Ford's tilt toward China, Asia begins to pay off
On Oct. 7, 1913, Henry Ford's assembly line moved for the first time. A century later, among the changes in Ford Motor Co.'s production, none is more dramatic than simply where it takes place.
Ford vehicles assembled in China and the rest of Asia now outnumber those built in Europe for the first time. By 2015, Ford will have the capacity to produce more cars and trucks in Asia than it made last year in North America.
Wealth in Asia is surging even faster than it did in America after Henry Ford's manufacturing innovation and the five-dollar workday he introduced the next year. Just as when his Model T became the first car for millions of people, a burgeoning middle class in countries such as China means that at least two of three buyers in these markets are getting their first set of wheels.
"It's so aspirational and such a big deal," said Joe Hinrichs, who led Ford's manufacturing and Asia operations before taking over the Americas late last year. "It's the freedom that comes from the ability to own your own transportation that's never been had in your family. That's what it was like 100 years ago here."
Opening up the highways to these consumers is going to be lucrative business. Morgan Stanley said in a report last month that it values Ford's Chinese operations at $15 billion (92 billion yuan). That's more than a fifth of Ford's stock-market value and exceeds that of Mazda Motor Corp. and Fiat Group.
The rollout of Ford's factories, products and dealer network in China has been "breathtaking," wrote Adam Jonas, an analyst for Morgan Stanley.
Such praise is rolling in even though Ford was a straggler in China. The carmaker formed its first joint venture in China six years after General Motors and more than a decade after Volkswagen Group, which remain the established leaders among foreign automakers.
Attention is turning to Ford's Asia ambitions as auto sales in its home market are poised for a fifth straight year of growth for just the second time since World War II.
"Of all the regions of the world, that's the one that we're most" underrepresented, said Ford CFO Bob Shanks, referring to Asia. "That's where we've got the most absolute opportunity for growth."
Company CEO Alan Mulally set a plan with Executive Chairman Bill Ford, Henry's great-grandson, to build up the company's Asia presence early in their relationship. They discussed the topic in their first meeting at Bill Ford's home before Mulally, 68, agreed to leave Boeing Co. in 2006 and become Ford's chief.
At the end of Mulally's first full year at the helm of the company, Ford's market share in Asia was 2 percent. Through this year's first half, it's up to 3 percent.
A mid-decade target of 6 percent market share for Ford in China, from about 4 percent now, looks "potentially conservative," Itay Michaeli, an analyst at Citigroup Inc., wrote in a recent report. He cited demand for SUVs and the still-high presence of first-time buyers.
Capturing a bigger slice of Asian markets is crucial to Ford because of the heavy costs of playing catch-up there. Ford has said it's spending $4.9 billion to expand its lineup and double production capacity in China alone. Read More...