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Late to the Chinese market, Ford aims to catch up

CHONGQING, China -- Last year, Chinese consumers bought 19 million cars and trucks — 5 million more than consumers in the U.S. Ford's share of those sales was just 3 percent. Years of corporate chaos and financial trouble slowed Ford's entry into China as its rivals gained a foothold. Together, General Motors and Volkswagen control a third of China's market.

But the race is far from over. China is still a country where just 58 out of every 1,000 people own cars. In the U.S., that number is closer to 800.

Every year, tens of millions of Chinese are reaching the income threshold they need to buy a car, Schoch says. Many analysts predict annual sales in China of 30 million by 2020, almost double the U.S. forecast of 17 million. It's up to Schoch to ensure Ford gets a big chunk of that phenomenal growth.

Ford wants to double its Chinese market share to 6 percent by 2015. To make that happen, the company is launching six new vehicles in China this year, including two small SUVs called the Kuga and the EcoSport, the Mondeo midsize sedan and the Explorer SUV, which is exported from Chicago. The Lincoln luxury brand will arrive next year.

To meet its goals, the company has undertaken its most ambitious growth since Ford went on a postwar building spree in Michigan 60 years ago.

Ford is spending US$5 billion to build five plants — including three assembly plants, an engine plant and a transmission plant — that will more than double its Chinese production capacity to 1.7 million vehicles by 2015.

Ford sold a company record 407,721 vehicles in China in the first six months of this year. But that was only a quarter of the vehicles GM sold. Volkswagen has six brands aimed at every type of buyer in the vast Chinese market, from the cheap Skoda to the ultra-luxury Bentley. Until Lincoln arrives, Ford has just one.

There are other obstacles. Ford cars are expensive. In a market where 70 percent of vehicles sold cost less than US$14,500, Ford's cheapest car is the Fiesta, which starts at US$13,300. The Explorer starts around US$80,000 thanks to a 25-percent import duty and other taxes.

Ford's development costs are also steep compared with competitors' because it still does much of the research and design for Chinese vehicles at its headquarters in Dearborn, Michigan, where costs are relatively high. Ford hopes to double its technical workforce in Nanjing to 1,500 people by 2015; GM already employs more than 2,000 people at its technical center in Shanghai.

Another complication is the unpredictable Chinese government, which could scramble expansion plans at any time. The government requires foreign automakers to partner with local companies and decides where they can build their plants.

But Ford can't keep relying on Europe and North America, where it sells 73 percent of its vehicles. The company lost US$1.75 billion in Europe last year as sales plummeted in a recessionary economy, and it expects to lose US$2 billion there this year. Profits in Asia would have cushioned those losses, but Ford's Asian operations lost US$77 million because of the big investments in new plants and vehicles.

Ford hopes its manufacturing base in Chongqing, far from China's crowded eastern coast, will help it attract rural buyers in the still largely untapped markets in western China. For those buyers, Ford is developing a low-cost car to compete with the US$9,500 Chevrolet Sail.

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In this photo provided by Ford Motor Co., workers assemble a car at a new plant in Chongqing, China. Late to the Chinese auto market, Ford aims to catch up with new cars, new plants and a new attitude. (AP)



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