.

The decision was reportedly made in response to the low value of the U.S. dollar in hopes of hiring inexpensive labor, but recently plans have changed due to a currency exchange rate that “no longer favors U.S. production,” according to two people familiar with the decision.

Ford’s original plan was to transfer the production of the Kuga model to Louisville next year from its present production plant in Saarlouis, Germany, to take advantage of lower labor costs and the weaker dollar, according to unidentified sources who talked to Bloomberg News. Now Ford plans to keep production of the Kuga in Germany.

The sudden change in plans exhibits Ford’s dilemma surrounding the need to lower labor costs in order to keep its prices competitive, which in today’s market is imperative. Ford planned to export 80 thousand units of the Kugas model to Europe, according to sources who asked for their names to be kept discrete. According to Bloomberg News: “That plan was tied in part to exchange rates and labor concessions Dearborn, Michigan-based Ford sought last year that United Auto Workers members rejected.”

“This raises issues of how the 2011 contract negotiations will go,” said Brian Johnson, an analyst at Barclays Capital in Chicago. He rates Ford “equal weight. If the UAW is going to try to extract givebacks, Ford is showing that with its global production footprint, it can build wherever it wants.”

Since the time that Ford agreed with the UAW in October to build the Kuga, in addition to the Escape (the two cars are built on the same platform), in its Louisville plant, the euro has fallen as much as 14% against the U.S. dollar, which reversed the financial picture for Ford. Initially the company was planning U.S. production due to a weakening dollar compared to the euro, (lowering the cost of domestic-made goods).

Ford plans to continue to produce the popular SUV Ford Escape in Louisville instead of the Ford Explorer, which is moving production plans to Chicago. “We are on track to begin production next year of a new vehicle from our global C-car platform at the Louisville Assembly Plant,” Mark Truby, a Ford spokesman. “Though we are not providing product details, we intend to fully utilize capacity at the transformed facility.”

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