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Ford’s big China play signals new thinking at the top

Jun 23, 2017

In the rhetorical battle between President Donald Trump and Ford Motor’s investors, the president is losing.

The Blue Oval is moving American production of the Focus to China – presumably because shipping it to Mexico from Michigan wasn’t sufficiently controversial.

For the first time, a Detroit automaker will, quote, “globally source” an established model and use Chinese labor to assemble it for sale to American consumers. Let the tweet storm commence – or not, as it turns out.

Credit Daniel Howes / Detroit News

The move announced this week says a lot of things: first, that Ford is serious about boosting its return on capital. Second, that U.S. gas prices are more likely to stay flat than rise again to four bucks a gallon. And third, that building small cars in U.S. plants staffed with union labor is a losing proposition unless demand is soaring. Which it definitely is not.

The decision also shows that Ford under new CEO Jim Hackett is more worried about investor sentiment than the guy in the Oval Office armed with a Twitter account.

How refreshing.

Ford invests plenty in the United States, as it never ceases to remind whoever will listen. Less certain is whether it’s making the right investments in its home market for the right reasons – not nostalgia or politics.

This move to China partially answers that question, emphatically. The automaker is violating a widely accepted norm in the global auto business: build where you sell. This is a glaring exception, and more are likely to come – whatever the “America First” chatter from Trump’s Washington or the United Auto Workers.

The long-term decline in oil prices, the rising investment demands for mobility and autonomy, the investor pressure on senior management and their directors – all of it is pushing the Blue Oval brass to make dicey political decisions it historically avoided.

Building the Focus in China probably won’t be the last. It can’t be for a company pushing to reshape its global footprint, fatten returns and deploy capital to mobility, autonomy and electrification.

This is what a Ford on the move could look like: let business logic drive decisions, not politics; show management is working for investors and customers first, employees and politicians second; let action speak for itself, not corporate spin.

Rival General Motors has been showing a bias for action over talk, and investors are starting to notice.  Now it’s Ford’s turn – to use the industrial revival of former CEO Alan Mulally to fashion a 21st-century future. To show the Blue Oval doesn’t need to be all things to all people, despite its tradition. To find the courage to exit segments and countries where it can’t make money or build market share.

If it doesn’t do all that, and more, the first constituency to make Ford pay will be its investors.

Executive Chairman Bill Ford Jr. spends a lot of time talking about how the auto industry is changing and how Ford will lead that change. The time for Ford to stop talking – and start doing – is now.

Daniel Howes is a columnist with The Detroit News. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.