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Due to tepid demand within the U.S. small car market Ford Motor Company recently announced their Focus compact would cease production at its Michigan Assembly Plant in 2018. With the factory suffering from underutilization, the Blue Oval may possibly move future production to another country. Formal labor talks are scheduled to commence between the automaker and the United Auto Workers union on July 23, yet there is speculation the announcement is merely a negotiating tactic employed by Ford to improve its bargaining position. Time will tell whether the announcement is a legitimate factor or not, but a look into the Focus’ manufacturing and market performance suggests the company has concerns ― especially with regards to opportunity cost ― when deciding to produce its compact car in the United States or elsewhere.

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Moving production between assembly plants is by no means a frivolous decision. There are significant financial and economic consequences that can easily affect an automaker’s business. For those reasons alone, it is unlikely Ford would lightheartedly mention moving Focus production merely to gain an edge on the UAW. Over the past three calendar years, the capacity utilization at Michigan Assembly has averaged 75%; however, the majority of Ford’s manufacturing plants operated at 85% or better in 2014. With so much lost opportunity relative to the rest of the company’s plants, it is understandable why Ford would be interested in producing potentially a higher volume, higher margin model at Michigan Assembly.

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A lagging sales demand and high inventory levels are indicative factors a manufacturing facility is mismatched for the market it serves. A comparison of days’ supply between the Ford Focus and its three main competitors ― the Chevrolet Cruze, Honda Civic and Toyota Corolla ― shows how the Blue Oval’s compact car has consistently been among the bottom two from a sales rate perspective over the past year. Ford cannot afford to continue producing the Focus at Michigan Assembly at its current volume while the model sits on dealer lots for longer periods than most of its competition. With the compact segment as competitive as it is, and with margins as thin as they are something has got to give.

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In order to help dealers move the Focus off their retail lots, Ford has been using incentive spending as one of their tools of choice. Between June 2014 and June 2015, the weighted average incentive spending per unit for the Ford Focus was $2,436, which was second-highest to the Chevrolet Cruze’s $2,701. Meanwhile, the Honda Civic and Toyota Corolla offered much less in incentives per unit at only $1,788 and $1,513, respectively. Although the Ford Focus is a very competitive model from a product quality standpoint, its performance is clearly suffering in multiple areas, the last of which is value retention. With a surplus of inventory and high incentive spending, used vehicle retention runs risk of taking a hit. With the Focus, that is precisely the case.

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Using the average from the past three months, the one-year retention for the Ford Focus is relatively low at 57.8%. That figure is only a slight 0.1-percentage point higher than the Chevrolet Cruze. Comparatively, the segment average is a much loftier 67.2%, while both the Toyota Corolla and Honda Civic are even better with retention figures above 70%. Taking into consideration how 17% of Focus sales in 2014 came from personal leases, it is clear how low-value retention is negatively affecting Ford’s business: Its Japanese competitiors are able to offer much smaller lease payments as a result of their stellar retention rates. Also, from a marketing perspective, the Focus fights an uphill battle as prospective buyers can identify a greater cost of ownership versus most of the alternatives in the marketplace.

Ford has accomplished many victories over the last several years and is now a much more competitive automaker with a very solid product lineup. The Focus is an example of an improved product that is arguably on par ― in many ways ― with the best offerings in its segment. Consequently, rumors of the Focus’ departure from its Michigan Assembly plant can seem overblown at first since it’s somewhat hard to believe the vehicle would be underperforming to such an extent. However, after looking at all of the data, it is evident the automaker is not full of hot air. The Blue Oval genuinely has it in its best interest to move Focus production and better utilize its domestic manufacturing facilities. If you are looking for a silver lining to this development, a recent model year Focus can be purchased on the used car market at a fantastic value. As they say, “One man’s misery is another man’s fortune.”