Here We Go - Clothing, Toys, Electronics Now Ford Says It "May" Export Vehicles FROM China

DETROIT/CHICAGO, Dec 2, 2003; Justin Hyde and Susan Kelly writing for Reuters reported that China's huge promise as a hub for global auto production, the head of Ford Motor Co. on Tuesday said the automaker expects to use about $1 billion in Chinese-made auto parts next year and may one day export finished cars from the country.

Chairman and Chief Executive Bill Ford Jr. did not offer many details about the company's plans in China, but said almost all of its parts sourcing there would likely be for the vehicles it makes in its Chinese joint venture.

"At some point we could see exporting out of China," Ford told reporters at a briefing, without giving a time frame.

U.S. automakers and parts suppliers have been racing to gain a foothold in the burgeoning Chinese car sector. They have established a number of joint ventures there, lured by the prospect of a growing middle class that has prospered as the Chinese economy sizzles.

Car sales of cars in China broke the one-million mark for the first time in 2002 and are expected to double this year.

Last month, the Big Three Detroit automakers said they plan to export thousands of vehicles to China in the next two years, moving to allay concerns over the U.S. trade deficit with China.

Ford has said it plans to boost investment in China's fast-growing car market by more than $1 billion over the next few years. General Motors Corp., the world's top auto maker and a major player in China, recently said it plans to increase capacity 50 percent at its Chinese plants by 2006.

Cheap Chinese labor is a key attraction as U.S. automakers face intense cost pressures as they fight a profit-eroding price war.

"Obviously there are some cost advantages to China on the labor side. There's a ready pool of workers to be tapped," said Gary Thayer, chief economist at A.G. Edwards.

China's currency, the yuan, is pegged to the U.S. dollar, so U.S. manufacturers gain no currency advantage in that market when the dollar weakens.

AUTO PRODUCTION HUB

Automotive exports from China are now a relatively small part of the global auto market. But the country is already a production base for many foreign companies, and it is hoping to become a manufacturing hub for automobiles as well.

The dominant foreign automaker in China, Volkswagen AG , said last month it would ship 600 Chinese-built cars a year to Australia over the next five years. That would be the first major foreign market for its cars made in China.

Major U.S. auto components makers such as Delphi Corp., Dana Corp. and Tenneco Automotive Inc. have set up their own facilities in China and are looking for export opportunities as well.

Although eclipsed by imports from Mexico, Canada, Japan and Germany, auto parts imports into the United States from China rose nearly 26 percent in the first half of this year.

"The potential for exports from China is phenomenal," said Charles Brady, auto analyst at Credit Lyonnais Securities.

Some auto suppliers say China's low-priced parts are beginning to set the tone for global pricing of components.

"It is a worldwide purchasing market now. We purchase not just from China, but literally from all corners of the earth, and we'll continue to do that," Ford said.

He said Ford had been slow to get into China but stressed that it had been taking a more cost-effective approach to the market than some of its competitors.

On his first-ever trip to China last October, Ford said production at the company's joint venture Chongqing Changan Automobile Co. Ltd. would rise to 150,000 units from a current 20,000 as part of its expansion, which is also due to include a second car plant and engine plant. He did not give a precise time frame.