Ford to boost output, build second plant in Russia

TURIN, Italy, May 19 (Reuters) - Ford Motor Co. F.N plans to increase production at its Russian plant to about 125,000 units a year by 2009 to meet growing demand for cars in the midst of a Russian economic boom.

Demand is so strong and market potential so big that Ford is looking to build another plant there, said Jim Tetreault, the U.S. car maker’s head of manufacturing for Europe.

"There is always room to grow," Tetreault, vice-president of manufacturing for Ford of Europe, told Reuters on the margins of an automotive congress in Turin, home to Italian peer Fiat SpA FIA.MI.

The Russian market for cars is growing so fast it will be as big as Germany's by 2015, Thierry Morin, the head of French car parts supplier Valeo SA VLOF.PA, told the congress.

Tetreault said Ford would likely decide on a location for a second plant in the next year or so.

“It will be in the short term,” he said, adding it might not be in St Petersburg, where its first plant is.

Ford will be increasing the annual capacity of its plant to 125,000 units from 75,000 by the end of 2008, but will not make that many cars until 2009, he said.

It imports about half the cars it sells in Russia, he added.

One reason why Ford and other car makers are opening plants in Russia is to beat the high tariffs on imports.

Tetreault said Ford had no fully developed a reliable local supplier base and infrastructure was also a problem.

Ports were so congested that Ford had to pay a premium to get its deliveries on time, he said, the rail system was not dependable while the road network was poor.

Adding to the cost of doing business in Russia was a rise in wages, up 20 percent a year for the past three years, he said.

The growing strength of the rouble against other currencies was also making Russia more expensive, Tetreault added. (Reporting by Gilles Castonguay; editing by David Hulmes)