Ford mulls expanded partnership with Changan

BEIJING Sat Apr 24, 2010 11:48am EDT

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BEIJING (Reuters) - Ford Motor Co (F.N) is looking at options to expand its partnership with Chongqing Changan Automobile Co 000625.SZ beyond the terms of the current joint venture the automakers have in China, a senior executive said on Saturday.

"We have a strong partnership with Changan and we're talking about a lot of opportunities for the future," said Joe Hinrichs, who heads Ford's operations in Asia and Africa.

Hinrichs declined to say whether Ford would look to bring Changan commercial vehicles to markets outside China, a step that would parallel the move recently announced by rival General Motors.

GM GM.UL and its China joint-venture partner SAIC announced a deal last year to set up a joint-venture in India. GM expects the partnership to double its market share to nearly 10 percent of the Indian vehicle market with the addition of work trucks manufactured under the Wuling brand.

Hinrichs, speaking to Reuters on the sidelines of the Beijing auto show, said Ford's senior management was focused on the growth opportunity in markets like China now that a painful restructuring in its home market is behind.

"We want to grow and we know we need to grow and we know we need new products to do that," Hinrichs said of Ford's China operation.

Ford sells the Fiesta small car, the Focus and Mondeo sedans and a version of the Transit Connect utility van in China. It will add the Edge crossover this year but trails market leaders like VW and GM in the breadth of its offering.

The automaker showed off a concept car with a 1-liter, 3-cylinder engine with direct injection and turbocharging, an extension of the "Ecoboost" engine line it has used to improve performance and fuel economy in larger vehicles. Ford says the engine will power future small cars but has not committed to making a microcar for China.

"I don't think you have to have (a vehicle) for every segment in China, but I think you have to have scale for your dealers and suppliers and for your partners in manufacturing," Hinrichs said. "We have some opportunity there."

SALES SURGING, ADDING PLANT

Ford, the No. 2 U.S. automaker, was a relative latecomer to the China market. It began production in China in 2003 and then ran into difficulty restructuring its U.S. operations over the next three years.

The company hired the head of Boeing Co's (BA.N) commercial airplanes business, Alan Mulally, as chief executive in 2006 and borrowed more than $23 billion to fund its restructuring.

Analysts credit Mulally with driving a strategy centered on the principle of unifying vehicle design and engineering in global operations to reduce costs and improve quality.

In addition to that "One Ford" strategy, Ford has shifted toward smaller and more fuel efficient cars and crossovers and away from the trucks and SUVs that came to define the brand in the 1990s in the United States.

In China, Ford's first-quarter sales were up 84 percent, ahead of an industry-wide surge of nearly 70 percent. It has not detailed 2010 sales projections, but plans to add 70 new dealers in China, expanding its retail network by 25 percent.

Ford is also adding production capacity in its China-based venture with Changan. The automaker is building a new factory in the central city of Chongqing set to begin making a version of Ford's Focus small sedan for the Chinese market in 2012.

For its part, Changan now ranks as the No. 3 automaker in the Chinese market, now the world's largest. Its sales more than doubled in 2009.

The only of the former "Big Three" U.S. automakers to have avoided a government-sponsored restructuring, Ford has also been taking share in its home market.

"I think the exciting thing is that Changan has grown dramatically over the past several years," Hinrichs said. "With Ford's strength and restructuring over the last several years and with Changan's growth, it's a great partnership."

Hinrichs joined Ford in 2000 as a plant manager outside Detroit. He won recognition for his work in negotiating a series of landmark cost-cutting deals with the automaker's North American unions from 2007, just as the U.S. auto market tipped toward a sharp decline. He is also seen as one of a handful of potential successors to Mulally as CEO.

Hinrichs, 43, who assumed his current Shanghai-based job in December, prefers not to talk about that prospect.

"It's been great having Alan as CEO. We've learned a lot from him since he arrived," he said. "There's a lot to do right here."

(Reporting by Kevin Krolicki; Editing by Will Dunham)

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