Ford weighs third China plant to meet demand

BEIJING: Ford Motor Co may build athird assembly plant in China to meet fast-growing demand for its cars just fiveyears into its push into the booming Chinese market, a senior executive said."We're exploring opportunities to add to our capacity," John Parker, executivevice president in charge of Ford's operations in Asia, said late on Friday aheadof the Beijing auto show. Ford has an assembly plant in Nanjing, about 300kilometers from Shanghai, in partnership with its affiliate Mazda Motor Co andChina's Chongqing Changan Automobile Co.

That $510 million plant,which began operations last year, has an initial capacity to produce 160,000vehicles per year that could be expanded so it can produce up to 300,000, Parkersaid. Through its joint venture Changan Ford Mazda, the No. 2 U.S. automakeralso operates a nearby engine plant. In addition, Changan Ford Mazda has anassembly plant in the southwestern city of Chongqing. That facility is runningnear capacity at about 270,000 vehicles per year, Parker said, making the area aclear candidate for new investment. "It's still up for discussion but Chongqingis a likely destination," Parker told reporters. "We're currently capacityconstrained in Chongqing, so it's important to get Nanjing on stream thisyear."

Ford, which lost $2.7 billion last year, is banking in parton growth in markets like China to offset losses in the United States as it aimsto return to profitability in 2009. Ford sells the European-designed Mondeosedan and the smaller Focus sedan in China. Later this year, Ford will add itsnew small car, the Fiesta. Jiangling Motor Corp, another joint venture, handlesFord's commercial vehicles like the Ford Transit van. "We see opportunity onthat side of the business," Parker said. Ford only began operations in China in2003, but already has a roughly 2 percent share of the country's auto market,with sales of more than 200,000 vehicles last year.

Parker declinedto give a 2008 sales forecast, but said Ford had not been slowed by itsrelatively late start in a market that has grown by between 20 and 30 percentover the past five years to become the world's second largest. "A lot of peoplesay, 'You're the Johnny come lately,' but look at the growth we've experienced,"Parker said. "Toyota came to the U.S. market how many decades after GM and Ford?And they did very well." Changan Ford Mazda posted a 58 percent gain infirst-quarter sales to almost 62,000 vehicles. Including commercial ones, Fordsold almost 91,000 vehicles.

Ford's larger Detroit-based rival,General Motors Corp, moved earlier to clinch a joint venture in China and lastyear ranked No. 2 in sales with almost 10 percent of a highly fragmented marketthat now includes all of the global car companies and some fast-growing Chineserivals. Ford Chief Executive Alan Mulally, who joined the No. 2 U.S. automakerfrom Boeing Co in 2006, has been pushing the company toward aheavier reliance on global vehicle platforms, cutting engineering andmanufacturing costs.

One of the first cars to be rolled out underthat plan will be the revived Fiesta subcompact, and Parker said Ford hadestablished a supplier hub in Nanjing it was using to source lower-costcomponents from China for export to assembly plants making that car in othermarkets.

In addition, Parker said Ford was working with more localChinese component suppliers in a bid to reduce costs on cars it is alreadyselling in China, like the Focus sedan. The Focus now has about 75 percent localcontent, but Ford is targeting sourcing about 90 percent of parts from Chinesesuppliers when it makes the next generation of the sedan, Parker said. "Workingon managing margins is very critical," he said. "I just don't see anyopportunity to pass on the costs."