February 11, 2009 / 10:21 PM / in 9 years

Ford Canada sees bigger piece of automotive pie

TORONTO (Reuters) - Ford Motor Co's Canadian subsidiary has enough cash to ride out the industry's steep downturn and is well positioned to emerge from the crisis with an enlarged market share, its chief executive said on Wednesday.

Ford has secured a line of credit of up to C$2 billion ($1.6 billion) with the governments of Canada and the province of Ontario that it can draw on if market conditions worsen. But David Mondragon, on the sidelines of the Canadian International Autoshow in Toronto, said in an interview that the company doesn't think it will need the aid.

Industrywide sales in Canada plunged 25 percent in January, on top of declines of 21 percent in December and 10 percent November.

During those three months, Ford Canada managed to gain market share and outsell Toyota Canada, a feat that Mondragon described as "a pretty big deal."

The company's sales in Canada fell 14.1 percent in January and 6 percent in December. They rose 1 percent in November.

During those months, Ford Canada's market share rose to around 14 percent from an average 12.5 percent in 2008.

"We feel like we are well positioned right now," said Mondragon. "If you can stabilize or grow share in a declining market, when the business starts to strengthen, then you've got a bigger piece of the pie that you can expand faster."

Even so, with capacity so far out of line with current demand, the company will need concessions from labor if it is to keep manufacturing vehicles in Canada, Mondragon said.

"Manufacturers ... will be making hard decisions based on productivity and cost, and we need to be competitive in Canada to ensure a viable manufacturing footprint," he said.

The Canadian Auto Workers union has said it will reopen its collective bargaining agreements reached last year with the Canadian arms of General Motors Corp and Chrysler to help them lower costs and meet conditions to draw on government loans. Ford has said it also expects to get some concessions from the union, even though it may not need government aid.

Mondragon said Ford expects industrywide sales in Canada to be down around 7.5 percent this year, which is slightly better than the average industry forecast of a 10 percent decline.

However, he warned that the decline could be even greater if some of the actions the Canadian government has put in place to stabilize the market don't take seed.

Ottawa said in its recent budget it would provide up to C$12 billion to loosen financing for vehicle and business loans and leases.

Ford of Canada currently has a C$2 billion asset-backed security offering on the market.

"And we have many more securities that we intend to be able to exercise and sell through the new government program," said Mondragon. "Once those dollars start to flow, and Ford Credit gains access to those, we'll be able to really bolster our ability to offer viable financing in the Canadian marketplace."

Leasing has played a vital role in the Canadian automotive market, but with credit tight, Ford's leasing now represents about 5 to 10 percent of its new car deliveries, down from an industry high of nearly 50 percent. GM and Chrysler are now largely out of the Canadian leasing market.

($1=$1.24 Canadian)

Reporting by John McCrank; Editing by Frank McGurty

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