Ford’s Russian JV Begins Operations

VIENNA – Ford Sollers Holding, a 50-50 joint venture between Ford and Russian auto maker Sollers, begins operations this week, fulfilling a memorandum of understanding signed in February.

“We are very positive about this joint venture,” Wolfgang G. Schneider, Ford of Europe vice president-governmental, environmental and legal affairs, tells WardsAuto. “Russia is growing slowly but surely, and for this reason we have great expectations of the country and are glad to be there.”

Ford Sollers JV to add Transit output “relatively soon.”

Ford believes the Russian market easily can grow to 4 million-5 million units annually by 2020. Last year, 2 million vehicles were sold there, according to WardsAuto.

“It would then be the largest automotive market in Europe, larger than the German one,” Schneider says. “And this is a market we want to participate in.”

Ford Sollers is headquartered in Khimki, near Moscow. The JV includes Ford’s Focus/Mondeo assembly plant in Vsevolozhsk, near St. Petersburg, as well as two Sollers factories in Naberezhnye Chelny and Elabuga in the Republic of Tatarstan.

The company also will make engines and transmissions, operate a stamping plant and establish research and development activities. In addition, the JV will be responsible for distribution of both locally assembled and imported Ford vehicles.

Ted Cannis, former deputy general manager of the Ford Otosan JV in Turkey, has been named president and CEO of Ford Sollers. The American native headed the transition team overseeing the launch of the new JV.

Adil Shirinov, previously commercial director of Sollers and general director of the truck plant Sollers-Isuzu, has been appointed executive director and chief operating officer of Ford Sollers. At Sollers, Shirinov was responsible for purchasing and localization for all the brands manufactured under license by the company. Shirinov previously worked for Ford in Russia between 1999 and 2002.

Ford Sollers will launch production of several new models.

“Vsevolozhsk will continue to produce the Focus and the Mondeo, while the Tatarstan plants will make all the other models,” Schneider says.

The Ford Explorer SUV and Transit commercial van were announced as the first two new vehicles to be built in Russia starting in 2012. Plans call for both vehicles to be assembled from semi-knocked-down kits initially.

“We will be beginning with the Transit relatively soon, initially with assembly, and continuing with it until the plant in Elabuga is ready for production,” Schneider says. “But our endeavor is naturally to localize production of the Transit as soon as possible. Assembly of the model is only to be a transitional solution.”

Other models expected to be made in Russia are the Kuga and Transit Connect.

It remains unclear whether there will be a B-segment sedan positioned below the Focus.

“The whole product line has been decided on, excepting such a vehicle,” Schneider says. “We don’t know whether we will be producing a B-segment car, and if so which one, as we are still considering the matter with Sollers.”

Ford says the Sollers plants in Elabuga and Naberezhnye Chelny are state-of-the-art.

“We were very pleased to see the good state they are in and also the environmental and safety standards they have in place,” Schneider says.

Prior to signing the MOU, Sollers had a production deal with Fiat. The Naberezhnye Chelny facility assembles Fiat Albea and Linea sedans and previous-generation Doblo light-commercial vehicles. The Elabuga factory produces previous-generation Fiat Ducato commercial vans.

Output of the Fiat models will end.

“Sollers has drawn up a transitional plan with Fiat, one that we are all in agreement with,” Schneider says. “Production of the Fiat vehicles will be phased out within a few months.”

Ford Sollers will construct a combined engine and transmission plant in Tatarstan. Engine production will begin first, Schneider says.

The engine plant is an essential component of the JV and is required by the new Decree 166 Russian automotive policy framework. “But we would have gone for it even without the decree, as we want high local content,” Schneider says.

The plant will have an annual capacity of 180,000 engines. Schneider says Ford hasn’t defined which engine will be produced.

Russia’s state-owned Vnesheconombank (VEB) will finance the JV. The bank earlier signed an agreement with Ford and Sollers for a credit line of RR36 billion ($1.1 billion).

Ford is getting considerable support from the Russian government, as it wants its automotive industry to be competitive globally, Schneider says.

“We have a constructive and pragmatic relationship with the government, and the same applies to the administrations of the Leningrad Region and of the Republic of Tatarstan,” he adds.