Ford Lio Ho concerned about cross-strait tensions

In an already crowded market suffering from overcapacity and a shrinking customer base, Taiwan’s WTO membership is expected to put additional pressure on local manufacturers as import quotas are relaxed. But the WTO benefits of easing expansion into mainland China’s growing car market may be muted by political wrangling.

“We are hoping that the WTO will create more cross-strait opportunities,” said James Parker, Ford Lio Ho’s president, “but we don’t know if politics will get in the way or out of the way.”

With last month being one of the worst months for auto sales in 13 years, declining 21 percent, and Taiwan’s car market shrinking around 18 percent so far this year, Ford Lio Ho has been seeking advantages across the Taiwan Strait by exploiting synergies between the two markets.

The company has sold 1,000 locally built Ford Mondeo’s to the mainland this year and expects to sell 3,000 Ford Metrostar’s in 2002 due to the similarity in preferences for automobiles between the two sides. “What we learned about customers in Taiwan, we found has been applicable in [mainland] China,” said Parker, adding that this has lead Ford to import Taiwan built cars to the mainland instead of European models.

Entrance into the WTO by both Taiwan and mainland China would help facilitate Ford Lio Ho’s expansion into the market at a time when imports of Japanese and Korean cars are expected to become more plentiful in Taiwan.

Though quota restrictions would only be lifted gradually over the next few years, the result would effectively limit local manufacturers to the middle segment of autos, namely family sized models, said Parker. He explained that producing luxury automobiles do not generate enough volume to make domestically produced models competitive and small-end cars from Korea are just too plentiful, dominating the market.

While Parker said Ford Lio Ho is not fearful of going out of business as a result of the increase in competition, this fate may befall Taiwan’s 12 smaller manufacturers, he said; “[They] can’t possibly survive.”

Flaring political tensions between Taipei and Beijing, however, could limit cross strait exchanges, warned Parker, hindering one of the only outlets for the increased market pressure local manufacturers will face.

And as global companies, including Ford Motor Company, look at mainland China and Taiwan in terms of the Greater China region, Parker said the exact role Taiwan will play in the company’s worldwide operations remains unclear because of the difficulty of cross strait relations.

For now, Ford Lio Ho is pouring effort and money, over US$60 million this year alone, into focusing on the local market, refreshing its model line and improving its brand strength in Taiwan. Having released a face-lifted Tierra, the MAV and Metrostar already this year, Parker said Ford will unveil a new model before the year is over.v

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