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Ford cements China ties, sees return to profit

Ford cements China ties, sees return to profit
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First Published: Fri, Sep 25 2009. 07 34 PM IST
Updated: Fri, Sep 25 2009. 07 34 PM IST
Chongqing/Shanghai: Ford Motor Co said it expects to return to the black in 2011, as it expanded ties with the fast-growing and lucrative China market with plans to build a new $490 million plant there.
The US automaker, which competes with General Motors and others globally, produces the Focus, Mondeo and other sedan models in China in a tie-up with Chongqing Changan Automobile Co and Japan’s Mazda Motor.
The plant, to be based in the southwestern city of Chongqing, will have an initial annual production capacity of 150,000 units, increasing annual capacity at Ford’s joint venture plants to 600,000 by 2012, according to a joint venture statement on Friday.
The 3.34 billion yuan Chongqing plant marks the latest connection for Ford in the country, which surpassed the United States in January to become the world’s biggest automobile market.
When asked if Ford can return to profitability in 2011, CEO Alan Mulally, attending a ground-breaking ceremony for the new plant, told Reuters: “Absolutely, we are on plan.”
He said Ford expects to have around 16% market share in the US market in 2009, where it expects industry-wide sales of up to 11 million vehicles for the full year.
“We think that the market is probably going to be about 10.5 to 11 million units (in the United States). We are around 16 percent of market share,” Mulally said.
Ford posted about $30 billion in net losses from 2006 and 2008 and has been restructuring its operations in the past four years, including job cuts, plant closure and sales of several brands from its former luxury division.
In July, it booked a $2.3 billion quarterly net profit, mainly due to gains from a $10 billion debt reduction plan, and said it was on track to at least break even in 2011.
China market in spotlight
Ford, the only Detroit automaker that has steered clear of emergency federal funding and bankruptcy, is a relatively late comer to China, where GM and Volkswagen AG lead.
The new plant in China will make Ford’s next-generation Focus sedan when it starts operation in 2012, according to Ford and Changan executives.
Changan Ford Mazda, Ford’s China car venture aims to have 5% of auto market in the country by 2014, up from less than 3% currently, Zou Wenchao, executive vice president of the venture told reporters.
“Ford has been talking a rather prudent approach in China over the past years. But the new car assembly plant is obvious a sign that it is speeding up expansion in a market that is too important to miss,” said Huang Zherui, an analyst with CSM Worldwide, a global consultancy.
The US automaker will introduce four new vehicles in China over the next three years, Mulally and other Ford executives said.
When asked about Ford’s plans for the sale of its Swedish unit Volvo, Mulally said “We are progressing with our conversation with potential buyers.” He declined to name any potential buyers.
Chinese automaker, Geely Group Holdings, China’s largest private automaker, has said it is interested in buying Volvo.
Geely executives have said they would like to buy the company, with media reports putting the price tag at around $2.5 billion.
China has been a leading bright spot in the struggling global auto industry as Beijing’s stimulus package bolstered consumer confidence.
Many global car makers, from GM to Hyundai Motor Co are either building greenfield plants or teaming up with new partners to ride on the wave of explosive sales growth since April.
Ford’s announcement of the new China plant comes two days after it unveiled plans to launch a new small car in India, another fast growing market.
Ford plans to product the Figo beginning early next year, aimed at the India market and for export in the Asia Pacific region.
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First Published: Fri, Sep 25 2009. 07 34 PM IST