Week of March 1, 2004
  Snapshot from the Field
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Selecting a site in Nanjing (pictured) positions Ford within three hours of
Shanghai, China's richest city and its business capital.
Ford Fiesta
Ford's first plant in Chongqing went online in January of 2003 with production of the Fiesta (pictured). The southwest China plant then rapidly added the Mondeo sedan and the Maverick compact SUV to its production line.
Ford Accelerating $1.5-Billion
Chinese Expansion Plan

by JACK LYNE, Site Selection Executive Editor of Interactive Publishing

NANJING, ChinaFord Motor Co. (www.ford.com), putting considerably more meat on the bones of its billion-dollar Chinese plans, will build a new car plant near the city of Nanjing in east China. The automaker recently announced that it had signed a land-use agreement with Nanjing's Jiangning Economic and Technical Development Zone (www.njjndz.com).
        Likely a very large plant, the project will operate under the moniker of Changan Ford Automobile Corp., the 50-50 joint venture that Ford formed in 2001 with China's Changan Group. The Nanjing plant will be Changan Ford's second production operation. The joint venture opened its first manufacturing facility in January of 2003 in the southwest China city of Chongqing.
        As if trying to make up for lost time, the Chongqing plant rapidly expanded its product line. It began last year by making the Fiesta, then added the Mondeo sedan in May. In July, the plant further augmented production with still another product, the Maverick compact SUV.
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"It's true that we were late to enter the China market and were slower in the past," Ford China Chairman Meiwei Cheng (pictured) allowed in announcing the company's new Nanjing plant.

        The Nanjing plant's output could prove to be similarly varied. Ford didn't specify which products the new facility will build. That decision will be made later, officials said.
        "We will bring a lot of new products to China in the years to come in order to maximize our investment and increase our market share," Ford China Chairman Meiwei Cheng explained in announcing the Nanjing plant. Ford, he added, is approaching China with a "phased investment approach, [not] a big bang."
        Nonetheless, the Nanjing project will almost certainly create a sizable bang. Ford hasn't yet released plant investment or employment estimates. Auto analysts, however, are projecting that Ford's newest Chinese plant will be at least a US$1-billion project.

Ford Flexing Much More
Muscle in Chinese Market
That big a plant would certainly seem appropriate for Ford - as well as considerably overdue. The U.S. automaker was a notable latecomer in setting up its Chinese manufacturing. Ford opened its first Chinese plant four years later than its principal competitors. And the automaker's initial Chinese expansion moves are widely regarded as far too cautious by many within the industry.
        Now, though, Ford seems to be flexing a newfound aggressiveness in establishing itself as a Chinese manufacturer. Ford Chairman William Ford late last year announced that the company planned to invest as much as $1.5 billion in China in boosting manufacturing capacity, introducing new models and expanding sales networks.
        "The automotive future of China is very bright, and we are participating fully in its growth," Ford said in October during what was his first-ever visit to China.
        But the automaker's participation was surprisingly small in its first Chinese plant. Ford's total capital investment for the Chongqing facility was a decidedly modest $49 million.
        By comparison, General Motors invested $1.6 billion in its first Chinese joint venture plant in Shanghai. Part of GM's partnership with the Shanghai Automotive Industry Corp., the Shanghai facility opened in 1999 and makes Buick sedans. Ford also attempted to forge a joint venture with Shanghai Automotive before the Chinese company went with GM.
        The disparity in the two auto investments left many industry analysts scratching their heads. Could Ford, some wondered, have possibly underestimated the Chinese market's potential?
        That potential, however, is profusely documented. Chinese auto sales have been growing at an annualized rate of 50 percent. Last year's 4.39 million in vehicle sales, for example, almost doubled 2001's tally.
        Ford was certainly emphatic about the Chinese market's clout during his visit last year. "China, at present the second-largest automotive market in Asia, [is] potentially the largest in the world within the next generation," he said.

Second Plant Site Provides
Much Stronger Market Access
In addition, Cheng acknowledged the company's previously sluggish Chinese expansion pace in announcing the Nanjing plant.
        "It's true that we were late to enter the China market and were slower in the past," he said. "But we don't expect a one-or-two-year miracle in China, but a long-term success."
        Selecting Nanjing as the site for its second Chinese plant certainly ups Ford's success odds.
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In addition to Fiat (left) and Siemens, high-profile players with a major presence in the Jiangning Economic and Technical Development Zone include Ericsson, General Mills and Pepsi.

        Nanjing is a three-hour drive from Shanghai. That gives Ford's new plant strong market access to China's richest city and its business capital. In contrast, the Chongqing plant isn't near any of China's major markets, and the city is landlocked as well.
        A host of other multinationals have also been drawn to Nanjing's Jiangning Economic and Technical Development Zone. The 10-year-old zone has attracted more than $1 billion in direct foreign investment.
        Automakers, most prominently Fiat, currently produce 60,000 cars annually inside the Nanjing zone. Other high-profile tenants include Ericsson, General Mills, Pepsi and Siemens.

Ford Still Faces Tough Catch-Up Challenge
Ford's new plant signals its rapid Chinese production ramp-up. With the Nanjing operation, the automaker's Chinese production capacity will increase to 150,000 units from 2003's 20,000 units. Ford's Sino-expansion also calls for adding a new Chinese engine plant.
        But Ford still faces a tough game of Chinese catch-up. Its capacity increase, for example, still pales dramatically compared to Volkswagen, which currently produces 880,000 vehicles a year in China. And the German company has announced plans to double that number in the near future.
        VW remains the leader in Chinese vehicle sales, selling 700,000 cars last year. GM was No. 2, with 386,710 sales in 2003. For Ford, 2003 marked its first year ever to top 200,000 Chinese sales.
        Ford's deferred manufacturing entry into China also faces other obstacles. One big one is simply the rapidly snowballing ranks of the nation's auto plants. Overcapacity threatens to create significant excess inventory. Cutthroat price wars are already breaking out to stimulate demand.
        Even so, many industry analysts see foreign auto manufacturers in China continuing to enjoy market demand.
        "China will continue to lead the way in 2004 in global market growth," said Carlos Gomes, an auto industry specialist with Scotiabank. "Despite rapid growth, there are still only three cars per 1,000 people in China, compared with more than one vehicle for every driving age American and 0.56 per-capita vehicles in Canada and Western Europe. We expect purchases in China to exceed five million before the end of the decade."
        Though it's a late arrival for China's manufacturing party, Ford seems intent on grabbing a far larger slice of that fast-growing pie.




©2004 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.