| SHANGHAI, April 16
SHANGHAI, April 16 In 2006, as China's
automobile market was fast becoming the juggernaut that by 2009
would overtake the United States in vehicle sales, Ford Motor Co
executives were spending only 10 percent of their time
working on Asia.
Now, China and the rest of Asia take up 35 to 40 percent of
weekly meetings of Ford's top executives, many hooked in by
video conference from around the world.
"We're about at break-even and we're also at the height of
our investment," said Alan Mulally, chief executive of Ford, of
the company's profit margins in China.
The rising role of China is the central aspect of what is a
transcendental moment in the company's history, Mulally and
Chief Operating Officer Mark Fields said in an interview last
week at Ford headquarters outside Detroit.
"This is one of the biggest transformations in business
history," said Mulally, citing the shift of emphasis for a
company that was sustaining big losses and mainly making large
vehicles for the U.S. market, to a profitable company that is
Ford lost $77 million last year in Asia, but turned a profit
in the fourth quarter. Ford does not break out financial results
for China only.
Mulally said the progress Ford has made in China was on the
back of a limited lineup, but that is about to change, which has
him encouraged about continuing to turn profits in China and
Ford this year is launching three sport utility vehicles in
China, part of the company's plan to introduce 15 new or
significantly refreshed vehicles in the world's biggest auto
market by 2015.
Since 2006, Ford has invested $5 billion to expand in China
and open five new plants, including three assembly plants, by
2015. It will double its 2012 production in China along with its
joint venture partner Changan Automobile Co, to 1.56
million vehicles annually by 2015, including 1.2 million
The 67-year-old Ford chief said he is encouraged the company
is starting to be profitable in China while "doing that with the
biggest investment we have ever made. Now think about when the
plants are in, just think about where those margins go."
Ford's vehicle sales rose 21 percent in 2012 in China, where
industry sales rose only 4 percent. Ford sold 626,616 vehicles
in China last year.
Ford in 2012 held a 3 percent market share, well behind
industry leaders Volkswagen AG and General Motors Co
Ford's sales gains have been impressive, but like
Volkswagen's recent gains in the U.S. market, they come from a
low base. Ford's China sales in the first quarter were 186,596,
up 54 percent. By contrast, GM sold 2.84 million vehicles in
China last year, up 11 percent.
LEVEL OF INVESTMENT
While Ford's investment in expanding its footprint in China
is aggressive, it is investing less than either Volkswagen or
General Motors in its effort to catch up to the leaders after
getting a late start. Ford did not sell any cars in China until
2003, when Volkswagen and GM had already laid a solid foundation
with their Chinese joint venture partners.
Sales of a single Volkswagen model, the Lavida compact car,
in February were higher than all of Ford's lineup of passenger
cars in China.
Volkswagen plans to invest more than double what Ford will
spend by 2015 in China, and GM said in 2011 it would spend up to
$7 billion through 2015 and has hinted that it will up its
spending beyond that.
LMC Automotive analyst Zhu Bin in Beijing said the level of
Ford's rate of investment in China is at the right pace. He said
Ford needs to build the foundation that VW and GM built years
ago before it gets even more aggressive.
"Ford should wait and see if they need more investment" in
China once its planned plants are up-and-running in 2015, said
Zhu. "The market in China will not grow as significantly as it
has in the past."
China is also concerned about overproduction, Mulally said.
ASIA SOON TOP FORD MARKET
Of course, when Ford's executives spent only 10 percent of
their time worrying about Asia, they could be forgiven for
paying attention to existing operations. Ford lost $30 billion
between 2006 and 2008, and its share price reached $1.01 in late
Last year Ford made a net profit of $5.7 billion, its fourth
straight year in the black. It's shares now trade above $13.
China and the rest of Asia will account for 40 percent of
Ford sales by the end of this decade. China last year became
Ford's second-biggest market behind the United States, and is
nearly twice the size of its third-largest country in sales,
"Clearly this is going to continue to be the highest rate of
growth for us over the next few years it's going to be one of
the major contributors to our revenue and our profit," Mulally