Re: Asia:Ford to invest up to $1.5 billion in China expansion
Ford to construct 2 plants to build Chinese market
October 18, 2003
FREE PRESS STAFF and NEWS SERVICES
BEIJING -- In a move underscoring the emergence of China's auto industry, Ford Motor Co. announced Friday it would spend more than $1 billion to increase its production in China from the current 20,000 units to 150,000.
Ford and its Changan Automobile Group partner said they would build a second manufacturing plant along with a new engine plant. Details are to be announced later.
"I can think of no better way to celebrate our centennial year than by announcing plans for expansion," Ford Chairman and CEO Bill Ford said. "The automotive future of China is very bright, and we are participating fully in its growth."
In January 2003, Ford's plant in the western city of Chongqing launched the Ford Fiesta, Ford's first domestically produced car in China. In May, a second Ford passenger car model, the Ford Mondeo, was introduced.
"The rapid growth of the Chinese economy can be attributed directly to the forward-looking policies of the government and to the increasing well-being of the Chinese consumer," Ford said. "I came to Asia to see directly for myself the dynamic growth that is occurring.
"China, at present the second-largest automotive market in Asia and potentially the largest in the world within the next generation, is the logical place to conclude what has been for me a most successful trip."
Ford was a relatively late arrival in China, beginning auto production in 1997, and is trying to catch up with U.S., German and Japanese rivals.
Germany's Volkswagen AG makes 880,000 vehicles a year in China and recently announced a multibillion-dollar expansion to double that in coming years. General Motors Corp. recently stepped up its manufacturing capacity in China to 200,000 cars per year, the Asian Wall Street Journal reports.
"They need to expand to catch up with other automakers," Mei Luwu, an analyst at Penhua Fund Management in the southern Chinese city of Shenzhen, told Bloomberg News. "But they'd better bring in more up-to-date models, as General Motors have done, instead of introducing old ones."
Ford's announcement comes as the Chinese government reported its economy, the world's sixth-largest, grew 9.1 percent in the third quarter, a faster pace than its 6.7-percent expansion in the second quarter.
Car sales in China smashed the million-unit barrier last year and are expected to rise to some two million sedans this year. But analysts warn that too much expansion could cause a serious glut that will erode margins.
"Every carmaker is expanding in China because the car market grows at an average 50 percent every month," said Gu Qun, who tracks carmakers at Automotive Resources Asia Ltd., an industry con******t, in Shanghai. "It makes sense to expand."
General Motors said in July it will share a 2-billion yuan ($242-million) investment with its partner Shanghai Automotive Industry Corp. to quadruple production to 400,000 units by 2007. Volkswagen, which counts China as its biggest sales market after Germany, said in July it will invest 6 billion euros ($6.8 billion) in the next five years to double production to 1.6 million units.
Toyota Motor Corp. has set aside 45 billion yen ($381 million) to expand production in China to 400,000 units by 2010 and wants to capture 10 percent of the country's car market by then.
Ford is a 50-50 partner with Changan in their joint venture. Ford also owns a 30-percent stake in Jianling Motor Corp. in the southern province of Jiangxi, through which it has produced the Transit delivery van since 1997.
Ford also has six smaller joint ventures producing auto parts and components. Its financing company, Ford Credit,has opened an office to prepare for the opening of the auto financing business to foreign companies.
During an earlier visit to Thailand, Ford announced the company and its Japanese affiliate Mazda Motor Corp. would invest $540 million in their joint venture plant in Thailand.
That would expand the capacity of its joint venture plant, Auto Alliance Thailand, to 200,000 vehicles per year from the current 135,000.
Bill Ford, whose company posted a smaller-than-expected quarterly net loss of a cent a share Thursday, said he intends to make and sell a full range of luxury cars in China but declined to give a timeframe. Its brands include Lincoln, Mercury, Land Rover, Volvo, Jaguar and Aston Martin.
"Of course, trees don't grow to the sky, and someday the growth will actually start to slow down, but I do think this is going to be for a long time a very dynamic market," Ford said.
As a U.S.-based investor in China, Ford said exchange rate stability is important. American business and labor groups have asked the Bush administration to pressure China into revaluing its yuan currency, also known as the renminbi.
"We deal with exchange rates all around the world," he said. "The one thing that really hurts us is big swings in currencies."
My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.
My next Ford.....