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Old 01-31-2003, 06:51   #1 (permalink)
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Ford begins race to catch up to formidable competition in China

By ALYSHA WEBB | Automotive News

CHONGQING, China -- To the accompaniment of flamenco dancers and fireworks, a gold Fiesta subcompact rolled off the line at Ford Motor Co.'s assembly plant here last week to launch the U.S. automaker into China's red-hot passenger-vehicle market.

With Job 1 behind it, Ford must move fast to catch up to a fast-developing market that exploded in 2002 to an estimated 1.1 million light vehicles after years of ho-hum performance. But China's passenger-vehicle market, effectively created 20 years ago by Volkswagen, has become jammed with formidable competitors.

Besides Volkswagen, which still holds a commanding 41 percent share of the local market, the competition includes General Motors, which has a 150,000-unit plant in Shanghai and a claimed 10 percent of the market.

Looming even larger on the competitive horizon are Japan's Big 3 - Toyota, Nissan and Honda. The three Japanese automakers have announced major expansions here that will create more than 1 million units of additional capacity a year.

In the wings: Korean automakers Hyundai and Kia, awaiting final approval for plans to produce more than 500,000 cars a year.

In contrast, the Ford operation will turn out 20,000 Fiestas this year, rising to capacity of 50,000 next year. But the site has room to expand to 150,000 to 170,000 cars a year, Ford says.

The venture, Changan Ford, was established in April 2001. It is owned 50 percent by Ford, the maximum allowed for a foreign company under Chinese law, and 24 percent by the Changan Group. A publicly listed Changan subsidiary, Chongqing Changan Automobile Co., holds 26 percent. Another Ford venture in China has been turning out Transit vans with Jiangling Motor Corp. in Nanchang since December 1997.

David Thursfield, Ford's president of international operations and head of global purchasing, isn't concerned by the towering competition.

"We've probably come at the right time," Thursfield said at a press conference here. "We've hit the sweet spot of the market with the product we've got right now." Moreover, he said, Ford intends to expand its lineup and output rapidly as it races to catch up - both with its rivals and with China's surging demand.

"The China auto market could be in excess of 5 million units in the next three or four years," Thursfield said. "It could be No. 2 or No. 3 in the world in the not-too-distant future - we can't afford to overlook that."

The Fiesta is based on the European model produced in Spain - hence, the flamenco-flavored launch ceremony. But it has been tweaked to account for the differing tastes and needs of Chinese consumers.

To compensate for China's rougher roads, the suspension has been stiffened and its ride height increased. It will get the first automatic transmission ever offered in a Fiesta as an option. And the China model is a sedan; European models are all hatchbacks.

Priced from $10,725 to $15,435, depending on the engine and transmission, the Fiesta is being marketed to 25- to 35-year-old singles and newly married couples. The ad slogan, "Let's go to the party," uses Chinese characters for the first words, followed by the English word "party," widely understood here to mean a social gathering and not the Communist Party.

"We hope the slogan suggests the car is about a new optimism for the long-term," said Doug Molloy, international vice president of J. Walter Thompson, which came up with the campaign.

Ford aims to have 26 full-service dealerships operating in 18 cities nationwide by summer, with multiple dealers in Beijing, Shanghai, Shenzhen and Guangzhou. Those cities have the country's highest income levels.

Thursfield strongly hinted that Ford has other models in mind for Changan once production of the Fiesta is underway. "It's not unusual to have three models in one plant," he said. "This plant has a lot of similarities to Valencia, which started as a Fiesta plant 30 years ago. I used to run that plant in the '80s. Now it makes 450,000 units a year, 2,000 a day."

The Valencia plant builds three models -- the Ka, Fiesta and Focus.

The Mondeo mid-sized sedan, assembled in Taiwan by Ford affiliate Ford Lio Ho, is expected to be the next model for Changan. A V-6 Mondeo emblazoned with "Changan Ford" in Chinese symbols on the hood was on display at the plant last week.

"We will have new models out, potentially within a year," Thursfield said. "There is nothing wrong with going quickly. We need to be aggressive in the Asia-Pacific region, especially in China."
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