F Ford Motor Company

By Mike Colias 

Ford Motor Co. is increasing its bet on electric cars, saying Wednesday it will convert a second North American plant to build plug-in models even as demand for the technology remains weak in the U.S.

Ford plans to overhaul its assembly plant near Detroit in Flat Rock, Mich., to start production in 2023, part of a four-year, $11 billion plan to expand its lineup of electric cars globally. The company also plans to build electric cars in Mexico for the U.S. market, starting with a sporty sport-utility vehicle scheduled to go on sale next year.

The Dearborn, Mich., car maker had previously planned to spend nearly $900 million to retool the plant for self-driving cars, but now says it will build electric vehicles there instead for roughly the same investment. Ford plans to also build a redesigned Mustang sports car at the same location.

The company will shift the driverless-car production to a separate undisclosed location, spending $50 million to get it ready to produce vehicles beginning in 2021. The company's timeline to deploy self-driving cars and its volume targets haven't changed, Ford's global operations chief Joe Hinrichs said in an interview.

This latest investment comes as the Detroit auto makers prepare for contract talks this summer with the United Auto Workers union for new four-year labor agreements. Securing new factory work and jobs is a priority for the union, which represents more than 150,000 blue-collar workers at Ford, General Motors Co. and Fiat Chrysler Automobiles NV, and the companies often use it as a bargaining chip at the negotiating table.

Rival GM has come under fire from President Donald Trump for its decision to close four plants in the U.S., part of a restructuring expected to shed thousands of workers. GM has cited the need to invest more in future technologies like electric and autonomous vehicles as a primary reason for the cuts.

Car companies are pivoting to electric vehicles despite uncertainty over consumer demand. U.S. sales of electric and plug-in hybrid cars surged 81% last year to about 360,000 vehicles -- driven mostly by a big increase for Tesla Inc. products -- but electrics still accounted for just 2% of overall sales, according to research site InsideEVs.com.

Mr. Hinrichs said the company's outlook for electric-car sales has improved, partly because its research suggests younger buyers are more open to the technology. He said Ford must stay flexible to respond to demand that will be influenced by many factors, including gas prices, government incentives and future regulations on fuel economy and tailpipe emissions.

"We're bullish on battery-electric vehicles long term," Mr. Hinrichs said in an interview. "We're setting ourselves up to be able to support the demand as it comes."

Ford said the investment would add a second shift of about 900 workers to the Michigan factory, which also produces the Mustang sports car and Lincoln Continental sedan.

Mark Wakefield, head of consulting firm AlixPartners LLP's automotive practice, said auto makers risk missing out on growth if they don't spend money now to develop electric-vehicle portfolios. But they will need to add production capacity in small chunks that will allow them to adjust without overspending as the uncertain market unfolds, he said.

"Everyone believes the train is going this way, so you need to have some capacity," Mr. Wakefield said.

Auto makers have earmarked around $250 billion globally through 2023 to develop and build some 200 new electric models, an AlixPartners study last year found.

Aside from Tesla, electric-vehicle sales in the U.S. have struggled to take off over the last decade as buyers largely shunned the small sedans and hatchback cars that companies offered. To spark demand, auto makers are developing electric SUVs, sports cars and other vehicles in categories that are more popular among consumers.

Ford has said it could someday offer electric versions of its most popular nameplates, including the Mustang and F-150 pickup truck.

Write to Mike Colias at Mike.Colias@wsj.com

(END) Dow Jones Newswires

March 20, 2019 15:03 ET (19:03 GMT)

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