A Better Idea?

Building Fords in Mexico

Mexico has often been used by U.S. automakers as a junkyard for dumping outdated models. Now Ford is making a U-turn. The company has decided to cross the border and spend $500million to build a new small car at Hermosillo in northwestern Mexico.

To help make its Mexican car. Ford has teamed up with Toyo Kogyo, Japan's third-largest auto company, after Toyota and Nissan, and the maker of Mazda cars. Toyo Kogyo (1983 sales: $5.8 billion), 25% owned by Ford, will supply engines and transmissions for the Mexican model from its Hiroshima factories.

Most of the plant's annual production of 130,000 cars will be heading north to Ford's American and Canadian dealers, the nearest of which is only 160 miles from the factory. Ford hopes to use the car to replace the Mercury Lynx, whose sales have dropped from 95,000 in 1982 to 79,000 last year. Though Ford has recovered from losses of $658 million in 1982 and had profits of $ 1.1 billion during the first nine months of 1983, the company's overall U.S. market share has dropped from 22.8% in 1978 to 17.1% in 1983. In the $20 billion U.S. small-car market. Ford's share of sales has dropped from 21% in 1982 to 18.7% last year.

Ford headed south partly to take advantage of Mexico's low wage rates. Though Mexican autoworkers have a reputation for sloppy production, some are paid only 56-c- an hour, against $12.71 for their U.S. counterparts. Ford expects to employ 3,000 workers when it starts to produce the subcompact in late 1986. American union leaders immediately called the move a threat to job security. The Ford plant will become the second-largest automobile factory in Mexico and a tonic for its sickly auto industry, which last year produced 260,000 cars, down from 571,000 in 1981.

Ford's decision to seek Japanese help is another example of the intricate global alliances that automakers are rushing to make. It also means that each of Detroit's Big Three now relies on a Japanese company to provide some of its small cars. Starting next year, GM plans to build some 250,000 small cars a year with Toyota in a plant in Fremont, Calif. By 1986 the company hopes to import 300,000 cars built by Suzuki and Isuzu. Predicts GM Chairman Roger Smith: "Joint ventures are going to be a way of life." Chrysler, which last week filed an antitrust suit seeking to prevent the Toyota-GM hookup, imports four Mitsubishi models and will probably replace its aging Omni and Horizon models with a car built overseas. Says Chrysler Vice Chairman Gerald Greenwald: "The days of U.S.-based small-car production are coming to an end."