Ford Motor Expanding Asian Presence

As Posted to the Wall Street Journal

Ford Motor Co. is making a major push this week in Asia -- long a weak link in its global operations -- as part of an ambitious strategy started three years ago by Chief Executive Alan Mulally.

In India on Wednesday, Mr. Mulally unveiled a new low-cost small car specifically developed for Asia that will be built at a newly expanded Indian plant. The vehicle, called the Figo (pronounced fee-go), will be sold in India and exported to other countries in the Asia-Pacific region.

On Friday, Ford will announce plans to open its third assembly plant in China, according to people familiar with the matter.

The two moves will significantly increase Ford's production capacity in the fastest growing region in the global auto industry, and will give the company a new car that is priced and sized for a large swath of buyers across Asia.

"Alan fully recognizes that we had to be strong in all three areas of the world if Ford Motor Co. was going to be a cohesive, integrated and successful company," said John Parker, executive vice president of Ford's Asia-Pacific operations.

The new small car -- Figo is colloquial Italian for "cool" -- is due to be launched in 2010. It was developed as part of a $500 million investment in India announced January 2008. Part of the investment doubled capacity at a plant near Chennai to more than 200,000 cars a year.

The tiny four-door hatchback with cat-eye headlamps gives Ford an entry into an increasingly important segment of the Asian market.

The vehicle is expected to sell for under $10,000, within reach of many people in India's growing middle class.

Ford believes the Figo will appeal to customers who want more than a bare-bones vehicle, such as the $2,000 Nano developed by Indian auto maker Tata Motors.

For Ford, which sold only about 30,000 vehicles in India last year, the Figo "will be quite crucial for further growth," said Asish Mathew Jose, market analyst for Segment Y, an automotive research company in Goa, India.

In China, which is expected to pass the U.S. as the largest auto market this year, Ford has two plants that together can produce about 447,000 cars a year. The company is expected to announce a third plant with partner Chonqing Changan Automobile Co., bringing total capacity to more than 600,000 vehicles a year.

Ford still faces many challenges in Asia, however. Even with the new capacity it still trails key competitors in China.

Toyota Motor Corp. can make 800,000 vehicles a year, and expects to lift that to more than one million in a few years, a Toyota spokesman said. General Motors Co., which got an earlier start in China than Ford, has partnerships and joint ventures that give it total capacity of 1.29 million vehicles a year, including small commercial vans.

The Ford name isn't uniformly known in India or China, and its dealer networks are still developing. In China, Ford has 216 full-service dealers, compared to Toyota's more than 500 and GM's more than 800. Ford accounts for about 2% of car sales in the Asia-Pacific market.

Shoring up Ford's Asian operations has been a critical goal for Mr. Mulally, a former Boeing Co. executive with substantial experience in the region. But since arriving at Ford in 2006, Mr. Mulally has had to focus on keeping its U.S. operations afloat.

He is credited with having taken quick action to put the company in a much stronger position than rivals GM and Chrysler Group LLC, both of which went through bankruptcy and took government bailouts.

At the same time, however, Mr. Mulally also dispatched executives to find out what was holding up growth in Asia. They found an organization that wasn't focused enough on the region's two giant markets, China and India.

In China, Ford has lagged behind GM, Toyota, Volkswagen AG and other Western auto makers. According to J.D. Power & Associates, Ford is the No. 12 auto brand in China in terms of sales.

The company has been slowed in part because its partner is located in Chonqing, in the less developed western provinces. There, Ford hasn't always been able to find suppliers for certain components, forcing it to use more expensive imported parts, Ford officials said. That hurts the profits, they said.

GM and VW, in contrast, have plants near Shanghai, an area teeming with auto suppliers and consumers with cash to spend.

In India, Ford struggled early on with models that proved too expensive for Indian consumers. Now, the Fiesta subcompact is its top seller, and a model called the Endeavor is the country's top-selling sport-utility vehicle.

In 2008, even as Ford's problems worsened in North America, the company mapped out a plan to invest $2 billion to become more competitive in Asia. It started work on the Figo and recently, Ford said it would move its Asian headquarters from Thailand to Shanghai.

Ford is now working to consolidate manufacturing in four regions. It also seeks a more cohesive regional approach instead of country-by-country operations, and is working to enhance the Ford brand.

"We concluded that we wanted to focus on the Ford brand because this is what you were going to have to do if you wanted to create a Ford powerhouse around the world," Mr. Mulally said in an interview.

While committed to building products in the markets in which they are sold, Mr. Mulally said he wouldn't rule out making Fords in Asia for the U.S. market. When GM recently considered a similar move it caused an uproar at the United Auto Workers union.