They're signs of the times in today's U.S. automotive market: a pair of pending mega-projects, one by the USA's Ford, the other by Japan's Toyota. Each will likely entail a multibillion-dollar investment. But there are differences here – big ones.
   On one hand, Ford – now using "Driving American Innovation" as its advertising tag line – may be set to soon announce a new US$1.4-billion assembly plant in Mexico. Undoubtedly, the U.S. automaker has started adding significant muscle to its Mexican manufacturing. Dogged by rampant speculation about its south-of-the-border expansion plans, Ford on June 16th confirmed that it will make major overhauls at all three of its Mexican production facilities.
   On the other hand, Toyota, Ford's Japanese rival, has targeted the U.S. for its latest North American expansion. On track to soon take the title of world's biggest automaker from General Motors, Toyota is planning a new American assembly plant that could cost as much as $2.5 billion.
   The Ford and Toyota projects are microcosms of the two firms' diverging directions across the U.S. manufacturing landscape.
   Ford, for example, announced in January that its "Way Forward" turnaround plan would include closing seven of its 18 North American assembly plants by 2008. Most of the shutdowns announced thus far are U.S. operations. By 2012, another seven North American plants will be padlocked as part of what Ford Chairman and CEO Bill Ford called "painful sacrifices to protect Ford's heritage and secure our future." The Way Forward only vaguely mentioned a single North America expansion: "A new low-cost manufacturing site is planned for the future."
   Toyota, in contrast, is gunning its U.S. growth engine at a pedal-to-the-metal pace. In addition to its current American site search, 13 of the company's 15 existing North American plants are in the U.S. Toyota later this year will bring another U.S. plant online in San Antonio, Texas, and in 2008 it's opening a new production facility in Woodstock, Ont.

Ford President of the Americas Mark Fields (left) initially characterized the leaked internal report as "speculation." Other executives said it was a wish list from Ford of Mexico President Louise Goeser (right). As recently as June 24, Ford Chairman and CEO Bill Ford, Jr., said no decision on Mexico had yet been made.

   Most analysts are predicting that Ford's Mexican plant will be announced before Toyota's U.S. facility. The American automaker's south-of-the-border deal, in fact, could be virtually done.
   Or at least that's the expansion scenario extensively outlined in a 28-page Ford internal report that leaked to Detroit-area newspapers on June 14th. Entitled "The Way Forward – Mexico," the document details a massive Mexican expansion: Ford and its suppliers over six years would invest $9.2 billion and add more than 100,000 jobs.
   Labeled "Ford SECRET" on every page, that report includes a description of a new $1.4-billion Mexican plant annually assembling 280,000 unidentified vehicles. Ford has downplayed the significance of the document, leaked by what the Pontiac, Mich.-based Oakland Press described as a "disgruntled" Ford employee.
   Ford President of the Americas Mark Fields on June 15th characterized the leaked report as "speculation, and I don't comment on speculation."
   Other company executives called the report a "wish list" compiled by Ford of Mexico President Louise Goeser. Goeser, they said, used the information in an April presentation to Ford Americas COO Anne Stevens.
   Two days after the leak, though, some major elements on that "wish list" became realities.
   Ford on June 16th confirmed that, as the leaked report indicated, it would upgrade its Mexican manufacturing portfolio. The makeovers include assembly plants in Cuautitlan and Hermosillo,

Ford now says that it will upgrade its assembly plants in Cuautitlan (above) and Hermosillo (below). Combined investment could total $1.9 billion, the company's leaked report suggested.

as well as an engine plant in Chihuahua.
   "Ford has been doing business in Mexico since 1925, and we were the first automaker ever in the country," said Fields. "We plan to upgrade our [Mexican] facilities for the future, just as we have been modernizing many of our facilities in the U.S. and Canada."
   Ford didn't provide any project investment or employment information. Those particulars, it said in a statement, "will be announced during the next several years as the improvements take place."
   Ford's leaked document, however, contains a lot of detail. Here, for example, is how it describes the two assembly plant makeovers:
   • The Hermosillo facility, which builds Ford Fusions, Mercury Milans and Lincoln Zephyrs, would get a $1-billion upgrade, the document suggests. Following that makeover, the facility would have an annual capacity of 305,000 vehicles, 90 percent more than its current 160,000 vehicles.
   • The Cuautitlan plant, which makes Ford Ikon small cars and Ford Super Duty pickups, would undergo a $900-million facelift, according to the document. After the overhaul, the facility's annual capacity would increase to 222,000 vehicles, 44 percent more than its current 156,000 units. Ford's decision to revamp the Cuautitlan operation surprised some industry observers, who'd expected that the aging, underutilized facility would be shuttered. Many analysts now expect that a large part of the plant will be torn down and rebuilt.
   Ford's leaked report doesn't contain any specific information on the Chihuahua engine plant upgrade. That document does, however, describe Ford investing $2.3 billion in Mexican engine and transmission manufacturing.
   The U.S. automaker didn't address the leaked investment figures. Ford did comment, however noncommittally, about the rumored Mexican plant. Mexico, it said while announcing its three upgrades, hadn't already won the new North American plant cited in the Way Forward plan.
   "We remain committed to a new low-cost manufacturing facility," Fields noted. "But we have made no decisions on where it will be located. The key to success will be high quality and low cost, and that certainly can be in the U.S., Canada or Mexico."
   Fields reemphasized that point at a June 21st press conference discussing the company's 2007 models. Ford, he noted, was now focusing on identifying "new ways" to make a North American facility more economical. "The criteria is low cost," Fields said.

