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S.America:Brazil engineers turnround for Ford

Brazil engineers turnround for Ford
By Raymond Colitt in Sao Paolo
Financial Times

When Ford and its partners began construction of a $1.9bn assembly plant in Brazil's remote north-eastern town of Camaçari at the end of the last century, critics derided the project as a risky adventure.

The green-field site was little more than a bug-infested swamp and the town lacked a trained workforce. South America's auto industry was steeped in crisis and Ford was losing bundles of cash.

Today, the Camaçari plant is churning out vehicles around the clock, moving toward full capacity of 250,000 units a year. With low costs and international quality certification, it has even become a regional export hub.

The success of Ford's Camaçari plant has been instrumental in helping the US carmaker turn the page on a long, dark chapter of its South American presence.

"We reported positive results in South America for the first time in a long time and that is the direct result of this plant," says David Breedlove, director of product development for Ford South America.

In the first half of the year Ford reported a pre-tax profit of $37m for its South American operation, the bulk of which was in Brazil. It was the first positive result in a decade. Under Ford's accounting system, the results do not include exports.

The company had not been profitable on an annual basis in South America since the dissolution of a joint venture with Volkswagen of Germany there in 1994. In the three years to the end of 2003 Ford had lost $1.26bn before taxes in the region, dragging down its global results and share price.

Two years ago, Bill Ford, chief executive, made clear just what was at stake in Camaçari. "If that plant works, I think we have a viable business plan for South America. If it doesn't work, then I suspect we won't have one more 'final plan'."

The Camaçari plant was somewhat of a pioneer in the global auto industry with its in-house suppliers and a flexible assembly line able to produce different models alternately.

Its "just in sequence" and "just in time" parts delivery, which reduces inventory, packaging, and transport costs, has been used a model for Ford plants elsewhere.

Part of Ford's comeback is due to a more stable macroeconomic environment and a recovery in overall demand in Brazil that benefited the industry as a whole.

Yet Ford grew above the industry average, increasing its market share to 11.4 per cent last year, up from 9.6 per cent in 2002 and 7.9 per cent in 2001. "The figures speak for themselves, we are on the road to recovery," says Rogelio Golfarb, director of corporate communications.

In addition to new products and the Camaçari plant, "restructuring of the distribution network contributed to above-average market share growth", says Antonio Maciel Neto, president of Ford South America.

Sales outlets were refurbished and relocated. "In some cases we had simply been on the wrong side of the road," says Mr Golfarb.

Another key element to Ford's recovery has been its focus on "local content" - a strategy Mr Maciel was entrusted with by headquarters when he was hired in 1999.

Some observers argue it has been the local design team that has allowed the company to produce cars "more in tune" with consumer preferences in the regional market. There are now 780 employees in product development, making Brazil the company's third-largest design centre worldwide.

Among the five models partially or totally designed locally is the EcoSport. This small off-roader, designed specifically for Latin American road conditions, driving-style, and lower average income, has had surprising success in the region - particularly in Mexico, Argentina, and Venezuela.

The EcoSport accounts for nearly 40 per cent of Ford's total exports from Brazil, which rose by 22 per cent in 2002 and 44 per cent in2003 to 84,773 units worth $790m.

Foreign sales continued to grow by 55 per cent in the first seven months of this year and Ford is among the top-10 Brazilian exporters.

The Camaçari plant accounts for three-quarters of exports and from next January will begin exporting the New Fiesta and the EcoSport to Central America.

"Local design has been the key to success," says Mr Breedlove. "We used to copy US models and then we recognised the need to focus on the South American market."

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.....
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