Saturday, September 1, 2018

Ford Cancels Focus Crossover Model, Cites Trump Tariffs

Ford Motor Co. announced on Friday that it will be canceling its plans to sell its new Chinese-built Focus Active in the U.S. next year, citing President Trump’s escalating trade war as the reasoning behind the move.

Kumar Galhotra, president of  Ford’s North America division, said the president’s move to hit autos built in China with an additional 25 percent levy last month undermined the profitability of the new car, which the company had initially planned to ship into the country next year.

“Our viewpoint on Focus Active was that, given the tariffs, obviously our costs would be substantially higher,” Galhotra said in a conference call, according to Bloomberg News.
“Our resources could be better deployed.”

As I have said before, Trump's tariffs shrink the global economy and lowers standards of living.



  1. Except that the driving factors behind Ford's product mix in the first place are entirely government created. CAFE, safety regs, emissions, and so on have been pushed into diminishing returns as 'nudges' to social engineer people's choices.

    Passenger automobiles and light trucks are now designed for the government first and the customer second. It's forced sedan design into a place where they don't make sense to buyers. It's driven small pickups out of the market. There are other huge changes that has forced that changed buying habits. And then the cost up to meet all these regs has been enormous. The the interference in labor, needing to cut a deal with political office holders to build and/or operate a manufacturing facility, and more.

    All those things combined are a huge hunk of what drives a decision to build a car in China. Trump's tariffs are just that final nail in the coffin at most. Maybe a way of the political class to force companies back into dealing with them and making the appropriate pay offs. Either way it's far from the root of the problem.

    1. You couldnt be more right and accurate about the extreme regulation leveraged on the industry Jimmy. Its good to see more awareness of this on top of the insanity of gov regs!

    2. --- All those things combined are a huge hunk of what drives a decision to build a car in China. ---

      A'huge chunk'? Try again. There are no standards to meet except market standards for much of everything else and yet everything else is made in China and Southern Asia countries. The law is called Comparative Advantage, not CAFE. What government mandates do is change what you make, not where you make it.

    3. Torres,

      As usual in exchange with you I end up feeling like Thornton Mellon explaining reality to arrogant professor. You simply have no idea what it takes to manufacture a product that is certified to government or private standards. An automobile is not a piece of consumer electronics or some other product that has to pass a few simple regulations or standards or none at all.

      There is a great cost associated with certifying and qualifying everything from materials in the country of manufacture to even simple components like bearings. Something besides saving some labor cost after considering transportation has to be there. Something more than your comparative advantage. Something that makes a company desperate to hold cost targets. Time for ROI just doesn't work well for it.

      But that's just the cost issue. The other issue is that automobiles and light trucks are designed for government first in the USA.

      Ford builds the Focus in plants around the world or did. It was the regulatory requirements in the USA that drove Ford to decide to get out of the sedan business. In order to make a sedan or coupe or to government standards makes the price higher while diminishing the product's attractiveness to customers in the US market. The poor visibility to pass rollover requirements. The high door sills for side crash requirements. Loss of trunk space, rear leg room, and more all driven by calculations and requirements from government. Other less burdened vehicle classes like light trucks then attract the customers.

      CAFE for instance was changed to the footprint calculation. This alone is a big factor why compact pickup trucks are gone from the US market. Not only does the CAFE calculation hurt them the safety and other regs make the compact trucks cost almost as much as a full size truck. There's no significant number of buyers for a compact truck at a full size truck price. Passenger cars face a similar issue while because CUVs (crossovers based on the same platform) are classified as light trucks with a significant regulatory advantage (especially CAFE) as a result. This regulatory advantage also allows for a much more useful vehicle.

      Ford's north american plants won't be producing the base car of the Focus Active. So that means China or Germany. For the US market there isn't enough margin for Germany. So it's China. Had the regulatory environment not driven buyers away from sedans, coupes, hatchbacks, etc there would still be a plant in the USA, Canada, or Mexico making the base car and because of the costs I touched on and others the Active would have been made in that plant.