Off-shore companies on southern soil: The U.S. South has become a hotbed for foreign automakers' non-union plants, including Mercedes' Vance, Ala., operation (above) and Nissan's Smyrna, Tenn., facility (below).

   Ford's denials, though, didn't dampen speculation about the automaker's next move vis-à-vis Mexico.
   A number of industry insiders now believe that Ford will, in fact, announce a new plant of some sort in Mexico in the near future. With costs far lower than in the U.S., a major new Mexican production operation would seem virtually essential to achieve a key Way Forward goal: making North American operations profitable by 2008. In 2005, Ford's North American unit lost $1.6 billion. But it would save $1.8 billion a year, according to the leaked document, by implementing all of the actions outlined in the Mexican expansion plan.
   If Ford is, indeed, planning a new Mexican plant, that raises another big question: When will the company go public with the project?
   The leaked internal document contains a Mexican expansion timetable – a comprehensively detailed chronology of "Next Steps."
   Many of the report's listed dates had, in fact, already passed before the document's June 14th leak. April 21st, for example, was the report's specified date for "expected final [Mexican] government proposal." Perhaps more significantly, the step labeled "final agreement with Mexican government" was scheduled for May 17th.
   Only one major timing issue was unresolved in the report's Mexican expansion timetable: the "corporate announcement." Instead of coming with a specific date,

"Bold Moves: The Future of Ford" is an online documentary series allowing the world to witness the inner workings of the automaker as it rebuilds its business in North America.

that step is designated "TBD" – to be determined.
   The internal document does, however, analyze that issue in a section called "Ford's Investment Announcement Scenarios." Two major events dominate that discussion: the United Autoworkers' June 11th–15th convention and Mexico's July 2nd presidential election. The report lays out three timing options for announcing a Mexican expansion: (1) before the UAW conference; (2) between the union convention and the Mexican election; and (3) after both events had passed.
   The best choice, the report indicated, was in between the UAW's conference and Mexico's election. "This timing [for the announcement] may work for both parties (Mexican government and Ford)," it noted.
   Whether that timing is still considered optimal is another matter. The internal report leaked out during the UAW's convention, embarrassing both the union and Ford. Both may now want a cool-down period for political fence-mending before any further action.
   Even so, Ford knows it can't wait too long before giving Wall Street some strong reasons to rally behind its stock. Many analysts have roundly criticized the Way Forward for being too much talk, too little action.
   "Ford's restructuring plan was widely anticipated, but was more vague and protracted than we expected, which is disappointing," Goldman Sachs analyst Robert Barry said in a note to investors. "We also see sizable North American share loss continuing, weighing on earnings and offsetting many restructuring benefits."
   Clarity is obviously in short supply in plumbing Ford's actual expansion intentions. That foggy picture could soon gain far greater focus, however. Ford and the UAW are reportedly working on reaching an accord, with a two-part compromise said to be in the works:
   On one hand, Ford would, as the leaked report outlined, announce a major new plant in Mexico. That facility would build subcompacts known as B-cars for a broad international market.
   Aside from low costs, a globally focused Mexican plant would provide significant aid for Ford's financially challenged North American arm. Mexico's trade pacts with large European and Latin American markets are more advantageous than those of the United States. And with the North American Free Trade Agreement, the automaker can cost-effectively import Mexican-made subcompacts into the U.S., aiming them at the entry-level market.
   The union, on the other hand, would grab its own big carrot in the bargain: a new U.S. plant making larger C-cars. Even more importantly for the UAW, Ford would site that American facility in a southern state. The union has long sought an organizational foothold in the South, a hotbed for non-unionized foreign auto plants. Staking out a southern beachhead may be a survival essential for the UAW, which is struggling with plummeting membership and widespread plant closings.

"These challenges aren't the kind that can be ridden out," UAW President Ron Gettelfinger told attendees at the union's recent Las Vegas convention.

