Why Is Ford Moving To Mexico?

October 18, 2021

One of the most significant pieces of news to emerge from the manufacturing industry recently is the plan proposed by Ford to move a large proportion of its manufacturing operation to Mexico. The decision has been met with a combination of celebration and criticism from consumers. 

Ford has a significant presence across the United States, having traded in the region since 1925. Last year alone, the company produced almost two and a half million cars and vans at their U.S. based plants. 

Ford has also made a significant investment into its U.S. engine plant, stamping plants, and two assembly plants, with more than $10 million dollars having been invested over the last few years. Despite this, the company still intends to expand into Mexico, and there are a number of good reasons why this makes excellent business sense for the automotive industry giant.

Trade Agreements

Mexico is currently involved in a number of trade agreements with nations around the globe, and this is good news for businesses. Having a trade agreement in place allows businesses to export their goods to the cosignatory countries with minimal hassle and at a reduced financial cost. 

As an example, the North American Free Trade Agreement (NAFTA) that currently exists between the USA and Mexico allows goods to be traded at vastly reduced tax rates and with minimal fees on objects moving in or out of the country. In total, Mexico is currently part of forty-three trade agreements. This dramatically opens up new markets to Ford, offering them a far wider number of trading partners to choose from.

Lower Costs

Another major draw of moving to Mexico is the chance to benefit from reduced costs, which applies to all stages of the manufacturing process. Mexico is well-known for lower wages and cost of living; this allows businesses to maximize their profits by cutting the cost of production. 

This fact, combined with trade deals which do not carry the hefty import and export taxes that can come with international trade, increases the appeal of Mexico for businesses of all shapes and sizes.

Access To Trading Partners

Many consumers have criticized Ford's decision to move to Mexico, claiming that this will cost thousands of Americans their jobs. In truth, however, Mexico and the US are stronger when they make the decision to work closely together, rather than acting as rivals or competitors. By working together, companies that operate in both countries will be able to take advantage of a multitude of beneficial international trade agreements that may otherwise not be available to them.

Reputation For Quality

One of the main appeals of Mexico for many businesses is a reputation for top-quality products, typically, at a far lower price. 

The number of manufacturers who have made their way to Mexico for production is a testament to the reliability and quality of the products coming out of Mexico, and this is a trend that shows no signs of slowing down. 

As an added bonus, auto parts are often sourced from the United States, which further improves the reputation of the overall brand, while cutting costs and boosting profits.

Efficient Logistics

In addition to boasting a number of trade deals that help to improve the connections and contacts available from Mexico, the physical transportation of goods is also made easier thanks to a sophisticated logistics system. 

This means that businesses are able to transport their goods to a number of nations with ease, whether by road, rail, boat, or plane. By speeding up this stage of the process, Ford can ensure that they are working more efficiently, minimizing the time wasted.

Conclusion

There is no denying it—expanding operations to Mexico is a smart decision which offers a huge number of business benefits to Ford, the United States, and the automotive industry in general. 

Rather than seeing the decision as some sort of “betrayal”, it is useful to weigh up the pros, especially when we take into account the bigger picture and Ford's position in global manufacturing and trade.

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