Tuesday, January 3, 2017

Ford Cuts Capacity

Ford has decided not to build a new $2 billion factory in Mexico. This is not merely a question of location but has more to do with the question of manufacturing capacity. The U.S. auto industry got burned nine years ago by building too much capacity for anticipated demand that never materialized. Now they are doing the same thing again — but the furloughs that cut across the industry starting last month are making them wonder if they have made a wrong turn. By not building too much unneeded capacity in 2006 and 2007, Ford weathered the crisis of 2008–2009 without the need for bankruptcy. The decision not to build a whole new facility this year will surely look like a smart decision by the time the year is over.

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