Ford Investment In Mexico Is Not The Economy Killer You Might Think It Is
We live in a country of approximately 319 million people. Compared to the total global population of is approximately 7.4 billion. We’re just a small percentage of the overall population, yet we are one of the richest and most powerful countries on the planet. In order to achieve the wealth we enjoy today, we have to operate on a global scale and sell our products everywhere.
When working on a global scale without a global government, businesses have to work within the rules of each country they do business in. In some countries, that means extremely large taxes. In others, it could mean legal bribes. Regardless, it’s not particularly easy to make a product and sell it around the world.
Additionally, don’t forget the need to make a profit. A publicly traded company has a fiduciary duty to the shareholders to continue to grow the company. The stock market can be a cruel mistress. If you look at Apple’s latest earnings report, they still made a massive amount of money, but because they didn’t grow the stock market punished them severely. It doesn’t matter that they have the revenue of 2.25 Microsofts or that they have more cash on hand than any company on Earth, they aren’t doing well.
That leads me, in a round about way, back to Ford. Ford is a publicly traded company with an obligation to shareholders. They’re also a business who very much would like to remain in business. Plus, they have to do business on a global scale. Sometimes, that means investment in production facilities in foreign lands, such as Mexico.
Remember, some of the investment in Mexico isn’t even for vehicles that will be sold in the United States. If it weren’t for a press release announcing the investment, it would be something that nobody in the United States would even notice, let alone know about.
If Ford didn’t make any money, they’d go out of business, and going out of business would do far worse to the economy than anything going on right now. But that hasn’t stopped some from criticizing the company when they do invest in the United States. For example, in response to the recent $1.6 billion investment announcement in Michigan and Ohio, I was met with this reaction on Twitter;
How quickly we all forget that when the economy was in the crapper during the Great Recession, Ford was the ONLY U.S.-based automaker who didn’t take a government bailout. While they didn’t necessarily thrive during that time — nobody did — they kept Americans employed and money pumping into local economies across the country.
Secondly, Ford invests a great deal in the United States and the workforce here. But don’t just take my word for it. We reached out to Ford for this story and were given some staggering numbers;
- In the past 5 years, Ford has invested $12 billion in U.S. plants and created 28,000 new jobs.
- Ford makes more vehicles in the United States than any other automaker.
- Ford employs more U.S. hourly workers than any other automaker with over 55,000 hourly employees.
Not only that, but Ford exports vehicles it makes in the United States around the world. The Mustang is the best-selling sports coupe worldwide. Where was the Mustang built? Flat Rock, Michigan. The Ford Lobo (the Mexican version of the F-150) is also constructed here in the United States.
Speaking of Mexico, Ford exports vehicles for sale to Mexico. In 2015, that number exceeded 30,000 vehicles.
There then is the issue of foreign wages;
Wages are an interesting subject because what qualifies as poor pay here in the United States is a lot of money elsewhere in the world. Just check out the Global Rich List to see where you fall in overall global wealth. A fair, or an even overly generous wage in one country still might not be a lot of money in this country.
Finally, there’s the question of why Ford just doesn’t invest even more in the United States? We turn back to the profitability argument for that. Right now Ford is shifting low-margin car production to Mexico and investing in the higher-margin production here in the U.S. If those low-margin cars were built here in the U.S., it’s likely Ford would have to take a loss to sell them at the price they currently sell for, which some claim is already too expensive. A company that loses money on every sale it makes is a company that’s not going to be in business too much longer.
FCA is currently looking for a merger partner, and the writing on the wall is pretty scary for them. In the meantime, Ford is doing well, employing more Americans than ever, and still continuing to grow. How, exactly, is that bad for the economy?
Let us know what you think over in the forums!
Lobo Platinum header image via [autocosmos.com / YouTube]