Ford invests $760 million for new China plant, more capacity

Thu Apr 19, 2012 8:28am EDT
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By Ben Klayman

HANGZHOU, China (Reuters) - Ford Motor Co (F.N: Quote) is investing $760 million to build a new plant in eastern China as part of its effort to catch up with U.S. rival General Motors Co (GM.N: Quote) in the world's largest auto market.

Ford said the new plant in Hangzhou in Zhejiang province will initially boost the U.S. automaker's annual capacity in China by 250,000 vehicles when production begins in 2015. Construction is expected to begin later this year.

The announcement comes two weeks after Ford said it would invest $600 million to build a third plant at its Chongqing complex in southwest China and is part of the largest and fastest expansion by the company since the 1960s in North America and Europe. Ford has now announced or begun building eight assembly and powertrain plants in Asia.

"We're looking at this more than just this quarter or this calendar year," Ford's Asia chief, Joe Hinrichs, said in an interview. "We're looking at this as how does Ford set itself up for success for the next several decades in Asia Pacific.

"People say, 'Are you too late?' No," he added. "You get one chance to really come at the market with the full power of Ford's product portfolio, but you want to be able to look everybody in the eye and say you truly developed the vehicles for China so it does require some patience."

Ford expects industry sales in China to hit about 30 million vehicles by 2020, up from 18.5 million last year.

Ford has said that its growth plans in China are part of its effort to increase global sales by about 50 percent from 2010 to about 8 million vehicles annually by mid-decade. By 2020, it said, about one-third of its sales will come from the Asia Pacific and African regions.

Ford, which makes Fiesta, Focus, Mondeo and other sedans in China in a three-way tie-up with Chongqing Changan Automobile Co Ltd (000625.SZ: Quote) and Japan's Mazda Motor Corp (7261.T: Quote), is a relative latecomer in China, where GM and Germany's Volkswagen AG (VOWG_p.DE: Quote) have a sizeable lead. Ford sold 320,658 vehicles in China last year, compared with VW's annual tally of 2.26 million and GM's 2.55 million.   Continued...

The new Ford Focus is displayed during the opening of the Shanghai Auto Show April 19, 2011. REUTERS/Carlos Barria