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October 26, 2006

Ford Goes to China To Grow

posted by MR WAVETHEORY at 10/26/2006 04:03:00 PM
An Old Sign of a Ford Dealer
When you run out of options for growth, go to China. That is the strategy at Ford Motor Company (NYSE F). Bill Ford says that over the next 10 years, 90% of the volume growth in cars will come from Asia. That is incredible and shows where the most dramatic amount of wealth creation in human history will occur.

Ford Motor Chairman Bill Ford Jr., touring two factories that the company is building with partner Mazda Motor in China, said in an interview with The Wall Street Journal that his company has no choice but to look outside the U.S. for growth. One of the factories will make engines, and the other will make parts, and production is scheduled to begin next year. Ford also is opening a research-and-development center in Australia and considering expanded production in India. "Ninety percent of all volume growth over the next 10 years will be in Asia," Mr. Ford said. "We're positioning ourselves to profit from that." He said that Ford would even consider manufacturing small cars in China for sale in the U.S. and other markets. "It's certainly possible," he said. "We don't have any plans now. But we'll look at everything." He also said that Ford, which reported a huge quarterly loss earlier this week, is on solid footing financially and doesn't need to seek out an alliance partner.

This is full of irony. Once, awed executives of Japan's Toyota Motor Corp. toured Ford's massive Rouge factory near Dearborn hoping to learn how to match the U.S. company's manufacturing prowess. When the dust settles from its latest restructuring, Ford could sell fewer vehicles in the U.S. than Toyota does.

And get this. Ford expects to buy between $2.6 billion and $3 billion of auto parts in China this year for use in its assembly operations in the U.S., Europe and elsewhere, up from between $1.6 billion and $1.7 billion in 2005. Mr. Ford said he expects that upward trend to continue.

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