Motor Co. may have been a step behind its competitors in focusing its full attention on the burgeoning Chinese market, but the delay was necessary, says Joe Hinrichs, group vice president and president-Asia/Pacific and Africa.
Before the auto maker could commit the necessary resources to China, it had to get its house in order, Hinrichs tells Ward’s.
“You go back to the last decade and we were focused on the transformation of our European and South American businesses and both were very successful,” he says.
Following that,was distracted with the purchase of a number of European brands, including Volvo, Land Rover, Jaguar and , and its key North American operations were in disarray and needed attention.
“Then we had capital calls on too much of our business,” Hinrichs says. “So we decided we wanted to focus on Ford globally and we sold off all the other brands. All of that took a lot of our attention and resources, management and time.
“Because of fixing all those things and transforming the business model within Ford, we’re now in position to take advantage of the growth unlike any time in our history,” he adds.
Today, Ford is flourishing in China, with sales up 40% in 2010 to 582,467 units vs. like-2009. Demand is expected to grow again this year, but at a slower pace.
“The Chinese industry is growing this year, but not anywhere near the rate we’ve seen the last two years,” Hinrichs says, noting much of the expansion will be centered in lower-tier cities, where incomes remain on the rise.
To help drive growth, Ford will expand its product portfolio in China, which now consists of just five nameplates.
The auto maker already has begun exporting Edge cross/utility vehicles from its Oakville, ON, Canada, assembly plant, though Hinrichs remains mum on volume predictions.
“The CUV/SUV segment is growing in China and I think Edge will do well,” he says. “And it will be the first introduction of Sync (infotainment system) in Mandarin, so it will introduce new customers to the Ford brand and technologies.”
Ford also will introduce its line of direct-injected turbocharged EcoBoost engines to China, beginning with the Mondeo sedan.
Other models will follow, but Hinrichs declines to identify them or reveal whether they will be imported or built locally. “We have a lot of great multi-activity SUV/CUV types of vehicles at our disposal to bring to the market over the next several years.”
Ford has said it will introduce more than 50 new vehicles and powertrains in the Asia/Pacific and Africa region by 2015.
“China is the biggest market in (the) Asia/Pacific and Africa, so you can assume a large number of those will be in China,” Hinrichs says.
There’s a good chance some of those vehicles will be built in China.
Last year, Ford and Chinese partner Jiangling Motors Corp. began construction of a $300 million greenfield plant in Nanchang for production of both Ford- and JMC-branded commercial vehicles.
However, Hinrich’s shoots down reports Ford will purchase JMC outright. The auto maker currently controls 30% of the Chinese JV.
Changan FordAutomobile, Ford’s passenger-car JV with Mazda Motor Corp. and Chongqing Changan Automobile Co. Ltd., recently inked a memorandum of understanding for a new $500 million engine plant in Chongqing, where a second CFMA assembly plant is under construction.
Hinrichs is vague about the future of the Ford-JV, which appears headed for a restructuring or break-up.
“We’ve said Changan, Mazda and Ford are exploring opportunities for setting ourselves up for growth in the future, and we’ve submitted a proposal to the (Chinese) government, but we haven’t gone into specifics or presented a timeline.”
To accommodate projected growth in China, Ford is expanding its dealership ranks quickly but cautiously, adding 100 showrooms in 2010 to take its total to 340.
“You’ll never see the number of dealers in China like you see in North America,” Hinrichs says. “Everyone is being a lot more cautious on the number of dealers we add.”
Since assuming his post in 2009 after years of serving in North America, Hinrichs says the most noticeable difference between the two regions is the frantic pace in China.
“The rate of growth is on a scale like nothing we’ve ever seen before,” he says. “China was 3 million units in 2003 and 18 million last year. Six times (the volume) in seven years. We’ve never seen anything like that.”
He also dispels any notion government intervention makes it difficult to drive sustainable growth.
“There is a lot of government involvement in the industry, but I wouldn’t say there are barriers.”
Intellectual-property protection remains a challenge, but shouldn’t be a deal-breaker, Hinrichs advises.
“It’s something you have to watch, but it’s not a reason not to do the right things for your business in China.”