BEIJING (Reuters) - Ford Motor Co (F.N) may build a third assembly plant in China to meet fast-growing demand for its cars just five years into its push into the booming Chinese market, a senior executive said.
“We’re exploring opportunities to add to our capacity,” John Parker, executive vice president in charge of Ford’s operations in Asia, said late on Friday ahead of the Beijing auto show.
That $510 million plant, which began operations last year, has an initial capacity to produce 160,000 vehicles per year that could be expanded so it can produce up to 300,000, Parker said. Through its joint venture Changan Ford Mazda, the No. 2 U.S. automaker also operates a nearby engine plant.
In addition, Changan Ford Mazda has an assembly plant in the southwestern city of Chongqing. That facility is running near capacity at about 270,000 vehicles per year, Parker said, making the area a clear candidate for new investment.
“It’s still up for discussion but Chongqing is a likely destination,” Parker told reporters. “We’re currently capacity constrained in Chongqing, so it’s important to get Nanjing on stream this year.”
Ford, which lost $2.7 billion last year, is banking in part on growth in markets like China to offset losses in the United States as it aims to return to profitability in 2009.
Ford sells the European-designed Mondeo sedan and the smaller Focus sedan in China. Later this year, Ford will add its new small car, the Fiesta.
Jiangling Motor Corp, another joint venture, handles Ford’s commercial vehicles like the Ford Transit van. “We see opportunity on that side of the business,” Parker said.
Ford only began operations in China in 2003, but already has a roughly 2 percent share of the country’s auto market, with sales of more than 200,000 vehicles last year.
Parker declined to give a 2008 sales forecast, but said Ford had not been slowed by its relatively late start in a market that has grown by between 20 and 30 percent over the past five years to become the world’s second largest.
“A lot of people say, ‘You’re the Johnny come lately,’ but look at the growth we’ve experienced,” Parker said. “Toyota came to the U.S. market how many decades after GM and Ford? And they did very well.”
Changan Ford Mazda posted a 58 percent gain in first-quarter sales to almost 62,000 vehicles. Including commercial ones, Ford sold almost 91,000 vehicles.
Ford’s larger Detroit-based rival, General Motors Corp (GM.N), moved earlier to clinch a joint venture in China and last year ranked No. 2 in sales with almost 10 percent of a highly fragmented market that now includes all of the global car companies and some fast-growing Chinese rivals.
Ford Chief Executive Alan Mulally, who joined the No. 2 U.S. automaker from Boeing Co (BA.N) in 2006, has been pushing the company toward a heavier reliance on global vehicle platforms, cutting engineering and manufacturing costs.
One of the first cars to be rolled out under that plan will be the revived Fiesta subcompact, and Parker said Ford had established a supplier hub in Nanjing it was using to source lower-cost components from China for export to assembly plants making that car in other markets.
In addition, Parker said Ford was working with more local Chinese component suppliers in a bid to reduce costs on cars it is already selling in China, like the Focus sedan.
The Focus now has about 75 percent local content, but Ford is targeting sourcing about 90 percent of parts from Chinese suppliers when it makes the next generation of the sedan, Parker said.
“Working on managing margins is very critical,” he said. “I just don’t see any opportunity to pass on the costs.”
Reporting by Kevin Krolicki in Beijing, editing by Richard Chang