Softening market complicates Ford decision to expand

GUANGZHOU -- China's slowing auto market has complicated Ford Motor Co.'s decision on whether to build a third plant for its joint venture with China Changan Automobile (Group) Co.

Ford executives have been leaning toward a third plant in Nanjing for Changan Ford Mazda Automobile Co., a joint venture between Changan, Ford and Mazda.

But Kenneth Hsu, spokesman of Ford Motor (China), told Automotive News China that Ford is still considering whether it should build a new plant now or simply expand the capacity of the existing plants.

"We can expand capacity in many ways, such as lifting capacities in the existing plants and adding shifts," he says.

Hsu says the softening demand in China's auto market in recent months has also prompted Ford to review and adjust its product plans for the China market. But he stopped short of saying how.

Changan Ford Mazda's two plants in China are in the southwestern China city of Chongqing and in the eastern China city of Nanjing.

An official with a Chongqing municipal government department overseeing the local automotive industry says no decision has been made by Ford and Changan on how to expand the capacity of Changan Ford Mazda.

Even if they decide to build a new plant, they still face another question, that is, where to build it, says the official.

Industry sources say Ford wants to build Changan Ford Mazda's third plant in Nanjing because Nanjing has a better auto parts supply base than Chongqing and the logistics costs there are also lower. But its Chinese joint venture partner, the Chongqing-based Changan, wants the new plant to be built in Chongqing, they say.

"We definitely wants Ford to build a new plant here (in Chongqing), but nothing has been decided yet," the Chongqing government official says.

In the first six months of this year, sales in China increased 17.1 percent, according to figures released by the China Association of Automobile Manufacturers. This is healthy growth, but slower than the 23.3 percent increase posted in the same period of 2007. 

With an output capacity of 250,000 units per year, Changan Ford Mazda's Chongqing plant makes the hatchback and sedan versions of Ford Focus, Ford Mondeo, Mazda 3 and Volvo S40 sedans as well as the Ford S-Max hatchback.

Its Nanjing plant, with 160,000 units of capacity, produces the hatchback and sedan version of Mazda 2. It will start making the new Ford Fiesta later this year.