   For Ford, such a southern U.S. plant could provide bottom-line benefits going well beyond the area's generally lower operating costs. Most importantly, that facility may not be constrained by traditional labor restrictions. The UAW is considering accepting a far more flexible operating agreement for the southern plant, some observers believe. With that concession, Ford could adopt cost-effective practices common in foreign automakers' U.S. plants: manufacturing teaming, for example, and broader job descriptions that stress cross-functionality.
   A more conciliatory UAW has become far more receptive in recent years to relaxing restrictions. Even with the Ford leak, leaders at the UAW's Las Vegas convention sounded unusually cooperative.
   "Like it or not, these challenges aren't the kind that can be ridden out," UAW President Ron Gettelfinger said after describing the U.S. manufacturing environment. "They demand new and farsighted solutions, and we must be an integral part of developing those solutions," said Gettelfinger, who was elected to a second four-year term in Las Vegas.
   Such a Ford-UAW tradeoff could give both parties another boost: Each could point to the savings-focused southern U.S. operation as the North American plant that the Way Forward envisioned.
   Meanwhile, the clock is ticking on a major event that could affect any Mexican expansion decision. Mexico goes to the polls Sunday to pick a new president.
   Ostensibly, the two leading candidates are a study in contrasts.

Populist Andres Manuel Lopez Obrador (left) and conservative Felipe Calderon (right) face off in Mexico's July 2nd presidential election.

The National Action Party's Felipe Calderon would likely continue the conservative, pro-U.S. policies of the outgoing Vicente Fox. Democratic Revolutionary Party candidate Andres Manuel Lopez Obrador, a populist known for hard leftist leanings, is less predictable.
   Ford, however, could decide to let the election pass by before making another Mexican move. Adopting that timing, the leaked report noted, would "reduce risks of confrontation with [the] new government." In addition, Ford may decide that neither candidate would risk making major changes in the nation's business climate, given the strength of U.S.-Mexican economic and political ties.
   Yet another timing factor may be in play: The U.S. automaker may've finalized a deal with the current Mexican government. In an environment shrouded by speculation, other sources inside Ford are indicating that Mexico's government has signed off on a subsidy package. The value of those incentives is reportedly between $500 million and $1.4 billion. That aid, though, is specifically for a new production plant, the sources said. Ford, they contended, hasn't negotiated with the Fox administration on the other actions described in the leaked document.
   Toyota's expansion project contrasts starkly with its U.S. rival's. By and large, the Japanese automaker's site search has remained under the radar of public perception.

San Antonio could be a major contender for any Toyota expansion in Texas. The automaker will soon open a plant there (pictured left during construction), and that site still has a lot of open acreage. The San Antonio facility will have about the same production capacity as Toyota's Georgetown, Ky., operation (pictured right) did when it opened in 1988. The Kentucky plant's capacity has since increased by 300 percent.

Guesswork is about the best one can do in fathoming specifics.
   Toyota is apparently looking for a new assembly plant site in the eastern half of the U.S. As many as 30 locations in 20 states may be in the early stages of the hunt. Toyota has reportedly demonstrated interest in sites in Arkansas, Indiana, North Carolina, Ohio, Tennessee and Virginia. Sources who've briefly discussed the project with the Japanese automaker describe an operation that will cost between $500 million and $2.5 billion, employing almost 2,000 workers on a site covering at least 1,000 acres (400 hectares).
   Toyota has downplayed the significance of its recent site tours. Such visits are common, the automaker has said, when the company is invited by government officials.
   Toyota may also have yet another U.S. expansion brewing. Company executives have indicated that the automaker might enlarge its manufacturing capacity in Texas.
   If Toyota is looking at Texas, San Antonio is sure to be a major contender. The automaker's new factory there will soon begin annually assembling 150,000 full-size Tundra pickups a year. The San Antonio plant site still has a lot of open acreage available. And Toyota has a history of rapidly ramping up production at its U.S. plant.
   Part of the American competition between Ford and Toyota is playing out in the public relations arena.
   Toyota, for example, is emphasizing its large and growing U.S. presence through magazine ads and billboards. The company is also touting the rapid increase in domestic content in its American-made vehicles. Toyota is further Americanizing itself by getting into NASCAR. The company will run a souped-up Camry in the 2007 Nextel Cup stock car series.
   Ford counters that there's only one key question: total jobs created.

Fighting the PR war: Toyota is Americanizing itself by entering a hopped-up Camry (above) in NASCAR, while Ford is funding the Level Field Institute, which urges U.S. consumers to buy from the Big Three.

   As Fields said in a June 14th speech to the U.S. Chamber of Commerce in Washington, D.C., "Taken together, GM, Ford and DaimlerChrysler directly employ about 350,000 [American] autoworkers – eight out of 10 workers in the industry. When you add in all the jobs they support, whether it's suppliers or accountants, that number jumps to 4.5 million U.S. jobs …
   "When it comes to the economic benefits to American society, all cars are not created equal," Fields emphasized. "If we think we can replace lost sales of domestic autos with rising sales of foreign imports, or even domestically built foreign cars, and suffer no significant economic loss, we are badly mistaken."
   For Ford, though, the timing of Fields' speech wasn't fortuitous. The next day, the American automaker's internal report leaked out, including its description of a Mexican plant exporting into the U.S.
   Now we'll see how much of Ford's new manufacturing, if any, is really headed to Mexico. ©2006 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.