Ford Motor Company's (F +4.06%) big bet on trucks and SUVs just got bigger: The Blue Oval announced that it is investing $1 billion to overhaul two Chicago factories and hiring 500 new workers to make -- you guessed it -- more SUVs.
It's a significant move for a couple of reasons, not least that Ford just happens to be announcing 500 new jobs while rival General Motors (GM +3.35%) is in the midst of laying off thousands of workers in the U.S. and Canada.
Here's what we know.
What Ford said
Ford said that it will spend $1 billion to overhaul its Chicago Assembly and Chicago Stamping plants to build the all-new Lincoln Aviator, Ford Explorer, and Ford Police Utility, a police-car version of the Explorer. The factories are expected to begin production of the vehicles this summer.
Workers at Ford's Chicago Assembly Plant are training to build the all-new 2020 Explorer. The new Explorer is expected to go into production this summer. Image source: Ford Motor Company.
The funds will pay for new tooling, as well as major renovations at both plants. Chicago Stamping, which will make body panels for the new SUVs, will get new precision technologies as well as extensive new tooling. Chicago Assembly, which will assemble the vehicles, will get a new state of the art "paint shop" and major changes in other sections of the plant.
Ford noted that both factories will also get upgrades intended to improve workers' experiences, including better lighting, cafeteria updates, and more secure parking lots.
The two factories together employ about 5,300 workers now; Ford will add 500 more to support increased output when the new SUVs begin production.
Is this important to Ford investors?
In some ways, this is an unsurprising, routine announcement: Ford has new SUVs coming and the factory will need new tooling to make them. But there are two notable things about this piece of news.
First, this announcement means the end of the big Ford Taurus sedan in the United States, at least for now. These factories currently manufacture the Taurus alongside the outgoing Ford Explorer, but there's no all-new Taurus coming to the U.S. market. If you had any doubts that Ford is serious about eliminating sedans from its North American product portfolio, erase them.
Second, and probably more importantly, this announcement can be understood as part of the long dance leading up to new-contract negotiations between the Detroit automakers and the United Auto Workers (UAW) later this year -- at a moment when the automakers, including Ford, are feeling the need to cut costs.
Ford clearly wants to win some points with its hourly workers. It made a point of inviting senior UAW officials to the announcement in Chicago on Thursday and emphasizing that it will upgrade lighting and cafeterias to make things a bit better for the plants' workers.
Check out the latest Ford earnings call transcript.
A counterpoint to job cuts elsewhere
Earlier this week, Ford announced that it will eliminate about 1,000 jobs at its Flat Rock Assembly Plant in Michigan, which builds the Lincoln Continental and Ford Mustang. Full-time workers will be offered jobs elsewhere, most at a transmission factory 30 miles away, but the total includes about 440 contract workers who aren't guaranteed another job with Ford.
This announcement may have been timed to function as something of an olive branch. Ford wants the UAW (and investors) to know that while it's cutting production of its sedans, it is serious about expanding North American production of other vehicles including new SUVs -- and that means plenty of jobs.
