Ford Motor Co., the world’s most profitable automaker, is hiring 1,800 workers and spending $600 million to overhaul a factory in Louisville, Kentucky, to build small sport-utility vehicles.
The factory, which now produces the midsize Ford Explorer SUV, will begin building a redesigned version of the Escape compact utility vehicle late next year, Marcey Evans, a Ford spokeswoman, said in an interview. At that time, the plant will begin operating two shifts and employing 2,900 workers, up from one shift and 1,100 workers currently, she said.
Ford is transforming the Louisville plant into its most flexible factory, capable of producing small cars, SUVs and wagons. Such flexibility is typical of Toyota Motor Corp. and Honda Motor Co. plants. Ford also plans to build a small Lincoln SUV in Louisville starting in 2012, according to two people familiar with the plan.
“Ford is putting itself in a position to answer the call of the consumer and build whatever they want,” said Michael Robinet, an analyst with IHS Automotive in Northville, Michigan. “For several years, the method they used was to overbuild and then tape money to the hood” by offering discounts on cars.
The Louisville factory will be able to make Ford’s new Focus compact car, should consumer demand outstrip the factory in Wayne, Michigan, where that model is built, Robinet said. Louisville also could build the Grand C-Max wagon Ford is bringing to the U.S. from Europe, he said.
Mark Fields, Ford’s president of the Americas, announced production of only the Escape at a ceremony today at the Louisville factory. There are no plans to build the Focus in Louisville, Evans said.
Production of the Lincoln small SUV may begin around June 2012, according to one of the people familiar with the schedule, who asked not to be identified discussing internal company plans. Evans declined to comment on the Lincoln SUV production.
State and local governments in Kentucky have committed to give the automaker $240 million in tax incentives over the next 10 years, Ford said in a statement. The tax breaks are based on current and potential future investments and job creation at Ford’s two factories in Kentucky, the automaker said.
Today’s $600 million investment in Louisville is financed in part by the $5.9 billion in U.S. Department of Energy loans it received last year to produce more fuel-efficient vehicles, Ford said.
Once output of the 2010 Ford Explorer ends Dec. 16, Ford will gut the 55-year-old Louisville factory, Evans said. The plant will receive new tools for assembling compact-sized models, new equipment for building car bodies and upgrades to its paint shop, she said.
“It will be a pretty major overhaul,” Evans said.
As many as 700 workers will be laid off in Louisville while the plant is renovated over the next year and they will return to work in the fourth quarter of 2011, said John Stoll, a Ford spokesman. Some of the workers that will be added at the plant will be transfers from other Ford factories, Evans said.
Ford expects to hire about 1,000 employees to either work in Louisville or fill vacancies created by those moving to the Kentucky factory, she said. The new hires will be paid about $14.50 an hour, about half what veteran assembly workers make at Ford, she said. To stimulate hiring and lower costs, the United Auto Workers union agreed to create a second wage tier in the 2007 contracts with Ford, General Motors Corp. and Chrysler LLC.
“Louisville now is operating at half speed,” Robinet said. “The increased flexibility there will really help Ford better utilize its capital structure.”
The next generation Escape that will be built in Louisville is based on the Kuga model Ford sells in Europe, Robinet said. It is expected to be more fuel efficient than the current Escape, which gets 23 miles per gallon in the city and 28 mpg on the highway, according to auto researcher Edmunds.com
Ford will end production of the existing Escape at its Kansas City plant late next year as Louisville begins assembling the new model, Evans said. Kansas City will continue to build the Ford F-150 pickup on one shift. Missouri lawmakers have offered Ford incentives to bring a new model to Kansas City and keep the plant open.
“Additional new products for Kansas City will be announced at a future time,” Evans said.
Ford, the only major U.S. automaker to avoid bankruptcy last year, earned $6.37 billion in the first nine months of the year, more than any other global carmaker. New models such as the Fiesta subcompact and redesigned Taurus sedan have helped Dearborn, Michigan-based Ford’s U.S. sales rise 21 percent this year, almost twice the market’s gain of 11 percent.
Bank of America Merrill Lynch today raised its 2011 earnings estimate for Ford to $2.40 cents per share from $2.25 and increased its 12-month price target for the stock to $24 from $20.
“Ford’s financial performance over the past year has been impressive,” John Murphy, Bank of America auto analyst, wrote in a research note. “We expect the company to continue generating solid pretax profits in North America and in Ford Motor Credit.”
Ford rose 7 cents to $16.76 at 4 p.m. in composite trading on the New York Stock Exchange. The shares have risen 68 percent this year.
The upgrades Ford is making at Louisville will put the second-largest U.S. automaker in a better position to compete against Toyota and Honda, Robinet said.
“This is another example of Ford taking an old-line factory and moving it into the 21st Century,” Robinet said. “Honda and Toyota have had flexible plants like this for years and now Ford is catching up.”