Despite Trump tweet, Ford says it won’t make hatchback in US

Citing Trump’s new tariffs, Ford on Aug. 31 said it was dropping plans to ship the Focus Active from China to America. (Reuters)
Updated 10 September 2018
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Despite Trump tweet, Ford says it won’t make hatchback in US

  • Citing Trump’s new tariffs, Ford on Aug. 31 said it was dropping plans to ship the Focus Active from China to America
  • Trump took to Twitter Sunday to declare victory and write: “This is just the beginning. This car can now be BUILT IN THE USA. and Ford will pay no tariffs!”

WASHINGTON: Ford won’t be moving production of a hatchback wagon to the United States from China — despite President Donald Trump’s claim Sunday that his taxes on Chinese imports mean the Focus Active can be built in America.
Citing Trump’s new tariffs, Ford on Aug. 31 said it was dropping plans to ship the Focus Active from China to America.
Trump took to Twitter Sunday to declare victory and write: “This is just the beginning. This car can now be BUILT IN THE USA. and Ford will pay no tariffs!”
But in a statement Sunday, Ford said “it would not be profitable to build the Focus Active in the US” given forecast yearly sales below 50,000.
For now, that means Ford simply won’t sell the vehicle in the United States. Kristin Dziczek of the Center for Automotive Research said that Ford can make Focuses “in many other plants around the world, so if they decided to continue to sell a Focus variant in the US market, there are several options other than building it in the United States.”
In April, Ford announced plans to stop making cars in the United States — except for the iconic Mustang — and to focus on more profitable SUVs. It stopped making Focus sedans at a Wayne, Michigan, plant in May. The plan, said industry analyst Ed Kim of AutoPacific, was to pare down the Focus lineup to Active wagons and import them from China.
“Without the tariffs, the business case was pretty solid for that model in the US market,” Kim said.
Demand for small cars in the US has been waning for years with relatively low gasoline prices and a shift from cars to SUVs and trucks.
If Ford sold fewer than 50,000 Focus Active wagons per year, it would run a US factory on only one shift per day, which isn’t cost-effective, Dziczek said. Automakers like to run plants on at least two shifts, and preferably three per day to cover the cost of building and equipping the factory, and to turn a profit.
Ford also wouldn’t want to spend millions on equipment to build the Focus Active here because at low sales volumes it wouldn’t get a good return on its investment, Dziczek said.
If sales were high enough to justify production at a US plant, the price of a compact vehicle isn’t high enough to cover the difference in wages here, she said.
“The margins are very slim,” Dziczek said. “Even if you had demand and volume, it’s still very difficult to build a small car in the US profitably, which is why you find very few of them here.”
In China, labor costs are about $8 per hour including benefits, but it’s more than $52 per hour in the US, according to Dziczek.
Ford, BMW, Mercedes and others export about 250,000 vehicles to China from the US each year, Dziczek said. Most of them are luxury cars and SUVs with higher profit margins that can cover higher US wages, she said.
For the Focus Active, the tariffs on Chinese vehicles changed everything. The United States on July 6 began imposing a 25 percent tax on $34 billion in Chinese imports, including motor vehicles. Last month, it added tariffs to another $16 billion in Chinese goods and is readying taxes on another $200 billion worth. China is retaliating with its own tariffs on US products.
The world’s two biggest economies are clashing over US allegations that China deploys predatory tactics — including outright cybertheft — to acquire technology from US companies and challenge American technological dominance.


Singapore Airlines finds premium economy a tougher sell on new non-stop US flights

Updated 15 November 2018
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Singapore Airlines finds premium economy a tougher sell on new non-stop US flights

  • The carrier last month resumed after five years the world’s longest commercial flight
  • It represents a major expansion in the US market for Singapore Airlines

SINGAPORE: Singapore Airlines is facing no problem selling business-class tickets on its ultra-long non-stop flights to the United States but is having to price premium economy seats very attractively, a senior executive said on Wednesday.
The carrier last month resumed after five years the world’s longest commercial flight, an almost 19-hour non-stop journey from Singapore to New York.
The airline ordered seven new ultra-long-range twin-engine Airbus SE A350-900ULRs fitted with just 67 business class and 94 premium economy seats for those flights and for non-stop services to Los Angeles and San Francisco. These flights have no economy class seats.
It represents a major expansion in the US market for Singapore Airlines and a test of whether the carrier can charge the 20 percent price premium that travel industry data shows is typical for ultra-long non-stop services due to their popularity with time-sensitive business travelers.
Singapore Airlines Executive Vice President Commercial Mak Swee Wah said there was existing demand for business class which he expected would continue to pick up.
For premium economy, however, he said some markets were not “entirely familiar” with the product, which offers more leg room and other amenities than economy class.
“I think we need to continue to stimulate and encourage the market to consider this product, initially with very attractive pricing, but eventually I think people will see that even at prices which we offer it is a good product to purchase because it is a very long flight,” he said at an analyst and media briefing.
His comments came after Singapore Airlines reported on Tuesday an 81 percent plunge in second-quarter net profit, hurt by higher fuel prices, lower airfares and non-cash losses at its part-owned Virgin Australia Holdings Ltd.
Yields, a proxy for ticket prices, fell 2.2 percent in the second quarter compared with a year earlier, failing to help offset the impact of a 24 percent rise in fuel prices.
Singapore Airlines is offering premium economy fares as low as S$1,698 ($1,230.17) return from Singapore to New York for weekday travel over part of the peak Christmas travel period, according to its website.
That is in line with economy class fares from premium rivals like Hong Kong’s Cathay Pacific Airways Ltd. and Dubai-based Emirates that require a stop and a longer travel time, according to a Reuters search on Expedia.
When it previously flew to New York and Los Angeles non-stop on four-engined A340-500 jets that used more fuel, it had initially offered both “executive economy” and business class but later switched to all business class. Those flights were abandoned in 2013 when high fuel prices made them uneconomic.
A Singapore Airlines spokesman said on Thursday that the airline constantly reviewed its cabin configurations.
“However, at this point we are confident we have the right balance with business class and premium economy class seating on our A350-900ULRs, and there are no plans to change it,” he said.