Ford plays catch-up in China with new plan, dealerships

CHONGQING Fri Feb 24, 2012 6:43am EST

The Ford Motor Company logo is shown during the firm's annual meeting of shareholders in Wilmington, Delaware May 12, 2011. REUTERS/Tim Shaffer

The Ford Motor Company logo is shown during the firm's annual meeting of shareholders in Wilmington, Delaware May 12, 2011.

Credit: Reuters/Tim Shaffer

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CHONGQING (Reuters) - Ford Motor (F.N) is on track to double the number of dealerships in China by 2015, its country chief said on Friday, as it launches a half-billion-dollar plant and races to narrow the gap with foreign rivals in the world's largest auto market.

Ford, which unveiled the new Focus at the opening of a plant in the southwestern municipality of Chongqing, is adding an average of two outlets a week to bring the total to 680 by 2015, said David Schoch, chairman and CEO of Ford's China operations.

"Obviously, it's not only important for us to grow the production capacity and get the new products in, but we have to improve the retail distribution network," Schoch told Reuters.

Ford, which steered clear of a bankruptcy filing and U.S. government bailout in 2009, is a relatively late-comer in China, where General Motors (GM.N) and Volkswagen AG (VOWG.DE) have built a sizeable lead.

It sold 320,658 vehicles in China last year, compared with Volkswagen's annual tally of 2.26 million and GM's 2.55 million.

In an effort to narrow the gap, Ford plans to bring 15 new vehicles to China by 2015, starting with the new Focus, which is scheduled to hit showrooms across China in the second quarter.

The introduction of new models, said Will Periam, strategy director for Ford's Asia Pacific and Africa operations, will enable Ford to compete in about 50 percent of the overall market segments in China, up sharply from 22 percent.

OPTIMISM FOR 2012 DESPITE WEAK START

Schoch said the U.S. automaker also aims to outpace the Chinese market, which he expects will increase between 5 to 10 percent this year despite a steep downturn in January.

He attributed Ford's 41.9 percent sales decline in January to the timing of the long Lunar New Year holiday period as well as the company's lower-than-expected inventory in the wake of a strong December when it vastly outpaced the market's growth.

In December, Ford's China sales rose 10 percent from the year-ago period, compared with a 1.4 percent industry-wide gain during the same period.

"The combination of those two affected our sales performance last month," said Schoch, who has been at the helm of Ford China since November 2011. "You almost have to look at January and February together."

The 15-day Spring Festival marking the Lunar New Year is China's most important holiday period, and most companies shut down for about a week so workers can return to their hometowns.

The holiday disruption was also blamed for a 23.8 percent drop in China's passenger car sales in January, the biggest monthly decline in more than three years.

NEW FOCUS

With the opening on Friday of the $490 million Chongqing facility, Ford's annual capacity in China will rise by 150,000-vehicles to a new total of more than 600,000 vehicles.

Ford's new Focus, using a shared platform around the world, allows the car to be made in Asia, Europe and North America sharing 80 percent of common parts and 75 percent of the same supply base.

Chief Executive Office Alan Mulally has often said Focus is the best evidence yet of the company's "One Ford" strategy of radical and sweeping simplification of design, engineering and production systems.

The car will expand Ford's local product portfolio, which now includes the previous generation Focus as well as Mondeo, S-Max, Fiesta and Transit models.

Ford, meanwhile, is studying the option to sell Lincolns in China where the luxury car segment has been enjoying a bull run, fuelled by rapidly rising incomes, company executives said.

BMW <BMWG.DE, Mercedes-Benz and Audi all registered more than 35 percent gains in car sales in China last year even though the overall market sputtered after years of frantic expansion.

Ford makes cars in China in a tie-up with Chongqing Changan Automobile Co Ltd 000625.SZ and Mazda Motor Corp (7261.T).

Ford, Changan and Mazda applied to the Chinese government to split up their three-way tie into two 50-50 entities. Approval has been held up because Changan has been unable to get a new car production license for its planned new venture with Mazda.

Schoch said the partners are still waiting for approval but declined to make further comments.

Ford also holds 30 percent of light commercial vehicle producer Jiangling Motors Corp 000550.SZ, which makes Ford Transit vans.

(Editing by Jacqueline Wong)

(Corrects spelling to Ford S-Max not Ford X-Max in 17th paragraph)

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