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JAPAN: Ford Brazil eyes doubled exports
Ford is planning to double exports from Brazil as it attempts to turn round its loss-making South American business without resorting to factory closures, the Financial Times reported, according to Dow Jones.
The news agency said the FT reported that the company is studying plans to sell its Ecosport small off-roader outside the region, as well as increasing exports to Mexico, where the vehicle has proved a surprise hit. It also wants to double exports to close to 40% of production, which could reach 260,000 in Brazil this year, according to the reports.
Ford do Brasil introduced the EcoSport compact SUV last February. It was the second model from the company's so-called Amazon Project, a complete range of models based on the recently redesigned European Fiesta subcompact.
Though based on the Fiesta, the EcoSport is not, however, a version of the European-made Fusion, a higher-riding 'tall roof' Fiesta derivative that has not sold well since launch.
"[The EcoSport] has a different design, powertrain and interior compared with the Fusion," Ford do Brasil vice-president of design Luc de Ferran, said at the launch. Compared with the Fusion, the EcoSport has a more aggressive and stronger look and is 21cm longer and 12cm higher than the Fusion, with 16-inch wheels.
The compact SUV has two Brazilian-made engines - a one-litre supercharged Zetec Rocam and 1.6-litre eight-valve units - and is also offered with an imported Ford Duratec two-litre 16-valve engine. For export, the EcoSport can also be fitted with a Peugeot 1.4-litre turbo-diesel engine, from Ford and PSA's diesel engine development joint venture which supplies a similar motor for the European Fiesta.
Ford initially introduced the EcoSport in Brazil with front wheel drive but all wheel drive versions are expected at the end of the year.
The EcoSport is produced in Ford's Camaçari plant, in Bahia state, built especially to produce the Amazon Project models. In February, Ford said it expected to produce 55,000 EcoSports this year, and sell about 30,000 in the Brazili, while exporting the remainder to other South American markets.
Dow Jones on Monday said that Ford recently began a ‘final’ plan to plug losses in South America by exporting its way out of difficulty, after the region lost $US1 billion in the past two years. Its strategy contrasts with rivals in the troubled Brazilian market who have been laying off workers and extending holidays, the news agency noted.
"We've got the proven ability to produce a product at a very competitive price in Brazil," Ford said, according to the FT.
Dow Jones said the markets Ford is thought to be studying include Europe, Canada, Australia, Japan and emerging markets in Asia, as well as more vehicles to satisfy demand in Mexico.
It would not ship vehicles to the US, where it is in the middle of difficult talks with its union about job cuts and factory closures, the report added.
Dow Jones said Ford's Sao Bernado plant is running on only one shift - half the norm - while Bahia is on two-thirds of maximum capacity, producing 160,000 Ecosports and Fiestas a year.
Exporting to developed countries will require expensive modifications to the design of the Ecosport to ensure it fulfills local safety regulations, the report added.
But Dow Jones said senior Ford executives believe Brazil could provide the company with a low-cost production base to compete with manufacturers in South Korea, which are currently gaining share with low-cost basic vehicles in many markets.
According to Dow Jones, Ford lost $69 million before tax in South America in the second quarter, most of it from its Brazilian operations. The losses were a third of the same period a year before, but the company said most of the improvement was due to the weaker dollar, as well as slightly higher sales.
However, Dow Jones added, under Ford’s accounting system, exports to Mexico are not included in the result, and the region is understood to have come close to break-even when they are included.
Dow Jones said other car makers are losing significant sums in Brazil after investing heavily over the past decade. Car sales have dropped despite an estimated $30 billion being poured into new factories and capacity of 3.2 million vehicles is more than double last year's sales of 1.5 million, with this year looking as though it will be worse.
Last month, Dow Jones noted, Volkswagen announced plans to lay off one in six of its 25,000 employees in the country as it attempted to get to grips with the cost of its half-empty factories.
Last week, according to other reports, VW’s Brazilian workers agreed to switch to a four-day work week, from five, to avert the layoffs.