Ford kills plan to import Chinese-made car in wake of tariffs

‘Our viewpoint on Focus Active was that, given the tariffs, obviously our costs would be substantially higher,’ says Ford North America president

PUBLISHED : Saturday, 01 September, 2018, 1:44am
UPDATED : Sunday, 02 September, 2018, 8:08am

Ford is cancelling plans to import a new crossover model from a plant in China after US President Donald Trump’s tariffs undermined the business case for bringing the vehicle to the US market.

Trump’s move to slap China-built autos with an additional 25 per cent levy in July undermined the profitability of the Focus Active that Ford planned to start shipping into the US about a year from now, Kumar Galhotra, president of North America, said in a conference call with reporters.

The company decided it was not worth investing more money in a vehicle that would have had fewer than 50,000 unit sales a year in the US.

“Our viewpoint on Focus Active was that, given the tariffs, obviously our costs would be substantially higher,” Galhotra said. “Our resources could be better deployed.”

With Trump trying to rewrite trade agreements on multiple fronts, carmakers are anxiously war-gaming where they will assemble cars and procure parts for them.

In addition to the tariffs already implemented for cars imported from China, the administration has also threatened steep tariffs on vehicles shipped from Europe and has a preliminary agreement with Mexico to require that more autos and components are made by higher-wage workers to avoid duties.

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Ford’s financial state has been deteriorating as it has over-relied on North American operations that have seen profit margins shrink due to an ageing line-up. Moody’s Investors Service this week downgraded the company’s credit rating to a step removed from junk.

Last month, Ford’s stock dipped below US$10 for the first time since 2012. The shares fell as much as 2.1 per cent to US$9.50 as of 12.06pm Friday in New York.

Watch: The origins and impact of the US-China trade war

Cancelling the Focus Active is Ford’s latest move in its oft-evolving strategy for global passenger cars. The company had planned to move production of the Focus to Mexico, drawing rebukes from Trump in the lead-up to the 2016 election.

Last year, Ford decided to shift production to China, and this year the carmaker made the move to eventually stop selling almost all of its passenger cars in the US.

Galhotra said Ford builds about 80 per cent of the cars it sells in the US in its home market and another 15 per cent are assembled in Canada and Mexico.

The remainder of its deliveries are primarily comprised of two models imported from India and Spain: the EcoSport crossover and the Transit Connect van.