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Ford Boosts Fusion Production As Demand Surges
Posted by: Live investor (IP Logged)
Date: August 31, 2013 06:10PM

The second largest US automaker Ford (NYSE: F) has started the production of the Ford Fusion sedan on Thursday for the first time at the Flat Rock Assembly Plant. Earlier, Fusions were manufactured at the carmaker’s Mexico plant. The Detroit giant is finally addressing the shortage of Fusion by extending production to its Detroit plant as the carmaker’s inventory fell short to cater to the robust demand.

Joe Hinrichs President of the American business of the automaker is pretty excited as the company is ‘getting the capacity set up to meet demand’ as the US automobile sector rebounds. As the company is augmenting the capacity to make available more Fusions, the auto giant is also hiring more to be able to attain the required production.

Preparing to augment capacity

The Detroit maker has spent $555 million at its Flat Rock plant to add flexible body shops which would enable the facility to produce multiple vehicle types on one assembly line only. The assembly plant has been completely transformed to facilitate the production of Fusion. These upgrades will help the carmaker build quality vehicles and beat competing models.

The Fusion is challenging Toyota’s (NYSE: TM) Camry which is the economy’s top selling sedan for the past 11 years. Another Japanese automaker Honda (NYSE: HMC) has also done exceptionally well in the US market with its high selling Accord. The sales momentum in the US with the recovering housing sector and strengthening consumer confidence led Ford to get set with sufficient inventory so that its sales doesn’t get adversely affected due to inventory shortage.

Ford’s Hermosillo plant at Mexico has an annual capacity of producing 350,000 Fusions and Lincoln MKZ. The Flat Rock factory will help the company to make 100,000 more Fusions to meet the enormous demand. This is helping the US automaker’s Fusion production level come closer to Toyota Camry and Honda Accord.

As per Kelly Blue Book, the average price at which the Fusion was sold this year through July increased 5.8% to $26,343, secondly only to Volkswagen’s Passat. Ford is selling Fusion at a premium of $1,176 over the segment average while $2,378 more than Toyota Camry. In fact Camry’s average price tumbled 2% to $23,965.

Hiring workforce

In addition, Ford has added 1,400 new workers to the plant which is needed to make cars in two shifts. The plant now has a total workforce of 3,300 who work on two shifts to make Fusion and Mustang on the same assembly line. The Blue Oval expects to make 12,000 hourly jobs in the economy by 2015. Of this, the company has already achieved 75% after adding 1,400 in the Flat Rock facility.

Hinrichs hasn’t disclosed if its workforce to build Fusion is cheaper in the Michigan assembly plant or in the Mexico unit. Mexico is usually not as costly as Michigan, but it needs to be noted that the carmaker has hired second tier workers who are paid much less.

Good Going

There is another good news for the US auto giant. Demand for Ford cars has been pretty encouraging for the company in its California market where light vehicle sales climbed 18% in the first half of the year.

Fusion is undoubtedly a masterpiece out of most competitive Detroit cars in the mid sized sedan segment. Even General Motors (NYSE: GM) Chevrolet Impala experienced positive feedback and won the top rating from Consumer Reports last month. The Detroit players are picking up in the mid sized sedan segment to give tougher competition to their Japanese counterparts. To this a Toyota Director Mark Hogan said ‘Toyota loves the competition and we’ll keep getting better and better, too.’

Looking ahead

Ford is building its plant at Flat Rock Assembly facility to adjust to the market demand in a better way. The automaker is better equipped to quickly respond to the dealer’s order as the same assembly plant can build different models. The 2013 redesigned Fusion, which was launched last fall, has been well liked by buyers. The carmaker sold as many as 241,263 units of the sedan in 2012 and this year sales is even better. The company Fusion sales increased 13% to 181,000 through July this year.

‘Fusion has exceeded all of our expectations, with demand outstripping supply’, said Hinrichs. It would be interesting to see how Fusion sales increase and fight rival cars Camry and Accord during the year.

Stocks Discussed: F, GM, HMC, TM,
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