US auto giant Ford to invest US$1b in Asia

Ford Motor Companys President and chief operating officer Jim Padilla hailed Thailand as a key production hub for one-tonne pickups, underscoring the importance of its successful Ford-Mazda joint-venture manufacturing assembly at AutoAlliance Thailand (AAT).

The comment from the top executive of one of the worlds largest automaker follows Thailands most significant achievement in its ambition to become the regions leading automotive hub – the celebration of a major production milestone: in November, local vehicle production for the year surpassed the one million unit mark, an event of great nationalistic pride for Thailand.

‘On behalf of Ford Motor Company, I wish to congratulate the Thai government for achieving this important milestone which brings Thailand closer to its vision to become the ‘Detroit of Asia’ said Padilla in a speech to the members of the American Chamber of Commerce in Thailand (AMCHAM) on Wednesday, December 14th.

‘Thailand is no emerging market in the global automotive sector. Thailand has emerged. The one-millionth milestone foretells the latent potential for this market to grow further.’ With an industry forecast at 680,000 vehicles this year, the volume is expected to hit one million units by 2012.

Padilla continued, ‘Ford Motor Company can truly take pride in our considerable contributions towards the achievement of this one-millionth milestone. Thailand is our production hub for the Ford Ranger and Mazda Fighter pickups and these world-class products are exported to 130 markets worldwide, all them outside of North America.’ (Editors note: The Ford Ranger sold in North America is an altogether different product from the AAT-produced Ranger.)

‘At our state-of-the-art assembly plant at AAT, we have been building Ford and Mazda trucks for both domestic and export markets since the first truck rolled off our production line in July 1998 when the region was mired by the Asian financial crisis.’

In spite of the crises and incrementally since, AAT has contributed over Baht 167 billion (US$4.2 billion) in export earnings to Thailand’s economy and achieved a net trade surplus of Baht 109 billion (US$2.7 billion) which is an enormous contribution to the country. In the first quarter of 2005, AAT was Thailands top vehicle exporter for completely built-up (CBU) vehicles, with total exports of 19,388 units representing a 22.3 percent share of CBU exports valued at Baht 8.0 billion (US$200 million).

With more than 80 percent local content, AAT has more than 148 local suppliers from which we purchase more Baht 30 billion (US$750 million) worth of parts and components per annum. This has led to the growth of upstream parts and components industry, which include many local small and medium enterprises.

Ford Motor Company directly employs more than 4,200 people in Thailand, and Bangkok has become the centralized location for Fords regional headquarters for its Asia Pacific and Africa operations. In addition, it is estimated indirect employment generated from AAT’s investment and operations is between 25,000 to 30,000 jobs. This creation of a technically skilled labor force adds to value creation which will serve the long-term needs of Thailands growing automotive industry.

In his AMCHAM speech, Padilla also confirmed that the Baht 20 billion (US$500 million) joint investment plan announced by Bill Ford in October 2003 to support new vehicle programs, facility upgrade and capacity expansion is fully on track. He added that AAT was on course to achieve its most successful year-to-date with capacity hitting 155,000 units for 2005 and further capacity increase expected to reach 200,000 units per annum by 2008.

‘The success of Thailands automotive industry is no surprise,’ Padilla noted. Today, Thailand represents the biggest market for one-tonne pickups of its kind in the world where the segment commands over 400,000 units a year and continues to grow.

‘This huge market for one-tonne pickups also translates into an intensely competitive landscape and an even more demanding customer base. To this end, while both the Ford Ranger and Mazda Fighter have enjoyed a respectable share of the segment, we realize it is innovation through the introduction of new products featuring advancements in safety, technology, environment and design that will drive the future of Ford Motor Companys success not only in Thailand but in every market worldwide.’

Padilla cited the recently launched Ford Focus, the first E20-capable sedan in Thailand as a great example of a new range of products to be brought to Asia Pacific while hinting at more new products to be revealed in 2006.

Thailand represents an excellent success story for Ford in Asia Pacific. ‘Strategically, Thailand plays a key role to our growth strategy in this region. However, I would reiterate that Ford takes an integrated approach to this region. For example, our approach to an integrated manufacturing strategy in ASEAN calls for plant specialization and complementation which promotes regional balance of trade and higher ASEAN local content.

‘This business model has worked well with Thailand being our production base for pickups and its derivatives while the Philippines produce passenger cars and compact SUVs. In addition, Ford’s regional manufacturing footprint in ASEAN includes assembly plants in Malaysia as well as Vietnam for domestic production,’ said Padilla.

While Fords outlook for the regions automotive growth is promising, Padilla also outlined some key challenges in building a successful global operation in Asia Pacific. ‘The business models we have used in North America and Europe do not necessarily apply,’ he said bluntly.

‘We need to apply innovative thinking to all our processes and practices if we want to succeed in Asia Pacific. This means making the right strategic investments and ensuring we have the best teams of people in place to combine our Ford ‘blue oval’ knowledge and experience with understanding and insight of local markets and consumer tastes.’

In closing his AMCHAM remarks, Padilla added, ‘As Asian governments continue to evolve and grow alongside their economies, we continue to face challenges from a broad range of export and import regulations, varied tax structures and what can best be described as a selective free trade agreements. For sustainable returns on long-term investments, it is absolutely necessary to create an environment of clarity and consistency in government policies followed by speedy and transparent implementation of such policies.’