Why Ford is Adding Thousands of new us Manufacturing Jobs
Therecent announcementthat the Ford Motor Company are investing $6.2 billion to create over 12,500 new jobs by 2015 is welcome news. It is an indication that the US car market is recovering, after the drop in sales following the 2008 financial crisis. However it is interesting to look at the recent history of both the Ford company and the US car market to get a better idea of the underlying processes that are driving this expansion.
Prior to the financial crisis, in 2005, Ford, the third largest car maker in the world, was having problems; its bonds, along with those of General Motors, were given junk status, by Standard and Poor. The big three motor companies in the US, Ford, Chrysler and General Motors had relied on larger vehicles such SUV's, and pick-up trucks, which offered a higher profit margin, while oil prices were low. However demand for these cars had begun to fall as oil prices were rising. Whilecompanies such as Toyota, unable to import cars because of tariffs, had begun building factories in the US. Their production systems were more flexible, and they had greater experience of manufacturing smaller cars.Whereas Ford had been losing market sharein the US, and had high liabilities with their retirement and health costs, and as demand for SUV's was falling, were reducing prices, and reducing profits.
Ford had begun the process of restructuring, and by 2008 wasregaining market share, partly because oil prices were falling again, when the financial crisis of 2008 caused a recession and massively reduced the numbers of car sold in the US. The big three car companies had torequest help from the federal government. Questions were asked about whether any money loaned would be used for retooling and the production of more fuel efficient cars.
In 2005, an annual total of17 million light vehicles were sold. In 2009 annual sales hadfallen to 10.4 million, the worst in 27 years. The 2012 figure for annual saleswas 14.46 million, and the US car market is predicted to continue increasing in size, into 2013, as US gdp growth figures remain positive.
As US light vehicle sales increase the interesting question for Ford is its market share. Recent figures on market share reveal that Ford's share of the US car marketgrew through 2009, however bothChrysler and GM filed for bankruptcy that year, and their respective market shares had fallen.In 2010Ford continued its increase in market share, and GM motors recovered, but Ford's market share fell slightlyin 2011.This was put down to lack of capacity, and it is therefore likely that their decision to create new jobs is based on a desire to both increase market share, and to meet increased demand for cars, as the US car market grows again.
Thenew investmentswill be at the Michigan Assembly plant, and at the Flat Rock Assembly plant, in Michigan. Investments and new jobs have also beenannounced in Louisville, Kentucy. Ford are in the process of investing in more flexible manufacturing operations, and are now introducing into the US market smaller, and more fuel-efficient car models, in response to legislation on fuel efficiency, and customer demand.A more globalised car marketwith car models marketed worldwide, is a worldwide industry standard now, with greater flexibility in factories, where production can be changed in response to changing demand for different car models. The big three US car companies have been catching up.
The demand for compact and sub-compact cars in the US is relatively recent, thoughdemand had grown faster than the supply, as the big three US manufacturers had favoured larger models, because of low fuel costs, and higher profits on bigger vehicles. Ford have re-introduced the Ford Fiesta, Mark VI, the Fiesta was discontinued in North America in 1980, but is a very familiar sight on European roads and has been marketed worldwide,including the US, as a global product, since 2008. The increased demand for small cars is partly in response to higher fuel costs, lower household incomes, as a result of the recession, and increased awareness of the importance of fuel efficiency. The new Ford product range does include a morefuel efficient pick-up truck, developed for the US market.
There has even been some speculation as to whether theFord Ka, a popular small car for city driving, in European countries, might be introduced into the USA.
The Ford expansion worldwide had followed a different model tothat of General Motors, which expanded by taking over companies such as German brand Opel, and Vauxhall in the UK, while Chryslermerged with Fiatin 2009 enabling them to introducesmall car models into the US market. Ford has set up its own factories worldwide, and this may well have assisted them in creating a global model for manufacturing, which is now becoming the standard car manufacturing model, and probably made reintroducing a sub-compact car, such as the Ford Fiesta, into the US car market, easier.
This new investment, bringing new jobs in the US, based around a flexible production model, with a wider range of small fuel-efficient cars, should prepare the company for a changing and growing US car market, and allow them to compete effectively both in the US market and globally.
