Mumbai: US car maker Ford Motor Co., which hasn’t made annual profits since 2005, said it will go ahead with its planned $500 million (Rs2,420 crore) India investment, notwithstanding a slowdown in the local market.

Upbeat on India:Michael Boneham, managing director of Ford India Pvt. Ltd, said he saw 2010 as the year for a significant turnaround in confidence and pent-up demand. Manan Vatsyayana / AFP

Michigan, US-based Ford is building factories in India and Thailand to counter a decline in US sales, which may force the company into bankruptcy, according to Standard and Poor’s.

Car demand in India has slowed this year because of interest rates near a seven-year high, forcing Honda Motor Co. Ltd to delay opening its second factory in the country.

Ford said in January it will begin selling a small car in India in two years and set up an engine factory at Chennai with capacity to make 250,000 units a year by 2010.

Since then, vehicle demand has declined as a plunge in the stock market, higher loan rates and inflation deterred consumers in Asia’s fourth-largest automobile market.

Car sales rose 5.3% to 600,385 in the first half of the fiscal year that began April, the Society of Indian Automobile Manufacturers said on 13 October. That’s less than half the pace of last year. Sales declined in July and August, the first reversal in more than two-and-a-half years.

Ford’s car sales in India declined 27% to 12,412 between April and September.

Honda, Japan’s second largest car maker, said last month it will delay opening a second car factory in India.

“Auto makers will be cautious with their capital expenditure now," said Mayur Milak, a Mumbai-based analyst at Alchemy Share and Stock Brokers Pvt. Ltd. “Nobody would want to part with liquidity these days."

General Motors Corp., Ford and Chrysler Llc., the top three US car makers, may be forced into bankruptcy by slowing economies and dwindling local auto sales, Standard and Poor’s analyst Robert Schulz said on 10 October. The companies said they have no plans for a bankruptcy filing.

The worsening credit crisis may pull sales to the lowest rate in at least 25 years in the US, Deutsche Bank AG has said.

Still, sales in India will rebound in time for the company’s introduction of its first small car, Boneham said. “We see 2010 as the timing for a significant turnaround in confidence and pent-up demand, which will perfectly suit our new small car-launch timing," Boneham said on Tuesday.

“India is poised to experience significant domestic growth. We continue to believe in the Indian market."