Ford’s pre-tax profit forecast for 2016 has taken a hit and the American carmaker aims to mitigate financial loss by moving its small car production from America to Mexico. Originally, Ford anticipated pre-tax profits of $10.8billion for 2016 – this has now slumped to $10.2billion.
It’s not only pre-tax profits for 2016 that look likely to decline however. Ford has also stated that there may be a slope in financial performance in 2017.
Pre-tax profit margins
There are numerous reasons for these shifts in Ford’s finances, including a large vehicle recall earlier this year which put a large dint in the bank. The biggest reason, however, is the slim profit margins for small vehicles produced on U.S. soil. This has been the key motivator for Ford moving its production to Mexico, which is a more lucrative location cost wise.
Ford CEO Mark Fields, said “Over the next two to three years, we will have migrated all of our small-car production to Mexico and out of the United States.”
$1.6billion Mexico plant
With the small car production shift form America to Mexico, Ford plans on building a $1.6billion assembly plant over the border, in San Luis Potosi.
The factory will start producing small cars in 2018 and is expected to create a huge 2,800 Mexican jobs – according to US News & World Report.
U.S. Republican Presidential candidate, Donald Trump, has already spoken out about Ford’s small car production relocation, labelling it as “horrible” – a comment largely motivated by his stance on immigration.
A $4.5billion investment in electrified vehicles
A large part of Ford’s forecasted 2017 financial hit is due its commitment to electrified vehicles. Ford plans on investing $4.5billion in 13 different electrified vehicles by 2020.
Speaking about the investment, Fields said: “We see huge social economic and environmental benefits. We're focused on usage where miles travelled be. Autonomous vehicles will account for one of every 10 miles travelled by 2025."
