Friday, October 24, 2014
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Future of St. Paul's Ford plant on the line

Ford Motor Company plans to release its third quarter earnings report on Thursday and some automotive analysts think the company may also have something to say about future cost-cutting plans. Ford's labor agreement with the United Auto Workers prevents the company from closing the Twin Cities Assembly plant in St. Paul until 2007. The plant employs more than 2,000 workers. But there's speculation that Ford will announce plant closings. Experts disagree on whether the plant in St. Paul is a likely target for cutbacks.

St. Paul, Minn. — A spokeswoman at Ford's headquarters in Dearborn, Mich., says the Twin Cities assembly plant remains a part of the company's North American operations. But she declined to comment on Ford's future plans for the 80-year-old facility in St. Paul's Highland Park neighborhood.

Automotive experts say it's no secret, though, that the demand for new vehicles is not enough to sustain Ford's existing capacity in North America. Catherine Madden, an analyst with Global Insight of Lexington, Mass., says a restructuring at Ford is likely to involve plant closings over the next two or three years. And Madden says Ford is under pressure to say which plants might close.

"Without clarifying which assembly plants are necessary to be removed from the system, due to the severe overcapacity that they face, I think it weakens their turnaround plan and may weaken the faith that shareholders, customers, and even Ford employees have in the company," according to Madden.

Madden and other analysts say the Ford plants most likely to be closed are those in St. Louis and in the Detroit suburb of Wixom, each of which is operating well below capacity.

The Twin Cities plant gained a new lease on life several years ago when Ford consolidated production of its Ranger pickup trucks in St. Paul, closing a New Jersey operation that also built Rangers.

But Ranger sales fell 25 percent last year and are down another 22 percent so far this year. Erich Merkle, of the automotive consulting company IRN, says even if the St. Louis and Wixom plants are more vulnerable, the St. Paul plant is not immune.

"In fact, given Ford's current capacity and given where they're at in terms of sales and market share, I think Ford in the next year to year-and-a-half is looking at closing three to four plants. Therefore, I think, unfortunately, St. Paul would fit into that category," Merkle said.

Catherine Madden, with Global Insight, is more optimistic about the outlook for the Twin Cities plant. She expects Ford to announce plans for a new generation of the Ranger that would begin production in 2010. Madden also expects Ranger sales to stabilize. She says as competitors have redesigned their compact pickup models, they've turned them into bigger, more mid-sized trucks.

Madden says that may help Ford claim buyers looking for smaller, more affordable pickups "because the product -- the investment for it -- was made many years ago and the tooling has been used for so long, Ford can sell it at a very low price, a very competitive price. And that alone, I think, will help bring in the consumer to purchase the product," he said.

Handicapping the future of the St. Paul Ford plant is not a new pastime.

"I've been worried about the Ford plant for years," said Fred Zimmerman, a manufacturing expert at the University of St. Thomas in St. Paul. Zimmerman says the Twin Cities plant enjoys a reputation for high quality and low cost because it generates its own power from a hydroelectric plant on the Mississippi River.

On the other hand, it is smaller than newer plants and Zimmerman says its parts are delivered from 11 different locales, which pushes production costs up. Zimmerman says he's surprised that Minnesota policymakers have not done more to improve the long-term viability of the Ford plant by helping to develop local suppliers or offering to make other improvements.

"It's in Minnesota's best interests to keep that plant up to date because that's probably one of the greatest fonts of prosperity in all of Minnesota, the Ford plant," according to Zimmerman.

Zimmerman says if the plant does eventually close, it's site on St. Paul's riverfront could likely be converted to other uses relatively quickly. But he says replacing the 2,100 jobs the plant provides would take much longer.

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