Under Chinese government policy, access to the world’s largest auto market is only granted if makers enter joint ventures with local companies.
Ford Motor Company’s (NYSE: F) passenger car joint venture in China, broke ground today for a new engine plant in Chongqing where it already has an assembly complex.
The $500 million investment at Changan Ford Mazda Automobile (CFMA) will more than double CFMA’s annual engine production capacity in China to 750,000 units when it opens in 2013. The engines will be used in Ford-brand vehicles manufactured and sold in the country.
China is now by far the world’s largest auto market, and Chinese industrial policy in effect requires that all profits earned there are reinvested in the country and its local partners. The U.S. remains alone among industrialized nations – with elected or totalitarian governments – without any such job and investment protecting policy. The $500 million (RMB 3.4 billion) investment will be funded entirely by CFMA and will be located in Chongqing’s so called New North Zone.
CFMA is a three-way joint venture among Changan Motors, Ford Motor Company and Mazda Motor Company.
Ford Motor Company posted a record year in China during 2010, selling 582,467, a 40% increase compared to 2009. Nonetheless, the Number Two U.S. automaker still lags far behind cross town rival Genera Motors in China, which sold a record 2,351,610 units in 2010. GM has been the Number One automaker in China since 2005 when GM surpassed the Volkswagen group.
In the first quarter, Ford’s U.S. market share was 16% – down 0.5% – and European market share was 8.5%, down 0.9% compared to the year earlier period. Asia Pacific, the only automotive growth area in the world saw Ford’s share increase to 2.4% as it wholesaled 240,000 vehicles. Ford estimates that it lost production of 14,000 vehicles during the quarter as a result of the Japan earthquake and tsunami. Since it is a minor player in Asia-Pacific Ford estimates that ongoing production disruptions will not materially affect its results.
Ford had a late start gaining access to the auto market in China, the result of a Chinese government decision that chose a Buick sedan from GM over a Ford Taurus as the vehicle that would enter production at a joint venture in Shanghai. Since 1999, Chinese versions of the Buick Century and Regal sedan have established Buick as one of the top brands in China.
Ford was years behind when it finally opened Changan Ford in 2003, a joint venture with a former Chinese armaments supplier in western China.
“Today’s ground-breaking ceremony represents yet another milestone in Ford’s accelerated expansion plan for China,” said Joe Hinrichs, president of Ford Asia Pacific and Africa, and chairman and CEO of Ford China.
Ford will double the number of white collar workers in China by 2015, adding some 1,200 new jobs across most automotive departments, including engineering, manufacturing, marketing sales and service, finance, government affairs, communications, IT and legal. The new jobs in China will be located at joint venture operations in Shanghai, Chongqing, Nanjing and Nanchang. About 550 new jobs will be added this year.
Chongqing Mayor Huang Qifan, together with other high-ranking Chongqing government officials, attended the ceremony at the engine plant site in Chongqing’s Liangjiang New Area – the only national-level development zone located in western China.
Last July, Ford’s commercial vehicle partner in China, Jiangling Motors Corporation (JMC), broke ground for a new $300 million vehicle assembly plant in Nanchang. JMC produces the Ford Transit, a leader in China’s light bus segment. In April of this year, Ford announced that it will bring 15 new vehicles to China by 2015. In addition, Ford signed an MOU in May to build its first transmission plant in the country, also in Chongqing, with an initial annual capacity of up to 400,000 units. Early next year, Ford’s second passenger-car assembly plant in Chongqing will begin production, starting with the new Ford Focus.
(Great Leap Forward! GM China Announces Five Year Plan to Double Sales by Introducing 60 New and Upgraded Models, and Ford to Double White Collar Workers in China by 2015 and Labor Group Blasts Ford for Chinese Sweatshop Abuses and Ford China Sets Sales Record 2010. Still Lags General Motors)
