(Updates share price in the final paragraph.)
Feb. 21 (Bloomberg) -- Ford Motor Co. said it will invest $200 million to make four-cylinder engines at an Ohio plant starting in late 2014 as the second-largest U.S. automaker equips an increasing number of models with smaller, more fuel- efficient powertrains.
Ford will add 450 jobs at the factory in Brook Park, Ohio, to build the 2-liter engine there, the company said in a statement. The Dearborn, Michigan-based automaker has been building the engine in Valencia, Spain. That factory will continue to build the engine for Ford European-built vehicles.
Chief Executive Officer Alan Mulally has revived Ford by overhauling its lineup to boost the fuel economy of models including the Taurus sedan and Explorer sport-utility vehicle. Adding U.S. output of smaller engines reduces Ford’s exposure to currency swings and helps it meet stricter emission standards. The United Auto Workers union also allows automakers to hire entry-level workers for less than more senior employees.
“It definitely makes sense to have local production, especially now with the lower UAW wages,” Mike Omotoso, an analyst for LMC Automotive, said in a telephone interview yesterday before Ford issued its statement. “The 2-liter turbo is close to the power of a V-6 with much better fuel economy.” Ford’s EcoBoost line of engines uses turbochargers to generate power similar to larger engines.
Automakers by 2016 will have to raise the average fuel economy of vehicle fleets sold in the U.S. to 35.5 miles (57.1 kilometers) per gallon. By 2025, carmakers will have to reach corporate average fuel economy, known as CAFE, of 54.5 mpg.
Ford produced about 215,000 vehicles in North America last year that were equipped with four-cylinder EcoBoost engines, according to LMC Automotive estimates. Output of those vehicles may surge 81 percent to 390,000 units in 2015, with the bulk the engines coming from the Ohio factory and some still coming from the Valencia plant, Omotoso said.
“Putting a four-cylinder engine in big cars like the Ford Taurus and even in SUVs like the Explorer helps both of those vehicles meet the standards,” said Omotoso, who is based in Troy, Michigan.
The company said today it expects to sell more than 500,000 U.S. vehicles this year with EcoBoost engines, up from 334,364 last year.
Ford’s decision to hire the hourly workers for its Ohio plant, about 14 miles southwest of Cleveland, combines with the company’s plan to add 2,200 salaried employees in the U.S. this year, the most in more than a decade.
Ford’s North American automotive employment increased to 80,000 at the end of 2012 from 75,000 a year earlier, according to a Feb. 19 regulatory filing. U.S. sales of cars and light trucks rose by 13 percent last year, the biggest annual increase since 1984, according to researcher Autodata Corp.
In Europe, Ford is retrenching to match production with slumping demand. Ford’s filing showed that automotive employment in that region slipped to 46,000 from 47,000. The company said in October that it planned to shutter three factories in Europe by the end of next year and cut 6,200 jobs in an effort to break even in the region by mid-decade.
Ford’s 2-liter EcoBoost engines are used in the company’s Ford Focus, Fusion, Escape, Explorer, Edge and Taurus as well as the new Lincoln MKZ sedan, according to the company. The automaker’s Ohio engine plant already produces the 3.5-liter V-6 EcoBoost used in the top-selling Ford F-150 pickup, the company’s website shows.
Ford shares fell 1.7 percent to $12.39 at the close in New York. They have slid 4.3 percent this year compared with a 5.3 percent gain for the Standard & Poor’s 500 Index.
--With assistance from Keith Naughton in New York. Editors: Bill Koenig, James Callan