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Ford plans second car plant in China

U.S. auto giant Ford plans to build a second car plant in eastern China to serve the booming area around the country's commercial hub, the company said Monday, playing catch-up to arch-rival GM and others.
/ Source: Reuters

U.S. auto giant Ford plans to build a second car plant in eastern China to serve the booming area around the country's commercial hub, the company said Monday, playing catch-up to arch-rival GM and others.

Ford, which aims to invest more than $1 billion in the world's fastest growing major car market in coming years, signed an agreement on Saturday that secured it rights to use land in Nanjing, a three-hour drive from China's richest city.

The new plant would grant Ford access to the bustling eastern provinces as well as better talent pools as it strives to compete against entrenched rivals General Motors Corp and Volkswagen AG in the coastal markets.

But analysts said Ford's move may be too little too late, with those two better-established rivals together controlling about half the country's car sales.

"They came to the market very late and this makes their job of competing with GM and Volkswagen that much more difficult," said Angela Gu, an analyst at Automotive Resources Asia, an independent industry consultancy.

"But the new plant is not just closer to the main markets -- the labor pool is superior too," Gu added.

Ford, knocked off its number two perch on the global rankings by Japan's Toyota Motor Corp, declined to specify which models the Nanjing plant would make, or the investment involved.

A cutting-edge facility could cost $1 billion, analysts say.

Until now, most industry observers had focused on Ford's ambitious expansion at its maiden manufacturing base in the country, in the far-flung city of Chongqing.

Ford said last year it would expand output seven-fold at its joint venture with domestic player Chongqing Changan Automobile Co Ltd.

The Nanjing plant would also be run by that venture, Changan Ford Automobile Corp Ltd, company executives said.

Years behind
Changan, which also has a partnership with Japan's Suzuki Corp, owns a minibus-making venture not far from the planned site of the Ford's new plant in an industrial estate.

"Once we've received final approval, we'll announce what models the plant will make," said Ford spokeswoman Susan Zhu.

Car sales in China smashed the one million-unit barrier in 2002 for the first time and exceeded two million in 2003. Car sales are expected to jump another 40 percent this year as the economy races ahead, putting money in the pockets of consumers.

Ford sold its first Model T on the mainland in 1913 before World War II cut short the company's China dream.

Its current facility, in the landlocked western city of Chongqing, rolled out its first cars only in January 2003, years behind the competition.

That plant is bumping up annual production from to 150,000. But this lags GM, which has unveiled plans to produce 766,000 units by 2006. And Volkswagen, the dominant player, wants to sell 1.6 million cars a year over a similar period.

Volkswagen controls 33 percent of the market, while GM trails in second place with just under 10 percent. Ford figures were not available.

But with around $10 billion in investment in the auto sector due to come on line over the next few years, some analysts questioned if Ford would ever see a return on its money.

"More and more cars are coming out and we've already seen major price cuts last year," said Lin Wenjun at Capital International Holdings. "Ford's current models in China are just not competitive, and it's unlikely new ones will be either."

Ford and GM have been slugging it out at home and are now taking their battle to China.

Now the smaller U.S. auto maker is fleshing out its offerings with luxury sedans and sport-utility vehicles.

The company, which rolled out its Maverick and Mondeo models in China last year, plans to launch a new model each year on the mainland and eventually sell a full range of cars in the country.

Its other worldwide brands include Lincoln, Mercury, Land Rover, Volvo, Jaguar and Aston Martin.

Mazda Motor Corp, of which Ford holds 33 percent, has said it would cooperate with the U.S. auto maker as it maps out a strategy for China.

Changan Ford spokeswoman Marina Guo declined to say if the Nanjing plant would be built in concert with Mazda, but said they were always looking for opportunities to work with them.