Slowing down production to meet diminished demand is smart but still reads bad.
Donald Trump isn’t going to like this latest news from Ford. Reuters is reporting that the American automaker will idle production at its Kansas City, Missouri, F-150 plant for one week. The F-150 plant in Dearborn, Michigan, will stay up and running. Ford will also stop building the Escape and Lincoln MKC at its Louisville, Kentucky, facility for two of the next three weeks. Finally, two of the automaker’s plants in Mexico, which combined build the Fusion, Fiesta and MKZ, will be shut down, although Reuters didn’t say for how long.
In total some 13,000 workers will be temporarily laid off, with 9,000 of those coming from the US. Much like the decision to stop work for a week at the Mustang’s plant in Michigan, these moves were made to match production with demand. "During our second quarter financial call, we said we expected the overall retail industry to decline in the second half of the year from the same period last year. We also said to expect to see some production adjustments in the second half - this is one of them. We continue matching production to meet demand," a Ford spokesperson told Reuters. When you scan the latest sales report from Ford, September 2016's numbers, it appears a slowdown is much-needed.
All the cars caught up in the plant idling plan posted negative sales growth in September 2016 (when compared to September 2015) except for the MKC. The Fiesta was the worst of the bunch, with sales down 39.5%. Despite America’s love for crossovers and SUVs the Escape was down 12%. The good news is that, with the exception of the Fiesta and Fusion, all the cars Ford is idling production of are currently exceeding 2015’s sales numbers. While production stops may seem like the end of the world for stock holders this move is much better than the alternative. That would be to continue producing more cars than can be sold.
As for the workers at these plants, Americans with a year or more of experience will get 80% of their pay, Ford’s supplemental pay combined with unemployment benefits, with no word on what compensation Mexican workers will get.