Ford's strategic shift to manufacturing in China

FORD Moving to China

For any economy to be stable and thriving, manufacturing base is vital. Manufacturing industries provide long-term employment to the public. The public become wealthier and will be able to spend and pay taxes. However, the manufacturing industries face many problems to run their industry in a profitable manner. In a strong currency country, like U.S., the manufacturing cost is higher due to higher labor costs. The industries face tough competition from foreign companies. Hence, they are forced to stay competitive by taking cost cutting measures. To cut costs, they take following measures: outsource parts from those countries that make these products cheaply. In fact, the idea of outsourcing is to buy parts from those places where there is an expertise. but, nowadays, outsourcing is used as a means to cut costs only. (Corporate America and Outsourcing)

Among the foreign countries, Asian countries prove to be the best bet for U.S. manufacturers. Among Asian countries, China is the best country for outsourcing parts or to move manufacturing bases. China is slowly becoming the world's factory. China is able to pull huge investments from major manufacturers and due to its lower labor costs and population, is able to produce enormous volumes of goods. China is posing a deadly competition to manufacturers in other countries leading to closing down of shops in other countries and moving manufacturing bases to China. (Google answers - Economic development)

Ford motor company is a long-term auto manufacturer in U.S. And is 2nd largest automaker in the world after General Motors. Ford said that its moving to China is not a recent phenomenon, but they started this way back in 1913. China is also able to adapt to the needs of the world for its own growth and success. (China-into the fast lane) as of October 2003, Ford said it would invest over $1 billion in China to achieve seven-fold increase in output from its base at China. Ford's production joint venture in China is Chongging Changan Automobile Co Ltd. The Chief Executive Officer Bill Ford said that there exists a bright automotive future in China and they are participating in that. (Company in Action: Ford invests $1 billion in China)

The global trade, cheap labor in China, costly American labor and price competition induce the move to China. The difficulties in moving complete manufacturing base to China lies in tough labor agreements at U.S., quality of products and logistics involved in shifting. As the advantages overweigh the difficulties, there is a strong trend for this shift. Auto giants, like Ford, force their suppliers to match the price with that of China. But U.S. suppliers are finding it extremely difficult to match their prices with that of China. To overcome this situation, either they outsource from China or move their operations to China. Both the ways remove jobs out of America. Hence, loss of jobs occurs at U.S.. Over a period of time, even the manufacturers, like Ford, move their manufacturing bases to China. (Chain Reaction: Big Three's Outsourcing Plan: Make Parts Suppliers Do it) manufacturing company that is giving employment to a large population of a town closes its operations and shifts its operations to elsewhere; this leads to loss of jobs. The entire town gets affected. As the public are not earning, they cannot buy and cannot pay taxes. The whole economy comes to a standstill. Hence, moving manufacturing base weakens the economy. Ford closed its New Jersey plant after 55 years of its existence. This closing resulted in early retirement of about 300 workers. The balance 600 workers were transferred to other Ford plants. By this closing down, about 400 jobs were eliminated. Ford is shrinking American operations, but is investing in Asia. When American companies are moving out of U.S., foreign companies starts investing in U.S. And they sell more cars in U.S.. (Exporting America: Why Corporate Greed is Shipping American Jobs Overseas)