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Ford to invest $760-million in China factory

A 2012 Ford Mustang V6

michael bettencourt The Globe and Mail

Ford Motor Co. will invest $760-million (U.S.) to build a new plant in eastern China as part of a drive to catch up with global rivals General Motors Co. and Volkswagen AG in the world's largest car market.

Ford's new plant in Hangzhou, in the rich entrepreneurial belt of China's Zhejiang province, will help the company double capacity to reach 1.2 million vehicles by 2015, the company said. Ford said the move is part of the company's "largest expansion in 50 years," aimed at boosting global sales by 50 per cent from 2010 to about 8 million vehicles a year by mid-decade.

VW and GM were early entrants in China and remain far more powerful there. Ford formed its first joint venture in China only just over a decade ago, while VW has been producing cars in China since the 1980s. GM and VW each produced more than 2 million vehicles in China last year.

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Ford, which produces cars jointly with Chongqing Changan Automobile Co. and Mazda, has dramatically stepped up the pace of its expansion in China. Two weeks ago it said it would invest $600-million to expand capacity at its facility in Chongqing, central China, the largest manufacturing base for the company outside its home in southeastern Michigan.

The company said it would bring 15 new vehicles and 20 new powertrains to China by 2015, increasing the company's relatively limited product range available on the mainland. Ford is expected to unveil a sport utility vehicle at the Beijing car show, which opens Monday, hoping to tap rising mainland demand for more fun, individualistic kinds of vehicles among younger buyers.

Meanwhile, GM played down speculation it had reached a deal with its Chinese joint venture partner, SAIC, to regain equal equity control of their joint venture by buying back 1 per cent of the equity sold to SAIC when GM was in financial straits in 2009. That deal had a proviso to allow GM to buy back the stake, so long as SAIC continued to be able to claim the joint venture's revenue under new Chinese accounting rules.

The Wall Street Journal reported Thursday that an agreement had been reached to split the venture into a sales arm and an operational arm, with GM and SAIC sharing control of the operational side equally. But GM said that negotiations on the matter are "ongoing" and that there was "no specific date set" for the repurchase. Any such deal would require government approval.

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